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The Washington Department of Labor & Industries announced its final rule amending Washington States’ white-collar overtime exemption regulations on 11th December 2019. If not overridden by the legislature or successfully challenged in court, the rule will thoroughly increase the pay rates necessary to qualify for the white-collar exemptions in Washington State.

The first major impact on salaries for the executive, administrative and professional exemptions will occur on 1st January 2021. That is when the new minimum Washington salary will first exceed the new 2020 minimum salaries under the federal Fair Labor Standard Act (FLSA). The rate will then ramp up to a projected $83,356 per year in 2028 (including estimated consumer price index (CPI) adjustments), after which annual CPI adjustments will be applied.

The hourly paid computer professional exemption will change on 1st July 2020. The minimum pay rate will jump from $26.63-hour to $37.13-hour for employers with more than 50 employees in Washington. This will rise to $47.25-hour, plus CPI adjustments, for all employers by 2022, after which annual CPI adjustments will be applied.

The regulation also amends the white-collar duties tests to confirm to the FLSA duties tests, but with some differences remaining. The amended duties tests will be effective on 1st July 2020.

Salary, Fee Rates for the Executive, Administrative and Professional Exemptions

For the executive, administrative and professional exemptions, the new minimum salary basis and fee basis rates are:

Date

Minimum Salary/ Fee Rate

(More from 50 Washington Employees)

Minimum Salary/ Fee Rate (50 or Fewer Washington  Employees)

1st  July 2020

1.25 X  Washington Minimum Wage

($35,100/year)

($675/week)

{The new  rate under the FLSA effective 1st January 2020, is $35,568/year,  or $684/week)

Same implies  for larger employers

 1st  January 2021

1.75 X  Washington Minimum Wage

($49,140/year  + CPI)

($945/week +  CPI)

1.5 X  Washington Minimum Wage

($42,120/year  + CPI)  ($810/week + CPI)

1st  January 2022

1.75 X  Washington Minimum Wage

($49,140/year  + CPI)

($945/week +  CPI)

Same as for  larger employers

1st  January 2023

2.0 X  Washington Minimum Wage

($56.150/year  + CPI)  ($1,080/week + CPI)

1.75 X  Washington Minimum Wage

($49,140/year  + CPI)

($945/week +  CPI)

1st  January 2024

2.0 X  Washington Minimum Wage

($56,160/year  + CPI)  ($1,080/week + CPI)

Same as for  larger employers

1st  January 2025

2.25 X Washington  Minimum Wage

($63,180/year  + CPI)

($1,215/week  + CPI)

2.0 X  Washington Minimum Wage

($56,150/year  + CPI)

($1,080/week  + CPI)

1st  January 2026

2.25 X  Washington Minimum Wage

($63,180/year  + CPI)

($1,215/week  + CPI)

Same as for  larger employers

1st  January 2027

2.5 X  Washington Minimum Wage

($70,220/year  + CPI)

($1,350/week  + CPI)

2.25 X  Washington Minimum Wage

($63,180/year  + CPI)

($1,215/week  + CPI)

1st  January 2028

2.5 X  Washington Minimum Wage

($70,220/year  + CPI)

($1,350/week  + CPI)

same as for  larger employers

 The new salary rates are defined in the rule as a multiple (e.g., 1.25 X) of Washington’s minimum wage rate for 40 hours of work per week. For 2020, Washington’s minimum wage is $13.50 per hour. For 2021 and thereafter, it will automatically be adjusted upward each January 1, if there has been an increase in the CPI.

The new FLSA salary minimum for 2020 and thereafter permits employers to satisfy up to 10% of the minimum level with non-discretionary variable pay. Washington did not adopt this rule. As such, employers that plan to pay salaries in 2020 of less than $35,100/year in reliance on the credit for non-discretionary variable pay will have to raise salaries in Washington State to $35,100 by 1st July 2020 if they wish to maintain exempt status.

The Washington rule’s text states that the highest salary rate of 2.5 X minimum wage is effective for all employers in 2026, not in 2027 and 2028, as this has been stated by the Department of Labor and Industries in multiple publications and announcements.

Hourly Rates for the Hourly Computer Professional Exemption

For the hourly computer professional exemption, the new minimum hourly rates are:

Date

Minimum Hourly Rate

(More from 50 Washington Employees)

Minimum Hourly Rate

(50 or Fewer Washington Employees)

1st  July 2020

$37.13/hour

(vs. the  FLSA rate of $27.63/hour)

$27.63/hour

(matched the  current WA and FLSA rates)

1st  January 2021

3.5 X  Washington Minimum Wage ($47.25/hour + CPI)

2.75 X  Washington Minimum Wage ($37.13/hour + CPI)

1st  January 2022

3.5 X  Washington Minimum Wage ($47.25/hour + CPI)

Same as for  larger employers

 Teachers & Academic Administrators

The professional exemption for teachers will now require payment on a salary or fee basis, but without mandating a minimum pay rate. The FLSA does not specify a form or minimum amount of payment for exempt teachers.

The administrative exemption for academic administrators will permit a salary that is at least equal to the entrance salary for teachers in the particular educational establishment involved. The FLSA does not include this provision, so the FLSA salary minimum pay will also have to meet the criteria to obtain an exemption from overtime under federal law.

Changes to the White-Collar Exemption Duties Tests

The new rule brings the Washington State duties tests for the white-collar exemptions (executive, administrative, professional, and outside sales) generally into conformity with the FLSA duties tests, but subject to a few differences.

Washington has no highly compensated exemption. This is a continuation of existing Washington law.

For the outside sales exemption, Washington is retaining its unique requirement that the employee be advised of their status as an outside salesperson.

For the outside sales exemption, the text of the final Washington rule continues the Washington requirement that the outside salesperson’s nonexempt work must not exceed 20% of a normal nonexempt workweek (typically 8 hours per week). This appears to be an error in the final rule, as this provision was shown as deleted in the proposed rule (for conformity with FLSA), and the Department’s explanatory statement does not mention any change on this score from the proposed rule.

The Department did not expressly incorporate into the Washington rule of the guidance that exists in the FLSA duties test regulations. As to the portions not incorporated, the Department’s explanatory statement says, “this guidance was not included in the text of the adopted state rule. The Department intends to rely on the interpretations of the current federal regulations, where terms are identical”.

Outside Salespeople

Washington’s outside sales exemption retains key features different than federal law. Currently, Washington’s new rule keeps the current requirement that the outside salesperson’s nonexempt work must not exceed 20% of a normal nonexempt workweek (typically eight hours per week), although it was initially deleted in the draft rule. This may change. Employers must also continue to advise employees under the exemption of their status as an outside salesperson as well as meet other requirements of the test.

Regarding pay rates, Washington’s law still does not require a minimum pay rate for this exemption. It does, however, continue to require that employers pay outside salespeople on a guaranteed salary, commission or fee basis.

Few Other Differences

Washington still does not recognize an overtime exemption for “highly compensated” individuals. This is consistent with existing law. So-called highly compensated individuals must still meet the duties tests for one of Washington’s overtime exemptions.

The teacher’s professional exemption for teachers will now require payment on a salary or fee basis, although there is no required minimum pay rate. For academic administrators, the exemption now permits a salary that is at least equal to any teachers’ entrance salary at the same education establishment where they work.

Plan in Advance

Washington employers should begin planning to avoid legal liability for misclassification and to ameliorate significant financial impacts of these changes. Some steps to consider:

Ø  Take this opportunity to make sure that each employee is classified properly. Make a list of all employees, noting each employee’s classification as either “exempt” or “non-exempt”. This will involve analysis of both the weekly salary paid as well whether the employee meets the duties test for the relevant exemption.

Ø  Identify employees who will need to be reclassified from the “exempt” to “non-exempt”, because they are or will be are paid less than the requisite amount or no longer meet the relevant “duties test”.

Ø  Calculate the financial feasibility and costs of raising these employees’ pay to the new threshold level to make them “exempt” versus reclassifying them as “non-exempt” and paying overtime.

Ø  If a reclassification is necessary, prepare meaningful employee communications. This includes management training, sharing necessary changes in company policies, presenting a unified message on how and why changes are going to be implemented, and positive individual communications to reclassified employees who will now need to keep track of their hours worked, take required breaks and may have a chance to their benefits. Cooperating with an employee background verification team will be added advantage.

Ø   Seek legal advice. The new rules are complex, and the employers who do not adhere to them strictly may be liable for serious financial penalties, including an unpaid overtime claim under Washington law.

Securecheck360 will monitor further developments to keep our clients with up to date knowledge of changing laws and implementations, so employers should ensure you are subscribed to Securecheck360 to gather the most relevant business information.

Audits are important to employers for several reasons. They can help improve processes that may be out-of-date. They can alert HR managers and business employers of activities that could be illegal, costly or potentially risky to the organization. Concerning human resource exercises, audits are fundamental due to interaction with the public, in the case of applicants, employees or clients. Recruiting and hiring employees is highly focused and regulated. Employers must be aware of the risk of litigation, before, during and after hiring.

Recent years have brought significant changes to the regulatory and legal environment of employment background screening. With EEOC and FCRA related litigations on the rise and a record-breaking $4.4 million settlement in the transportation industry for failing to provide candidates with their rights involving records used during the hiring process, there has never been a more pertinent time for organizations to audit employee screening process.

Regular employment screening audits help to ensure the arrangement of business screening practices with changes in employment law. These audits shores up gaps, identify opportunities for process improvement, help protect organizations from exorbitant suit, and eventually make an organization’s workforce stronger and safer.

Here are Few Tips on How to Audit Your Employee Screening Process

Ø  Work with an Accredited Consumer Reporting Agency

Background screeners who pledge to standards prescribed by the National Association of Professional Background Screeners (NAPBS) have proven expertise, positive compliance history, and system in place to align with the latest employment regulations, making them a valuable asset to your organization. Association with NAPBS gives you a level of trust and accreditation is an important seal of approval that organizations should look for when partnering with a background screening provider. Less than 2% of consumer reporting agencies achieve accreditation. The experienced elite earns accreditation through a rigid and important approval process.

Ø  Determine the Extent of Attorney-Client Privilege

Any information gathered during an audit could potentially be utilized in future litigation. Working with in-house counsel at the beginning of an audit can help determine if any work in progress documentation or subsequent changes will be protected by the attorney-client privilege.

Ø  Involve Cross-Functional Stakeholders

While an organization’s employee screening process traces everyone in the organization as part of the hiring process, particular stakeholders who can provide valuable insights for an auditing exercise. Including representatives from human resources, legal, compliance, security and operations will provide a well-rounded perspective and ensure alignment with other corporate-wide initiatives.

Ø  Assign an In-House Expert

While auditing, it is beneficial to designate at least one employment screening expert. This expert will stay abreast of the complex issues surrounding background screening and employment law. In-house experts should work closely with the organization’s background screening partner and internal teams to ensure full compliance with Federal, State, and Local employment laws. In addition, these designated experts should provide regular updates about pending and recent changes that impact the screening process.

Ø  Include All Locations

Organizations with multiple locations have additional communication and their employee screening process audit needs to address. Representative stakeholders from each location should be a part of the audit process. In addition, these location-based representatives should serve as ambassadors for implementing necessary updates at their respective locations. Few organizations will choose to centralize these efforts through corporate offices. Other businesses might allow field offices to make the final hiring determinations. In any case, the key to compliance comes from streamlining processes and establishing clear communication channels for disseminating important updates to everyone involved.

Ø  Show Consistency

A self-audit can also help to identify potential gaps in the current employment background screening program. Proactive associations cannot just discover approaches to improve the screening the procedure, yet also correct any paperwork errors, such as I-9 mistakes, which could be expensive in the event of a Federal audit. Employers who require obligatory drug screening must assure that their policies and approaches for employee selection, notification, and testing are consistent, randomized, and non-discriminatory.

Ø  Manage and Mitigate Risks

Determine precisely the right level of background screening that meets your employment criteria and workplace safety standards, so that your organization remains consistent with all the applicable regulations and is still able to hire the best talent. If the employer thinking of adding several layers of extra screening access whether there is any true risk mitigation benefit. If not, consider an increasingly streamlined program going forward.

Due to the constant changes in the nature of laws, regulations, and technology engaged in the background screening process today, performing your own proactive “pre-audit” is not as excessively cautious as it may sound from the recommendations above. Background screening oversights can result inexpensive fines from regulators, judgments from litigation, or damage to your brand in the case of newsworthy class actions.

These are the few tips of the best processes, organizations should consider when auditing their employee screening practices. It will assist organizations in focusing their efforts and bringing together the right support team.

Employers face various human resource challenges. Recruiting the right candidate for the right job is one of the most critical challenges, and this task has become more difficult with a growing global economy and a very mobile workforce. Employers can no longer rely solely on candidate interviews to make proper hiring decisions. Pre-employment screening is a process that gives access to employers to verify information regarding education, job history, and performance. Moreover, the pre-employment screening process reveals important information about a job applicant’s prior behavior which can help an employer access potential risk posed by an applicant. Prior behavior can include substance abuse, credit history, driving records, criminal convictions, and civil litigation.

Employers who use pre-employment screening as a part of their recruiting process realize several important benefits. One of the basic advantages is a general improvement inside the nature of candidates which eventually prompts better workers, expand efficiency, quality, and lower employee turnover. Declaring to all candidates the aim to conduct background checks will discourage some job applicants from applying. At a minimum, a candidate will be more likely to represent themselves honestly. Factually 60% of all resumes contain inaccuracies in employment, job performance, and educational achievement. Altogether, the declaration will energize some high-risk applicants with criminal backgrounds to eliminate themselves, which may save time and money in the recruiting process. Conversely, the declaration does not discourage good qualified job applicants who know their background check will not reveal significant problems.

A third-party background screening provider can help you plan a program specifically customized to your company requirements. Few of the greatest benefits you will experience when implementing fully comprehensive solutions are:

Improved Quality of Hire

If a candidate distorts their business history, education, certification, criminal history or employment eligibility, not only could it result in a poor hire, it could also potentially bring about budgetary, legitimate and regulatory risks for the hiring company. A background screening program can help uncover false or misrepresented information early on and prevent future risks and elevating hiring costs.

Decreased Negligent Hiring Risks

Negligent hiring claims may arise, for instance, when a worker causes’ harm to a co-worker or third-party within the scope of their job and the victim claims that the worker had a record of or inclination for causing this sort of harm that the employer should have discovered if it had conducted its due diligence. If this allegation is claimed, then the employer may be liable for negligent hiring damages.

A careless hiring lawsuit can bring about legal expenses, settlements and reputation harm. According to a recent survey by the Society for Human Resource Management (SHRM), the average settlement of a negligent hiring suit is close to $1 million, although some cases have resulted in settlements in millions of dollars.

Enhanced Regulatory Compliance

Compliance is one of the most important aspects of pre-employment background screening in the U.S. regardless of how good your background screening partner is if they don’t comply with all the laws and regulations you, as an employer might be in serious trouble.

Employers must know that:

-          There is a law in the U.S. that enables background screening records to be preserved and referred to for a maximum duration of 7 years and 10 years in case of bankruptcies. Once this period is finished, the record will not be legitimate and any adverse action made dependent on such records will be illicit as defined in the Statute of Limitations.

-          There are certain restrictions when it comes to screening information about issues of sex, race, disability, religion or age. For instance, an employer cannot ask for background information from candidates of a specific race solely because they belong to that race.

-          In California, employers cannot demand criminal record checks of the candidate before an employment proposition is made except if you are from an industry that makes contact with the growing population.

-          Several cases have been filed against employers for alleged non-compliance in background screening. The most common non-compliance the example includes an employer’s failure to provide proper disclosure, authorization and follow the adverse process mandatory under the FCRA guidelines. Apart from the FCRA, various other compliance norms in the U.S. need to be followed by background check agencies. These include multiple compliances, FTC, State, and City Ban the Box laws and the newly updated EEOC guidelines.

A third-party background screening support with in-house screenings specialists can help your association properly make a screening solution that not only fulfills industry standards, but also local, state, and federal regulatory requirements, which vary from state-to-state and by type of the position you are recruiting.

Without an effective pre-employment screening program, an organization could face costly fines, loss of privileges or legal damages. During each step of the pre-employment screening process, from background checks to completing an electronic I-9 employment eligibility verification, a background screening provider can help you implement a compliant screening program for your company.

Ensures a Drug-Free Workplace

Alcohol and drug abuse can create a significant safety threat in the workplace and can result in minimizing employee productivity. Implementing a clear and consistent drug testing policy within the workplace deters employees from abusing alcohol, usage of drugs, and helps companies hire responsible job applicants. Make sure you screen applicants with the right consumer reporting agency.

Advances Workplace Safety

Pre-employment background screening helps greatly reduce the chance of future workplace violence by filtering out applicants that could present a threat to the workplace environment. Comprehensive pre-employment background screening will detail past incidents that may provide critical insight into behavioral habits that could pose a threat in the future.