WA State threshold for OT exempt employees continues to rise in 2022
On September 30, 2021 the Washington State Department of Labor and Industries announced the new state minimum wage effective January 1, 2022: $14.49 per hour.
The Washington state overtime threshold for exempt jobs as of January 1, 2022 is set by state rule at 1.75 times the state minimum wage and will be $1,014.30 per week. Due to the monthly base pay model at the UW requiring a whole dollar amount, the UW’s thresholds are slightly higher than the state’s thresholds as shown in the table below:
L&I Salary Threshold Effective Jan 1, 2022
The first state threshold change occurred in mid-2020, but resulted in a state threshold of $675 per week, which is less than the federal threshold of $684 per week ($35,568 in annual terms or $2,964 per month). During 2020 employers in Washington were obligated to follow the higher, federal threshold. Since the state threshold that takes effect January 1, 2022 is higher than the federal, employers in Washington state will need to follow the higher state threshold. This approach follows the principle of law that in the event of a conflict between state and federal law, the law more protective of the employee will apply. In order to be exempt from overtime, employees must also meet one of the “duties tests”.
This same threshold applies to part-time employees; it is not pro-rated for employees who are less than full-time. This means, for example, that a 50% (half-time) employee whose annualized salary is $90,000 would be overtime eligible because their actual, half-time salary would be $45,000, which is less than the new $52,572 threshold.
Employees whose primary duty is teaching, instructing, or lecturing to impart knowledge are not eligible for overtime and this change does not impact them. For information about any potential impacts on academic personnel, please email the Office of Academic Personnel at firstname.lastname@example.org or call 206-221-UWAP (8927).
Employees with a combination of FTE and salary that falls below $1,014.30 per week will be converted to an overtime eligible job code no later than the last week of December. Starting Monday, December 27, 2021, they will need to track the hours that they work following the established time tracking procedure in their department. They will be paid for all hours worked, and time and a half (or compensatory time at time and a half) for all hours worked over 40 in a workweek.
If you have any questions regarding this change, please see the FAQ document (.pdf) or discuss them with your department’s HR administrator. For additional information, please see the HR website: FLSA and WMWA overtime eligibility and exemption.
Estimated L&I Salary Threshold Effective Jan 1, 2023
Effective January 1, 2023, based on the implementation schedule published by Washington State Department of Labor and Industries, the state overtime threshold will move from 1.75 times the state minimum wage to 2.0 times the state minimum wage. This is a 14.3% increase which the state has informed us will happen. On top of the 14.3% will be whatever increase comes due to inflation. Although we do not know what inflation will be during 2022, it is reasonable to assume that it will be at least 3%. The table below reflects this estimate of a cumulative 17.3% increase (14.3% + 3%) from the 2022 threshold. Based on these estimated changes, the weekly, monthly and annual thresholds are likely to be approximately:
Ordinarily, we only communicate about the overtime threshold increase one year at a time. Due to the large percentage change from 2022 to 2023, we are giving more than one year’s notice because we anticipate that a large number of employees will be impacted by the move to the 2023 threshold. We strongly encourage departments to begin preparing now for the impact of this change.
Further Impacts Beyond 2023
As part of Washington state’s goal of tying the state overtime threshold to the state minimum wage and stairstepping the overtime threshold to 2.5 times the state minimum by 2027, the threshold will advance as follows (based on 9/30/21 L&I estimates of future year thresholds):
2022 1.75x state minimum wage, $52,752 (actual)
2023 2.0x state minimum wage, $61,828 (L&I est.)
2024 2.0x state minimum wage, $62,920 (L&I est.)
2025 2.25x state minimum wage, $72,124 (L&I est.)
2026 2.25x state minimum wage, $73,528 (L&I est.)
2027 2.5x state minimum wage, $83,356 (L&I est.)
Years 2025 and 2027 are bolded to draw attention to the larger increases in those years which are due to moving to a higher multiple of the state minimum wage. Increases for years 2024 and 2026 are smaller, because the minimum wage multiple for those years stays the same, and in 2024 and 2026 the only increase in the threshold will be due to inflation (CPI).