How to Tell Whether an Employee is Exempt from Washington’s Minimum Wage Act

Determining which employees are covered by Washington’s Minimum Wage Act (“MWA”), RCW 49.46, is an essential consideration for employers of any size. The MWA requires that most Washington-based employees receive a minimum hourly wage, overtime pay, and paid sick leave unless they are exempt from those rules based on the nature of their job and salary level. Non-exempt employees are also entitled to meal periods and rest breaks.[1]

The Job Duties Test

Only certain “white collar” employees who would otherwise be covered by the MWA may qualify as exempt. These include executive, administrative, and professional employees, as well as outside salespeople and computer professionals, who are: (1) paid a fixed salary, (2) compensated above the minimum salary threshold, and (3) perform certain job duties.

The qualifying job duties are described in a series of regulations located at WAC 296-128-510 (executive), -520 (administrative), -530 (professional), -535 (computer professional), and -540 (outside salesperson). Whether an employee’s job description meets the requirements described in these regulations is highly fact specific. Employers who are uncertain about their application to a particular employee should consult an employment attorney.

Minimum Salary Threshold

Employees who meet the job duties test must also be paid a fixed salary above a minimum threshold to qualify as exempt. That minimum salary threshold is scheduled to increase annually as a multiple of Washington’s minimum wage until 2028 when it will reach 2.5 times minimum wage. The minimum salary threshold for 2022 is $52,743.60, or 1.75 times the minimum wage.

Computer professionals and outside salespeople are slight exceptions to this rule. Computer professionals may be paid by the hour at a comparable hourly rate, while qualifying outside salespeople are exempt if they receive any combination of guaranteed salary, commission, or fees, but do not need to receive a minimum salary.

Currently, the minimum salary threshold is the same for employers with up to 50 employees and those with more. However, the salary threshold at larger employers is scheduled to increase more quickly in coming years.[2] The Washington State Department of Labor and Industries’ website offers a useful reference tool for calculating whether employees meet the salary threshold test.[3]

Compliance

The minimum salary threshold is adjusted annually on January 1st, so now is a good time to review these requirements to ensure your business is complying with the law. That is especially true since the salary threshold increase for 2022 was a significant change for small employers, shifting from $42,712.80 to $52,743.60. Positions impacted by this change can be adjusted to comply with the law in one of the following ways:

• Maintain the employee’s exempt status by increasing their salary and verifying that the job duties test is still being met.

• Reclassify the position as hourly, non-exempt. In addition to paying overtime compensation, the non-exempt employee will need to be trained in tracking their hours, will become eligible for paid sick, and will be entitled to meal periods and rest breaks.

• Reclassify the position as salaried, non-exempt. The employee will still need to be trained to track and report overtime hours, and will also be entitled to meal periods and rest breaks. For some positions, it may be possible to limit or prohibit the use of overtime without prior permission.

As Washington’s minimum wage, and by extension the minimum salary threshold for exemption from the MWA, steadily in increases over the next few years, employers should make certain they are familiar with these rules commit to an annual compliance review.

[1] WAC 296-126-002(2)(b)

[2] https://www.lni.wa.gov/forms-publications/F700-207-000.pdf

[3] https://www.lni.wa.gov/workers-rights/wages/overtime/overtime-exempt-salary-budget-tool