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December 23, 2002

Hearings scheduled for 'salary basis' rules

TUMWATER - The Department of Labor & Industries (L&I) will hold hearings in January on proposed rules related to payment of a salary to executive, administrative and professional "exempt" employees.

The rules, developed with the help of a business and labor stakeholder group, clarify the circumstances in which employers may or may not deduct from exempt employees' salaries or leave banks.

Employees whose work duties meet the definitions in state law as executive, administrative or professional and who are paid on a "salary basis" are exempt from the minimum wage and overtime provisions in the Washington Minimum Wage Act. This means, in part, that the employer is not required to pay overtime to these exempt employees when they work more than 40 hours a week. The state has regulations defining what it means to be an executive, administrative or professional (exempt) employee. However, there are no state regulations defining what it means to be paid on a salary.

An employer who makes improper deductions from an exempt employee's salary risks being required to pay overtime wages to all affected employees, just as if the employees were hourly workers.

L&I's proposed rules were drafted in response to a 2000 State Supreme Court decision (Drinkwitz vs. Alliant Techsystems Inc.) in which salaried employees sued for back overtime pay. The court held that Alliant's business practices and salary violations destroyed the plaintiffs' exempt status. The plaintiffs were awarded overtime pay.

L&I's proposed rules define proper and improper deductions from pay and from leave banks. For example, the proposed rules say that employers generally may not dock exempt employees' pay for lack of work or for partial-day absences. The proposed rules also give employers a limited "window of correction" - a period in which employers can fix an "infrequent" and "inadvertent" improper pay deduction without violating the salary test. The rules also will clarify that payment of a salary does not in and of itself exempt a worker from overtime requirements; the worker must also meet the definition of what it means to be an executive, administrative or professional.

Download the complete rules from L&I's wage and hour web site.

The hearings, each at 1 p.m., will be:

  • Jan. 6, L&I's Spokane office, 901 N. Monroe St., Suite 100, Spokane.
  • Jan. 7, L&I's Tukwila office, 12806 Gateway Dr., Tukwila.
  • Jan. 8, Yakima School District Administration Offices, 104 N. Fourth Ave., Yakima.

Written comments must be received by Jan. 8. They may be e-mailed to swaj235@LNI.wa.gov, faxed to 360-902-5292, or mailed to: Josh Swanson, Specialty Compliance Services, P.O. Box 44400, Olympia, WA 98504-4400.

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