To be exempt from overtime under the Executive, Administrative, or Professional (EAP) exemptions under both federal and state law, an employee’s duties must meet a “duties test” and they must also be paid in a specified manner and a minimum amount, usually a minimum weekly salary. Prior to this week, the Computer Professional exemption under the Washington Minimum Wage Act (MWA) was an exception to the more common exempt tests, setting a minimum hourly rate of $27.63 per hour rather than a minimum salary.1
Under new regulations adopted last year, which become effective July 1, 2020, Washington is making changes to the required minimum compensation for all EAP exemptions. The primary change—the minimum salary level—will not have a practical impact until January 2021, but for employees who meet the MWA’s definition of “Computer Professional,” there could be an immediate impact.
First, Washington is increasing the required minimum weekly salary level for most EAP exemptions. The increase will be phased in over the next several years, at different rates for small and large employers. The first increase, effective July 1, 2020, raises the minimum EAP salary level under Washington law to $675 per week. This increase will not affect most Washington employers, however, because as of January 1, 2020, federal law generally required a minimum salary level of $684 per week to meet the EAP exemption requirements.2
For the Computer Professional exemption, there are two compensation changes effective July 1, 2020, which Washington employers should consider and plan for:
1. The Washington Computer Professional Exemption Now Allows for a Salary as an Alternative to the Hourly Pay.
The new rules allow Computer Professionals to be paid either on an hourly basis or a salary basis, and still be exempt from overtime pay requirements. This may or may not have a practical impact for many employers because, up until now, many Washington employees who meet the Computer Professional duties test were already paid on a weekly salary basis as they were considered exempt under one of the other EAP exemptions. This change does make the Washington regulation consistent with federal law, which already allows computer professionals to be paid on a salary or hourly basis.
For the remainder of 2020, whether under the Computer Professional exemption or some other EAP exemption, computer professionals who are paid on a salary basis, not on an hourly rate, must be paid at least $684 per week, the federal minimum salary requirement since it is more than the state mandated amounts. However, after January 2021, the state’s minimum salary requirement is expected to exceed the federal requirement and will become the salary level that Washington employers will have to pay. The exact minimum salary level will be determined later this year, and is slated to increase annually through at least 2028.
2. Large Employers Who Choose to Pay a Computer Professional on an Hourly Rate Must Pay a Higher Hourly Minimum.
Employers can continue to pay a Computer Professional on an hourly basis—instead of a guaranteed weekly salary—if they wish to do so. For companies with more than 50 employees, however, the new regulation increases the minimum hourly rate from $27.63 to $37.13 per hour. For the remainder of 2020, employers with 1-50 employees can continue to pay an hourly rate of $27.63 and not be obligated to pay overtime. Beginning January 1, 2021, all companies will have to pay a higher hourly rate for exempt Computer Professionals; the exact hourly rates for 2021 will be determined later this year.
3. Whether Pay is Hourly or Salary, the Duties Test Still Must Be Satisfied.
Regardless of whether an employee is paid the minimum weekly guaranteed salary or the minimum hourly rate for hours actually worked, to be exempt as a Computer Professional, an employee must also be a “computer system analyst, computer programmer, software engineer, or other similarly skilled worker” whose primary duty consists of one of the following:
(i) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
(ii) The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
(iii) The design, documentation, testing, creation, or modification of computer programs related to machine operation systems; or
(iv) A combination of the above duties, the performance of which requires the same level of skills.
If you have any question as to whether an employee meets the Computer Professional Exemption, or if you need guidance on implementing these changes, we would be happy to assist.
1 There were other exemptions that could apply to someone with the duties of a computer professional that allowed the employee to be paid on a salary basis, but the specific Computer Professional exemption required hourly pay.
2 Beginning January 1, 2021, the Washington minimum salary level will exceed the federal minimum salary level for the EAP exemptions. The amount of required minimum salary for 2021 will be determined later this year.