State adopts new overtime rules, expanding coverage and significantly increasing salary threshold.

After months of hearings, the Department of Labor and Industries has adopted new overtime rules. The L&I press release states,

The Department of Labor & Industries (L&I) has updated the employment rules that determine which workers in Washington are required by law to be paid at least minimum wage, earn overtime pay, and receive paid sick leave and other protections under the state Minimum Wage Act. These changes will affect executive, administrative, and professional (EAP) workers as well as outside salespeople and computer professionals across all industries in Washington…

Under the approved changes, the minimum pay a salaried worker must receive to be considered exempt would increase incrementally to 2.5 times the state minimum wage by 2028. Small employers (with 1-50 employees) will have a more gradual phase-in schedule to give them additional time to comply with the new rules compared to large companies (51 or more employees). The effective date for the first threshold increase is July 1, 2020.

Business groups had generally agreed that the rule needed an updated, but expressed concern that the increase went too far, too fast. We linked to detailed concerns here.

The department received substantial feedback.

L&I updated the overtime rules through a rulemaking process that began in March 2018. The public submitted almost 2,300 comments by email, fax, and mail, and 182 people testified during public hearings during this process.

The Associated Press reports,

The Department of Labor and Industries finalized the rules Wednesday and will phase them in by 2028. By that time, salaried workers making up to about $83,400 a year will be entitled to time-and-a-half pay if they work more than 40 hours per week.

Workers making more than that could also get overtime unless they are certain types of professionals — such as those with higher degrees — or unless they are truly managers or executives, as demonstrated by their ability to hire and fire, direct other people’s work or make significant business decisions.

Many job categories will be affected, including shift managers at restaurants and retail establishments, office managers, some medical workers and other white-collar staff, officials said.

The implantation schedule was modified in response to feedback, though other concerns were not addressed.

Business groups in Washington have agreed that the state’s rules needed to be updated, but they criticized the plans as drastic. The Association of Washington Business warned when the proposed rules came out in June that they would be a shock to many businesses and that they could particularly hurt nonprofits.

The organization said many businesses might convert salaried workers to hourly ones, reducing scheduling flexibility.

After hearing extensive public comment, the department added two years to the phase-in period. The threshold will increase incrementally until it reaches 2.5 times the minimum wage — about $83,400 — by 2028. The rules will phase in more slowly for businesses with fewer than 50 employees.

The AP reports that Washington’s new rule exceeds changes adopted in any other state.

The federal government and several states, including California, New York, Pennsylvania, Colorado, Michigan and Massachusetts, have recently updated or started to update their overtime rules, but none have adopted a target threshold as high as Washington’s, said Paul Sonn, state policy program director with the National Employment Law Project.

According to The News Tribune,

“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.”

We’ll see. More on responses to the new rule later.