Starting January 1, 2027, the starting salary for an exempt employee will be $82,976.40 for employers with 1-50 employees. This means that for an employee to be classified as exempt (not eligible) from overtime, they must be paid at least $82,976.40 and meet one of the job duties tests.
What is an exempt vs non-exempt employee? What is a salaried employee vs an hourly employee? What is the salary exemption threshold and how does that impact my employees? These are some common questions we’ve been hearing since 2020 when Washington State made changes to overtime rules.
Some Definitions
Exempt employees are not entitled to overtime pay, paid sick leave, or other Washington Minimum Wage Act protections.
Non-exempt employees must be paid at least a minimum wage and are eligible for overtime for hours worked over 40 in a workweek, paid sick leave, and other Minimum Wage Act protections.
A salary is a method of paying an employee where the employee regularly receives a preset amount of money (the salary) for each pay period, regardless of the amount of hours worked, or the quality of work performed.
The Tests
For an employee to be classified as exempt they must meet a battery of tests. Below is an outline that is common for non-profits, there are other exceptions not included below.
- They must be paid a fixed salary.
- The salary must meet or exceed the minimum salary threshold for that year. For 2027, that salary is $82,976.40 if you have 1-50 employees and is projected increase to $93,392.00 in 2028. If this salary is not met, then they must be classified as non-exempt.
- They must pass a primary job duties test that shows that their job duties (not title) meets the definition of an executive, administrative, or professional worker, outside sales person, or computer professional.
If an employee does not meet all three of the above criteria, then they most likely should be classified as a non-exempt employee, meaning they are eligible for overtime for any hours worked over 40 during a work week.
The Exempt Salary Threshold
This is updated every year and is calculated using the state minimum wage increased by a multiplier for that year. Minimum wage is updated January of every year based on the increase of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for September. The multiplier is determined by the year and how many employees you have but is set to be 2.5 regardless of employee count starting in 2028.
Scenarios
Employee A is paid on a salary basis of $65,000 per year. Some weeks they work more than 40 hours a week. They meet some, but not all, of the job duties test for Administrative test and none of the others. How would they be classified and paid?
- They meet the paid a salary basis criteria.
- They do not meet the salary threshold.
- They partially meet the job duties test for Administrative (they do not meet the salary threshold requirement but meet the other requirements).
This employee would be classified as non-exempt, meaning they would be eligible for overtime for any hours they worked over 40 in a work week. If the employer wanted to classify them as exempt, they would need to increase their salary up to the minimum threshold for that year.
Employee B is paid on a salary basis of $100,000 per year. Some weeks they work more than 40 hours per week. They are not able to do their primary job duties with discretion or independent judgment. How would they be classified and paid?
- They meet the paid a salary basis criteria.
- They meet the salary threshold.
- They partially meet the job duties test for Administrative Professional. They do not have discretion or independent judgement while performing their primary duties.
This employee would likely be classified as non-exempt. While they meet the salary basis and threshold requirements, they do not have discretion or independent judgement while performing their primary duties. They must meet all the requirements to be classified as exempt. They would be paid overtime for any hours worked over 40 in a work week.
Employee C is paid on a salary basis of $94,000 per year. They consistently work more than 40 hours per week. They meet all of the job duties requirements for the Executive job duties test. How would they be classified and paid?
- They meet the paid a salary basis criteria.
- They meet the salary threshold.
- They meet the job duties test for Executive Professional.
They would classified as an exempt employee, and therefore not eligible for overtime pay.