The Department of Labor announced Tuesday that it has finalized a new rule to raise the minimum salary requirement for executive, administrative and professional workers who are considered exempt from paid overtime.
The announcement comes about two months before the state’s Department of Labor and Industries is scheduled to adopt a final version of a similar — but larger — update to Washington’s own overtime salary threshold, which will likely begin to kick in six months after the federal version.
The new federal rule raises the threshold from an equivalent of $23,660 per year to an equivalent of $35,568 per year. Employees with salaries below the threshold are required to be paid overtime if they exceed 40 hours in a given work week.
The new threshold will take effect Jan. 1, 2020, and is expected to impact 1.3 million workers, according to a statement from the department.
The state’s threshold was last updated in 1976 and set at an equivalent of $13,000 per year. If a state’s threshold differs from the federal threshold, the higher number applies, so in practice, Washington’s threshold has been $23,660 since 2004, when the federal rule was last updated.
When the new federal rule takes effect on Jan. 1, it will apply in Washington as well; but it will be quickly superseded by the state’s own threshold hike, assuming it goes into effect as planned.
Washington’s proposal, unveiled by L&I in June, would eventually raise the state’s minimum salary to the equivalent of 2.5 times the state’s minimum hourly wage for a full-time worker, although there would be a six-year phase-in period.
The state’s minimum wage is set to rise to $13.50 next year, and after 2020 it will be adjusted each year based on the consumer price index. Based on projected increases in the consumer price index, L&I estimated that the state’s minimum threshold would be equivalent to $79,872 per year by 2026, the last year of the phase-in period.
L&I held a series of seven public hearings this summer in cities throughout the state to collect feedback on its proposal. At the August hearing in Vancouver, several workers, advocates and union representatives spoke in favor of the proposal, while business owners and business organization representatives urged the department to slow down the process.
A common refrain from the business community was that Washington should wait for the federal government to finish its own threshold update before making state-level changes, or drop the changes entirely and simply continue using the federal threshold at the state level.
L&I concluded the public comment period for its proposed threshold hike on Sept. 20 and is reviewing the online feedback. Spokesman Tim Church said the federal announcement will help inform the final decision process, but he said the department is still moving forward with the state-level update.
“From our point of view, this doesn’t really change anything,” he said.
It also hasn’t changed the opinion of some of the opposed business owners. The Association of Washington Businesses reiterated a previous call for Washington to use the federal threshold in order to avoid a regulatory patchwork between states.
“(The new federal number) is a more consistent and, we think, workable number,” said spokesman Bob Battles. “We believe the state number is going too far.”
Ryan Makinster at the Clark County Building Industry Association said he hadn’t seen the final version of the new federal rule, but he offered a similar call for Washington to use the federal number.
“We have a lot of members that work in Oregon and Washington, so just for ease of planning, it’s easier if they’re all under one standard,” he said.
L&I expects to adopt the final rules in early December. The first of the phase-in threshold hikes would take effect July 1, 2020.
The result for some Washington businesses would be two minimum salary hikes next year — the federal one at the start of the year and the state one halfway through, if the current proposed version is enacted as planned.
The six-year phase-in period has two different schedules of threshold hikes: a slower tier for businesses with 50 or fewer employees and a faster tier for businesses with more than 50 employees.
For the faster tier, the July 1 increase would be to 1.75 times the minimum wage, which would be equivalent to $49,140 per year – enough to supersede the new federal threshold of $35,568 that will take effect Jan. 1.
In the slower tier, the July 1 increase would only be to 1.25 times the minimum wage, which would be equivalent to $35,100, putting it just below the new $35,568 threshold.
The second hike, scheduled for Jan. 1, 2021, would raise the threshold to 1.75 times the minimum wage for the slower tier and 2 times the minimum wage for the faster tier. At that point, both tiers would have higher thresholds than the new federal minimum.