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Three Big Changes to Employment Law in the New Year

by | Dec 16, 2019 | Business And Corporate Law

This New Year ushers in three big changes to employment law in the areas of:

  1. Paid family and medical leave
  2. Non-compete agreements
  3. Overtime pay

Below is a summary on these changes.

Paid Family & Medical Leave (PFML)

Beginning January 1, 2020, eligible employees are entitled to leave and partial wage replacement for qualifying events under Washington’s new Paid Family and Medical Leave (PFML).

  • Partial Wage Replacement Benefit.  To qualify for partial wage replacement, employees must:
  • have worked at least 820 hours in Washington during the previous 12 months;
  • experience a qualifying event;
  • provide notice to their employer; and
  • file a claim with Washington State’s Employment Security Department (ESD).

The benefit (paid and administered by ESD) provides up to 90% of an employee’s weekly wage, with a minimum $100 per week and a maximum of $1,000 per week.   More information on this new benefit is available here.

  • Job Restoration upon Return from Leave.  To qualify for job restoration upon return from PFML the following requirements must be met: (1) the employees must have worked for the current employer for at least 12 months; (2) the employee must have worked for the employer for at least 1,250 hours during the previous 12-month period; and (3) the current employer must have 50 or more employees. This last requirement is satisfied if the employer employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year.  Unlike FMLA, the limit of 50 employees applies to the employer as a whole, as opposed to the number of employees within a 75 mile radius of the facility where an employee works.
  • Length of PFML.  Most eligible employees can take up to 12 weeks of PFML a year.  If an employee experiences multiple qualifying events in a 12 month period, the employee may be eligible to receive up to 16 weeks of PFML, and up to 18 weeks if an employee experiences a serious health condition during pregnancy.

For example, a mom that gives birth may take up to 16 weeks of PFML because she experiences two qualifying events: her own medical condition (delivery) and parental leave.  If she experiences a serious health condition during pregnancy, she may take up to 18 weeks.  A new dad, or a new mom in the event of adoption, may only take up to 12 weeks for parental leave.

  • Qualifying Event. Similar to the federal Family and Medical Leave Act (FMLA), qualifying events include: (i) the birth, adoption, or placement of a child; (ii) care for a family member with a serious health condition; or (iii) the employee’s own serious health condition.  Unlike FMLA, “family member” is expanded to include grandchildren, grandparents, and siblings, in addition to spouses, children and parents
  • Premiums. Employers started collecting and remitting premiums and quarterly reports to Employment Security on January 1, 2019.
  • Coordination with FMLA.  At this time, ESD is reluctant to provide clarity to employer’s on the coordination between leave taken under PFML and FMLA because it is still finalizing rules on this subject.  That said, RCW 50A.15.110 states as follows:
  1. Leave under [PFML] and leave under the federal [FMLA] is in addition to any leave for sickness or temporary disability because of pregnancy or childbirth.
  2. Unless otherwise expressly permitted by the employer, leave taken under [PFML] must be taken concurrently with any leave taken under the federal [FMLA].
  • Employer Notice Requirement.  The employer must provide written notice of employee rights (form to be provided by ESD) when the employer becomes aware that an employee is taking family leave.  This notice must be provided within the later of:
    • 5 business days after the employee’s 7th consecutive day of absence due to family or medical leave, or
    • 5 business days after the employer has received notice that the employee’s absence is due to family or medical leave.

In addition, employers must post a state-issued PFML poster (ESD has said they will make this poster available on their website no later than December 31, 2019).

  • Employee Notice Requirements.  Employees must provide employers with at least 30 days’ notice before leave is to begin, unless the date of the treatment requires leave to begin in less than 30 days, in which case the employee must provide notice as soon as possible. Employees will also be required to give ESD documentation supporting the basis of the qualifying event.

This summary may not discuss all changes in the law important to your company.  Please reach out if you have any questions or wish for the firm to review/amend Employee Handbooks or leave policies affected by this change.

Non-compete Agreements

The Washington legislature made significant changes to state law regarding employee non-compete agreements.  The new law is available here.

  • Limitations to Non-compete Agreements:  As of January 1, 2020, non-compete agreements will be void and unenforceable unless:
    • The employee earned at least $100,000 annually, or $250,000 for independent contractors (these amounts will be adjusted annually for inflation);
    • The non-compete period is 18 months or less; and
    • The employer provided the non-compete agreement prior to the employee accepting an offer of employment, or the employer provided independent consideration if entered into after the start of employment.
  • Termination as a Result of a Layoff.  In addition, if the employer wishes to enforce a non-compete against an employee “terminated as the result of a layoff,” the employer must pay the employee his or her base salary during the period of enforcement (less any wages received by the employee after termination).
  • Moonlighting.  The new law also prevents employers from prohibiting employees from working a second job (either for another employer, as an independent contractor, or self-employment) if the employee earns less than 2x Washington’s minimum wage, unless it raises safety concerns or interferes with reasonable and normal scheduling.
  • Statutory Penalties.  Employers must pay a statuary penalty of $5,000, plus attorneys’ fees, expenses, and costs if a court or arbitrator determines that a noncompetition covenant violates the law.  If the court or arbitrator rewrites or partially enforces the covenant, the party seeking enforcement must pay the greater of the aggrieved party’s actual damages or a statutory penalty of $5,000 dollars plus attorneys’ fees, expenses, and costs.
  • Retroactive Application.  For non-competes signed prior to January 1, 2020, but which violate this new law, an employer is liable for damages only if the employer attempts to enforce the non-compete.
  • Non-solicitation and Confidentiality Agreements.  This new law does not apply to non-solicitation agreements, confidentiality agreements, covenants protecting disclosure of trade secrets, or covenants for the purchase or sale of businesses.

This summary may not discuss all changes in the law important to your company.  Please reach out if you have any questions or wish for the firm to review/amend contracts affected by this change.

Changes to Overtime Pay

The Washington State Department of Labor & Industries (L&I), on December 10, 2019, issued a new rule on overtime pay.  This new rule largely overshadows rule changes issued by the U.S. Department of Labor (DOL) earlier in the year.

  • Three-Part Test. To be exempt from overtime, an employee:
    • (1) must be paid a fixed salary,
    • (2) must perform certain defined job duties (generally “white collar” duties), and
    • (3) his/her salary must meet or exceed a predefined salary threshold.  Under current federal rules, that salary threshold is $455 a week ($23,660 a year).

Certain positions, including teachers and agricultural workers, are exempt from overtime, regardless of the three-part test referenced above.

  • Federal Change to Salary Threshold.  The DOL rule increases the salary threshold to $684 a week ($35,568 a year), effective January 1, 2020.
  • State Changes to Salary Threshold.  The L&I rule, which doesn’t go into effect until July 2020, increases the salary threshold over an eight year period.  The phase-in will be fully implemented by January 2028, at which point the state salary threshold is set to be $1,603 a week ($83,356 a year).  The state’s salary threshold implementation schedule between July 1, 2020 and January 1, 2028 is available here.
  • Salary Threshold for 2020.  In 2020, Washington employers will be required to follow the federal DOL rule of $684 a week ($35,568 a year) because it is higher than the state’s threshold for 2020 (when state and federal thresholds conflict, businesses must meet the threshold most favorable to employees).
  • Salary Threshold for 2021 and Beyond.  Beginning in January 1, 2021, Washington employers will be required to comply with the state’s salary threshold, which will be higher than the federal threshold.  In 2021, businesses with 1-50 employees will have to pay exempt employees at least 1.5 times the state minimum wage, about $827 a week ($43,004 a year). For businesses with 51 or more employees, the threshold will be 1.75 times the minimum wage, about $965 a week ($50,180 a year).  There will be incremental increases in the state threshold until Jan. 1, 2028, when it reaches 2.5 times the state minimum wage ($1603 a week, $83,356 a year).  After that, the salary threshold will rise when the minimum wage is increased for inflation.
  • Job Duties. In addition to the change in salary level, the new L&I rules update the job duties test for exempt employees. Generally, these rule changes align with the federal job duties tests, with some exceptions.  More information on changes to the job duties test can be found here.
  • State Minimum Wage.  In addition to the new overtime rules, on January 1, 2020, Washington’s minimum wage rises from $12 an hour to $13.50 an hour.
  • Practical Impacts.  As a result of these rule changes, employers will want to compare the cost of increasing salaries above the new salary threshold with paying overtime to those exempt employees that will be reclassified as non-exempt.  Important practical impacts to consider include whether to:
    • train reclassified employees on timekeeping policies and practices;
    • implement or expand training on overtime approval policies;
    • revise benefits or perks which only apply to exempt employees;
    • restrict off-hour work related emailing/texting, to avoid incurring unintended overtime hours; and/or
    • train reclassified employees on rest and meal periods.

This summary may not discuss all changes in the law important to your company.  Please reach out if you have any questions or wish for the firm to review the exempt status of your employees and the legal implications of reclassification.

To learn more about these changes or how to prepare, contact an attorney at JDSA Law.