The salary threshold for classifying Washington employees as exempt will increase again effective January 1, 2022.
Employees must be designated as either exempt or non-exempt and classification is dictated by the law. Non-exempt employees must be paid at least minimum wage for all hours worked, they are entitled to overtime pay for hours worked in excess of 40 in a week, and are entitled to all protections guaranteed by the state Minimum Wage Act (MWA), including sick leave. Exempt employees, on the other hand, are not entitled to overtime pay, are not required to earn at least minimum wage for all hours worked, and are not guaranteed other protections under the MWA, including paid sick leave. In order to be classified as exempt, an employee must satisfy a three-part test.
Revisions to the state MWA have resulted in increases to the minimum salary level that must be earned by employees classified as exempt. Effective January 1, 2022, the threshold salary level will increase to 1.5 times the current state minimum wage for small employers and 1.75 times the current minimum wage for large employers. The salary threshold is revised each September for the following year based upon increases to the minimum wage which relies upon the Consumer Price Index. The Department of Labor and Industries has published a Salary Threshold Implementation Schedule which outlines estimated increases through 2028 for affected exempt workers other than computer professionals. The 2022 increase for small employers is estimated to change from $821.40 per week ($42,712 annually) to $975 per week ($50,700 annually) and for large employers from $958.30 per week ($49,831 annually) to $975 per week ($50,000 annually). Computer professionals who are paid hourly have their own schedule of estimated increases.
Whether an employer is considered a small or large employer depends upon the number of employees. Small employers are those with one to 50 employees, while large employers have 51 or more employees. When counting employees, employers may use one of two methods. Employers may either use the number of Washington-based employees (full-time and part-time employees are counted) employed on the effective date of each step of the implementation schedule or may use the same number of employees used for Washington Paid Family and Medical Leave purposes.
What amounts count as salary has not changed, and continues to include those set amounts paid on a recurring basis to compensate for work performed. Washington state law does not include board, lodging, housing, bonuses, commission, and benefits as salary.
Employees who no longer meet the salary threshold requirement may not remain exempt employees. Employers are not required to increase employee wages for those who have fallen below the salary threshold unless they wish the employee to remain exempt.
It is very important that employers do not misclassify non-exempt employees as exempt. Claims against employers for unpaid wages can be a costly mistake when attorney’s fees and costs are also considered.