Today the State of Washington Department of Labor & Industries released is new rules regarding which employees earn overtime pay. L&I officials have been developing this rule for some time. Washington Nonprofits has organized nonprofits to testify at hearings and submit comments to inform their deliberations.
The final rules call for the minimum overtime threshold to rise over an 8-year period until it reaches a level of 2.5 times the minimum wage. (Minimum wage is adjusted each year to rise with the Consumer Price Index). Employees, including those working for nonprofits, who earn salaries under this threshold must earn overtime for any hours worked over 40 in one week. L&I predicts the minimum annual salary for exempt employees will be $83,356 by 2028.
Labor & Industries did respond to nonprofit leaders’ pleas to implement the change more slowly to give us time to adjust. They opted to raise the overtime threshold over 8 years instead of 6, as originally proposed. They did not change the eventual goal of 2.5 times the minimum wage. They also chose to maintain a single standard across the state rather than adjusting regionally.
Labor & Industries has committed to working with nonprofits to develop guidance regarding certain aspects of the rules, such as how to maintain maximum flexibility for staff while complying with worker protections. Washington Nonprofits plans to engage in this work. I would love to hear from you if you’re interested in participating in these discussions.
What does this mean for nonprofits?
- The slower phase-in means that the effective salary threshold for all of 2020 will be the new federal threshold: $684 per week or $35,568 annually. Certain worker protections associated with the rules change (sick leave, minimum wage requirements) will become effective on July 1, 2020.
- In 2021, the new state threshold will rise to $43,004 for small businesses and $50,180 for larger businesses. (Small businesses are defined as having 50 or fewer employees.) It will continue to rise in subsequent years according to this implementation schedule.
- Nonprofits need to determine how they will adjust to comply with the new regulations if they have staff members who are currently salaried (exempt) but have salaries below the proposed threshold. Options include:
- converting those staff members to hourly,
- keeping them salaried but tracking time to ensure that they receive overtime for any hours worked over 40 in a week, or
- raising their salary above the threshold.
- For many of us, new systems to track employees’ time may need to be implemented.
- Nonprofits will need to understand the new rules and ensure that they are in compliance. We are working together with 501 Commons and Communities Rise (formerly Wayfind) to provide two free webinars on the new rules: A Legal Perspective on Feb. 12 and How to Update Your HR Practices on Feb. 19. You can also visit Labor & Industries’ page on the overtime rules change.
We will continue to advocate on behalf of nonprofits
I have spoken to nonprofits all over Washington state and I know this change presents a challenge to most of us, particularly outside the Seattle metropolitan area. We face rising labor costs and funding levels that are not keeping pace. On the positive side, this could move us toward better compensation in the sector and less burnout.
You can contact your legislators to let them know how these rules changes affect your organization. The legislature did not make this change, but they have the power to make changes to the rules in the future. If you do, please request that the State of Washington increase the level of its contracts with service providers to cover the additional cost of implementing the rule.
We are committed to continuing to educate legislators, state agency leaders, funders, and donors about the importance of adequately funding the important work of nonprofits. Please stay connected with us and speak out about your experiences.
Exempt: a class of employees that is salaried and exempt from overtime pay. For common exemptions see the Let’s Go Legal toolkit, pg. 24
Overtime: “Most employees who work more than 40 hours in a 7-day work week must be paid overtime compensation for all hours worked over 40. For every overtime hour worked, the employee must be paid 1.5 times the employee’s regular rate of pay.” Let’s Go Legal toolkit, pg. 23