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New FLSA Standards are not enough for Washington!

Good morning, Ladies and Gentlemen. Welcome to the people processes podcast where we dive deep into the tools, laws and policies that you need to scale and grow your people processes. I’m your host, Rhamy Alejeal and I’m the CEO of people processes. My company helps organizations all across the USA streamline, optimize, implement, and revolutionize their HR operations. We’ve helped hundreds of companies and thousands of HR leaders across the world get their people processes right. Today, we’re going to take a look at the FLSA requirements coming in 2020. Specifically, we’re going to talk about how some of the States are reacting, especially Washington and California. Before we go too deep though, I want to ask you to please subscribe to our podcast. You can find us on iTunes, Google podcasts, Spotify, Stitcher, pretty much any podcaster of your choice. You can also subscribe at peopleprocesses.com which gives you subscriber exclusive content, like our on-boarding checklists, our peopleprocesses guides, and a special episode every now and then.

Now let’s dive in first to some rules that Washington has put in place. Washington state that, adjust the salary threshold and job duties tests for white collar workers. Now I know we’re talking about the FLSA on a federal level, so don’t tune out if you’re not in Washington, but this is a great example of how some of the States are taking it even a step further. So the Washington state department of labor and industries has adopted a rule change to restore overtime protections to tens of thousands of workers and create a fair minimum salary level for workers who do not receive overtime pay, at least according to the Washington state department of labor. The rules affect executive administrative and professional workers as well as outside sales people and computer professionals. That’s the white collar workers defined by the FLSA exemptions. The adopted rule changes Amend Washington state legislature code called chapter 296 128 you can look it up on our website. We have some links to it directly. If you want to read it yourself. The new rules use a formula based on the state minimum wage to determine the minimum salary. A worker must be exempt from overtime rather than just a flat dollar figure. That’s important because their minimum wage, as you may hear back in one of our seasons, two episodes, is slated to increase every year, I believe until 2028 so it’s a heck of a thing. They’re going to start July 1, 2020 so coming up in about six months and will be fully implemented by January of 2028 .Starting July 1, 2020 the state minimum salary threshold will increase to 675 week. That’s 35,100 a year for all businesses, which is 1.25 times the state’s minimum wage.

The threshold will increase incrementally until 2028 which is when it will reach approximately $1,603 a week. That’s $83,356 a year. For those of you paying attention for an overtime exempt worker, which is 2.5 times the minimum wage. So that’s a really high one. By 2028. Now, next year’s in July, that $535,100 a year interestingly is lower than the FLSA age changes. The white collar employees generally working in management professional capacity that are paid a set salary have had a change to the FLSA. They exempt levels that go into effect all across the nation starting in 2020 coming right up. Initially Washington employers will be required to follow the federal overtime laws because the updated federal threshold is 684 a week. That’s $35,568 a year. Now, if you’re in any state in the nation and your paying less than $35,568 a year to an employee starting 2020, they are not FLSA exempt.

Now, we talk a lot about FLSA around here because that controls whether you’re required to track their hours so that you know you have paid overtime. If they work more than 40 hours in a week federally, then you owe time and a half, and that line federally is 35,005.68 a year, which is actually a little bit higher than Washington’s until 2021. When the State and federal thresholds conflicts, you must meet the most favorable threshold to the employees. So in Washington next year, just like the rest of the country, FLSA exempt is going to be 35,005.68, but by 2021, this is just for businesses with 1 to 50 by the way, this is the small business side of it. You’ll have to pay at least 827 a week. So 2020, you’re hitting the federal 35,005.68 a year, 2021, Washington, you’re at 40,300.4 a year.

If you have more than 51 employees, then the threshold will actually be 1.7 time, seven five times the normal wage, 1.75 times the minimum wage, which is about 965 a week or 50,001.68 a year. So if you got over 50 by January 1, 2021, FLSA exempt line is 50,001.80, for those of you in Washington, this is going to lead to more and more incremental increases in the state threshold until January 1, 2028, which is when it reaches that final 2.5 times the state minimum wage, that’s going to be a big, big dollar figure to swallow at that point. So this is a great example of how a lot of the States having had this kind of crack in the FLSA where we are finally at a level restructured what the minimum salaries are now. They are going in and adding their own requirements, which are significantly higher. There’s some other things to think about. Job duties test is not just based on salary on how much you’re paid. There’s also regulations on what the employee does itself. Now that’s a little beyond the scope of this particular episode. We do have one back in the archives and we’ll probably do an updated one here in first quarter of 2020 so that we can kind of read everybody in. Of course, we also have, if you’d want to, check it out at academy.peopleprocesses.com. A deep dive into employee classification where we go through at a federal level and then each individual state the requirements among other things for FLSA exemption. The job duties test is also changing out in Washington. The Washington state currently uses two job duties tests that have been reduced to one test with language that now more closely aligns with the federal job duties test.

So they are actually simplifying it, making it a lot more like the a FLSA at the federal level. I think that’s a good thing much more similar across the nation. The other thing is that when you look at how to comply with this, employers have multiple options. For example, they can convert current salary exempt employees to salary non-exempt or hourly non-exempt and pay overtime for any work over 40 hours a week. So you can keep the salary, but then if you’ve got to track their hours that they work over 40, you’re paying overtime or you can take them to hourly. Of course you could try to limit the number of hours of work to 40 hours a week or less. If they wish to maintain the employees exempt status, they would need to ensure the employee meets the new duties test and is paid at least the updated salary requirements. You got to pay more. In addition to qualifying for overtime pay, non-exempt workers must also receive other protections under the state’s minimum wage act, including paid sick leave up there in Washington. So if you’re looking at expanding into Washington or you’re already there, you need to do a quick little review to make sure you are covering.

Washington isn’t the only state making some changes. Coming up, starting January 1, 2020 California’s minimum wage among many other States is scheduled to increase California’s minimum wage will increase on January 1 to $13 per hour for employers with 26 or more employees and to $12 an hour for employers with 25 or fewer. State law requires that most California workers be paid the minimum wage. Some cities and counties have local minimum wages that are higher than the state rate. So you need to take a look around, see where your people are working, make sure you’re compliant with the local requirements as well. The legislation was actually enacted back in 2016. It was called Senate bill three, a link that is on the website as well. It provided increases in the state minimum wage over time to reach $15 per hour statewide by 2022 for large businesses and 2023 for small businesses.

So we are well on our way. There’s also a requirement to post information on wages, hours, and working conditions at work site areas. It has to be accessible to employees. There’s a couple of rules around it. Employer posting requirements are available from the department of industrial relationships, workplace postings website. So if you’re out in California and you’re concerned about that, I’ll put a link on the website for that as well. Keep in mind that this increase to 12 and $13 per hour, of course it’s a minimum wage increase that we need to worry about starting January 1. But, California is expected to also mirror something like Washington and their FLSA requirements are going to go up as well. So you need to take a look at your salary people in California, make sure that you’re doing the appropriate pieces in there. If you’re interested in me doing a bit of a deep dive on a salary requirements, just maybe by state, going through a couple of good examples and providing a chart, let me know in the comments.

You can email us at service at peopleprocesses.com. You can always comment on the episode, either on iTunes or wherever you’re at. Just drop a line. We read all of them. And suggestions always get floated up to us. Thank you for joining us today. I hope this was a quick and interesting thing to draw your attention to. Some of the changes coming up in the US we will be doing many interviews coming up in the coming weeks with business leaders and HR folk. We also have many more compliance updates scheduled to come, so please subscribe and drop us a line if you have any questions or anything we can help you with. We will be doing our Q and A’s. They were very popular last season. So if you want to reach out to us on Facebook, Twitter, Instagram, LinkedIn, we are at people processes on most of those. If you want to check it out, the links are below on our peopleprocesses.com website. Please message us in there and we use that to compile a Q and A that we do every few weeks where we go over some of the best questions from our listeners. Now it’s time for you to go out there, have a great day and get your work done. I’m Rhamy Alejeal, CEO of people processes. Thank you for tuning in.

Senate Bill 3

Workplace Postings

Source: State of California, Department of Labor and Industrial Relations, News Release No. 2019-94, December 5, 2019.

About the author, Rhamy

Rhamy grew up watching and working with his mother and grandmother in the senior insurance market. This familiarity with the struggles faced by people trying to navigate the incredibly complicated and heavily regulated healthcare market led him to start Poplar Financial while working on his degree at the University of Memphis. After completing his MBA and Bachelors in Finance and Economics, Rhamy guided Poplar Financial through the disruptive opportunity that is the Affordable Care Act. Since then Poplar Financial has received numerous awards from major insurance carriers and has completed its fourth year in a row of doubling in size. Now his team focuses on the processes around human resources and specializes in providing companies with between 20 and 1000 employees with the payroll, benefits, and HR needs.

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