Washington State Employers Face Significant Minimum Wage and Wage Threshold Increases | Davis Wright Tremaine LLP

Effective January 1, 2023, the Washington State minimum wage will be $15.74 per hour. This is a $1.25 increase from the current 2022 minimum wage of $14.49 an hour.

Because the wage threshold for exempt employees in Washington is tied to a multiple of the minimum wage, the exempt wage threshold for all employers with Washington-based employees will also increase. The exempt wage threshold for employees working for small employers (1-50 employees) increases to $57,293.60 per year, which is $1,101.80/week (and represents an annual increase of $4,550 compared to the 2021 threshold). The exempt wage threshold for employees working for large employers (51 or more employees) increases to $65,478.40 per year, which is $1,259.20/week (and represents an annual increase of $12,734, $80 over the 2021 threshold).

How Washington State Calculates Minimum Wage

Each September, the State Department of Labor and Industries compares the consumer price index for urban wage and office workers (CPI-W) for August of the previous year to the August index of the current year. The year-over-year increase from 2021 to 2022 over this period was 8.66%.

Although Washington State’s minimum wage and exempt wage thresholds are already among the highest in the United States, state law requires an automatic annual inflation adjustment based on CPI-W .

What the minimum wage increase means for employers

Effective January 1, 2023, employers with Washington-based employees must ensure that hourly rates of pay for their non-exempt/hourly employees are equal to or greater than the new minimum wage.

Employers must also ensure that their exempt employees/wage earners working in Washington State also meet the minimum wage thresholds. To the extent that an employee who is currently classified as exempt and paid on salary does not meet the new salary threshold, employers should either adjust their salary to ensure they do, or consider other alternatives to ensure compliance.

Employee Reclassification Considerations

Given the significant increase in the exempt wage threshold for employers of all sizes in all industries, it is likely that a number of employers will consider reclassifying currently exempt employees as non-exempt employees due to budget constraints, market conditions, wage compression and other factors. variables.

Employers considering reclassification should consult with an experienced wage and hour attorney to identify legal options for reclassification; impact on collateral obligations such as rest/meal periods, overtime pay, and coverage under state vacation laws; communication of employee relations; and training programs for supervisors and employees on record keeping and payroll administration following reclassification.

Exceptions to the Washington State Minimum Wage Law

The state minimum wage applies to most workers age 16 and older, but employers can pay 85% of the minimum wage to workers age 14 to 15. For 2023, the hourly wage for 14- and 15-year-olds will be $13.38.

Exempt IT professionals can be paid based on the exempt salary threshold (i.e. the limits set out above) or hourly. If paid hourly, the minimum hourly rate for 2023 for IT professionals increases to $55.09 per hour.

To note: Two municipalities in Washington state have local minimum wage rates that exceed the state minimum wage:

  • Seattle is expected to announce its 2023 hike in the coming months. In 2022, employers whose employees work in the city of Seattle must pay $17.27 per hour in 2022. Small employers (500 or fewer employees) who pay at least $1.52/hour for medical benefits of employee and/or for which the employee earns at least $1.52/hour in tips may pay a cash wage of $15.75/hour.
  • The city of SeaTac may also announce its increase for 2023 in the coming months. In 2022, hospitality and transportation employers with employees working in the city of SeaTac must pay a minimum wage of $17.54 per hour in 2022.

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