Effectively Communicating Exempt vs. Nonexempt

Over the course of the coming years, employers and employees will be significantly impacted by the changes to the federal Fair Labor Standards Act (FLSA) and Washington State Minimum Wage Act (MWA) related to the classification of employees as exempt or nonexempt. The changes to the FLSA took effect January 2020, but the Washington State changes begin in July 2020 and continue annually to 2028.

How employers should prepare

Employers should forecast financial ramifications for changes in labor costs necessitated by changes in the rules. Employers should also weigh the cost of raising employee salaries above the new threshold against the cost of reclassifying employees as nonexempt and paying overtime.

Once this analysis is completed, employers may determine how to best communicate with employees whose classification will need to be changed from exempt to nonexempt as a result of the increasing salary threshold.

It is important to let affected employees know that the organization conducted an impact analysis of the new regulations, looked at budgetary information, and considered the influence of other factors before determining what changes would be made within the organization.

How this information should

be communicated to employees

Depending on whether an employee is being affected, employers may use the following messages when communicating with employees:

• You are currently exempt from being paid overtime under the federal FLSA and the state MWA, due to both your job duties and the salary amount you are paid.
• As a result of changes to the federal and state minimum wage laws, we have analyzed your status as an exempt employee and determined that you [will/will not] continue to be exempt from being paid overtime.
  • You will continue to be classified as exempt
    • Effective [date], your salary will be increased to [$] to meet the requirements of the revised regulations.
    • Your salary continues to exceed the requirements of the revised regulations. We will monitor your status into the future and will update you should your exempt status be affected.
  • You will no longer be classified as exempt
    • Your status is changing to nonexempt (overtime eligible) effective [date].
    • You will now be paid an hourly rate of [$] and paid overtime at a rate of time and a half for any hours worked in excess of 40 hours per week.

Washington employers must keep in mind the need to re-evaluate the classification of employees as the salary threshold continues to increase to 2028. To see the schedule of when and to what amount the salary threshold will increase under the Washington MWA, please see the implementation schedule: https://www.lni.wa.gov/forms-publications/F700-207-000.pdf

Some employees will be happy about the change, while other employees may be upset about moving to a nonexempt status. Make sure that reclassified employees know they are not being demoted. Be clear that these changes are based on changes to federal and state law.

Read about a few other legal updates in 2020 here.