Washington State Employers to Face Significant Minimum Wage and Salary Threshold Increases

Starting 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 per hour.

Because the salary threshold for exempt employees in Washington is tied to a multiple of the minimum wage, the exempt salary threshold for all employers with Washington-based employees will also increase. The exempt salary threshold for employees working for small employers (1-50 employees) increases to $57,293.60 per year, which translates to $1,101.80/week (and is a $4,550 annual increase from the 2021 threshold). The exempt salary threshold for employees working for large employers (51 or more employees) increases to $65,478.40 per year, which translates to $1,259.20/week (and is a $12,734.80 annual increase from the 2021 threshold).

How Washington State Calculates Minimum Wage

Each September, the state Department of Labor & Industries compares the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from August of the previous year to the index for August of the current year. The year over year increase from 2021 to 2022 during this period was 8.66%.

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

What the Minimum Wage Increase Means for Employers

Beginning January 1, 2023, employers with employees based in Washington must ensure that the hourly pay rates of their non-exempt/hourly employees are at or above the new minimum wage.

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

Considerations for Employee Reclassification

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

Employers considering reclassification should consult with experienced wage and hour counsel to identify legal options for reclassification; the impact on collateral obligations such as rest/meal periods, overtime pay, and coverage under state leave laws; employee relations communications; and training programs for supervisors and employees on recordkeeping and pay administration following reclassification.

Exceptions to Washington State Minimum Wage Law

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

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

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

• Seattle should be announcing its increase for 2023 in the coming months. In 2022, employers with employees working 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 toward the employee's medical benefits and/or where the employee earns at least $1.52/hour in tips can 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.