New in 2020: Paid Leave, Non-Competes, Rising Minimum Wage, and More Overtime Eligibility
In January 2020, we will greet many changes to employment laws that have been years in the making. Washington will be the fifth state to offer paid family and medical leave to workers. Employees will have increased ability to change jobs as new restrictions on the use of non-competes take effect. The minimum wage will go up. And some lower-earning employees will be newly eligible for overtime when the federal salary threshold for exempt employees increases for the first time in over 15 years.
Washington Paid Family and Medical LeaveStarting in the new year, nearly every Washington worker will be eligible for up to 12 weeks of paid leave when they welcome a new child into their family or experience a medical event personally or in their family. The Employment Security Department (ESD) administers this program, which is funded by employer and employee payroll deductions. After receiving an application, ESD will decide whether an employee qualifies for paid leave, and how much weekly wage replacement they receive, up to 90% of wages with a $1,000 weekly maximum. Unlike FMLA, an employee does not need a long work history with a company to be eligible for Paid Family and Medical Leave (PFMLA). Employees need only work for any employer for 820 hours in the preceding 12 months. ESD has made clear that it considers FMLA and PFMLA to be separate entitlements. This means an employee may qualify for 12 weeks unpaid leave under FMLA and then qualify for another 12 weeks paid leave under PFMLA. Employees may be eligible for up to 16 weeks of paid leave for multiple events in a year, or up to 18 weeks of paid leave if they experience a serious health condition during pregnancy, and as much as 24 weeks of total leave with the two laws combined (though only a portion of that leave would be paid).
- Review leave policies. If you provide a paid leave benefit or want to, you can supplement the ESD benefit or opt out and create your company’s own benefit through a voluntary plan.
- Revise your handbook to address PFMLA and notify employees of the new benefit.
- Correctly collect premiums, and ensure compliance with ESD reporting requirements.
- Look out for ESD’s mandatory poster to notify employees of the program.
Non-Competition AgreementsA new state law limiting non-competition agreements takes effect on January 1, 2020. It will be harder and riskier for employers to use non-competes with employees, and employers should consult with counsel before enforcing any existing non-compete after January 1. Under the new law, an employee must earn over $100,000 (and independent contractors over $250,000) for a non-compete to be enforceable. Any non-compete with a restricted period longer than 18 months is presumptively unreasonable. If a court finds that a non-compete violates these or other requirements in the new law, the employer may be liable to the employee for a $5,000 penalty plus attorney fees and costs, even if the non-compete is enforced on modified terms. Please see our blog post about the new law for more information.
- Review your current non-competes with counsel to determine the extent to which they are still enforceable.
- Tell your employees that you will not be enforcing unlawful non-competes or offer an employee consideration in exchange for signing a new, compliant non-compete.
- Attach any proposed non-compete to an offer letter when hiring a new employee.
Minimum Wage IncreaseSeattle minimum wage employees will see a bump in their paychecks. Starting January 1:
- Large employers with over 500 employees must pay employees at least $16.39 per hour.
- Small employers with fewer than 500 employees must pay employees at least $15.75 per hour.
- Small employers can pay a lower $13.50 minimum wage if their employees are tipped or the employer contributes at least $2.25 per hour to medical benefits.
- Increase wages as needed; and
- Seattle employers: display the updated poster from OLS: https://www.seattle.gov/Documents/Departments/LaborStandards/2020WorkplacePosterFinal(1).pdf
More Lower-Wage Workers Get Overtime
The salary basis for exempt employees is increasing. Starting January 1, 2020, exempt employees must make at least $35,568 annually under federal standards. All employees making less than that should be paid overtime. The increased threshold is equivalent to $17 per hour for a 40 hour workweek, and is unlikely to affect many Puget Sound employers. Washington recently announced its own changes to the salary basis for Washington workers, which will make many more workers eligible for overtime over the coming years. With this change, the minimum pay a salaried worker must receive to be considered exempt will increase incrementally to 2.5 times the state minimum wage by 2028. Small employers will have a more gradual phase-in schedule than large companies. On July 1, 2020, the salary basis for exempt employees will go up to $35,100 annually. L&I anticipates that only about 40,000 workers will be affected with this first change. But by 2028, upwards of 259,000 workers will be newly eligible for overtime with salary threshold of $83,356.
- Review exempt and non-exempt employee classifications.
- Consider modest pay increases to maintain exemption for any employees whose job duties satisfy the standards and who earn less than $36,000 annually.
- Begin long-term planning for pay increases or modified work assignments to avoid overtime work in preparation for incremental salary threshold increases in the next eight years.