More Washington workers will qualify for overtime pay under new state rules

An estimated 259,000 workers in Washington state will be newly eligible for overtime pay by 2028, the state announced Wednesday.

The new rules determine the minimum salary a worker must receive to be exempt from overtime. The rules, which will be phased in starting July 1, 2020, focus on white-collar employees who are in managerial and administrative positions that receive a set salary, said Joel Sacks, director of the state Department of Labor & Industries.

L&I said for a worker to be exempt from overtime, he or she must be paid a fixed salary, must perform defined duties, and the salary must be at or above the minimum salary threshold.

The state’s current threshold to be exempt from overtime is $13,000 a year. It’s $23,660 under federal law but will increase to $35,568 on Jan. 1.

When state and federal thresholds conflict, businesses are required to use the one most favorable to employees.

Beginning July 1, 2020, the minimum state salary threshold will increase to $35,100 a year, just below the federal threshold.

On Jan. 1, 2021, the state threshold will jump to $43,004 for small businesses (those with one to 50 employees) and $50,180 for large businesses (those with 51 or more employees). The goal is to help small businesses adjust to the new rules, said Elizabeth Smith, L&I’s deputy director.

The state threshold will increase gradually until 2028 when it is set to reach $83,356 for an overtime exempt worker in both small and large businesses.

“We recognize how all this might impact businesses,” Sacks said at a media briefing. “That’s why the implementation of the new state rules won’t begin until next July, and they will be phased in over several years.”

After 2028, the threshold will increase when the minimum wage is increased for inflation.

The rule changes released by L&I are the first major update to state overtime in more than four decades.

Sacks gave the example of a shift manager who earns a salary of $40,000 a year but is expected to work 60 hours a week. In 2021, that manager’s hourly pay would be less than the state’s minimum wage.

“Under our current rules, which were adopted in 1976, that would be OK. But from our perspective, that is simply not OK. That is going to change with these new rules,” he said.

The new rules do not tell employers how much they have to pay their salaried employees, Sacks said.

For example, employers could convert current salaried employees who are exempt from overtime to salaried non-exempt or hourly non-exempt — and pay overtime for any work over 40 hours in a week. To cut overtime costs, businesses could limit the number of hours of work to 40 per week or less.

Also, the new rules update the job duties tests that are used — in conjunction with the minimum salary threshold — to determine which workers can be considered exempt from overtime. Those tests are designed in part to prevent employers from giving employees a managerial title — but not managerial duties — so those workers are not eligible for overtime.

The new job duties tests are expected to benefit an estimated 235,000 workers by 2028 who are currently entitled to overtime but have not received it because their employer might not be properly applying the job duties tests, Sacks said.

This story was originally published December 11, 2019 at 11:58 AM.