Wage Claims by "Salaried" Employees: What You Need To Know

You are just about to open a new business, and you have agreements with your employees that provide for a “salary” as compensation.  The agreement governs the payment of your employees, and you don’t need to be concerned with wage regulations, right?  Not so fast.  There are important things to understand about wage regulations at the local, state, and federal level, and having an attorney review your employment agreements may save you from problems down the road.Keep in mind that an employee, even though paid a “salary” under an employment agreement, is likely to still be covered by wage regulations relating to the hours they actually work.  In this regard, it is important to understand the difference between a “salaried” employee, and an “exempt” employee under applicable regulations.  If an employee is not exempt, then certain wage regulations will still apply even though such employee’s compensation is under a “salary” structure. 

• Minimum Wages and Overtime.

 Under the Minimum Wage Act, Title 49, Chapter 46 (“MWA”), “[a]ny employer who pays any employee less than the amounts to which such employee is entitled under or by virtue of this chapter, shall be liable to such employee affected for the full amount due to such employee under this chapter, less any amount actually paid to such employee by the employer, and for costs and such reasonable attorney's fees as may be allowed by the court.”  RCW 49.46.090(1).  See also Seattle's Minimum Wage Ordinance (SMC 14.19). 

• Exemption.

  For purposes of the MWA, “Employee” does not include, for example, “[a]ny individual employed in a bona fide … professional capacity … as those terms are defined and delimited by rules of the director.”  RCW 49.46.010(3)(c).  Those rules in turn define “professional capacity,” in the case of “an employee who is compensated on a salary or fee basis at a rate of not less than $250 per week,” simply as performance of work “[o]riginal and creative in character in a recognized field of artistic endeavor (as opposed to work which can be produced by a person endowed with general manual or intellectual ability and training), and the result of which depends primarily on the invention, imagination, or talent of the employee.”  WAC 296-128-530(1)(b) and (5).  Determining whether your employees are exempt is an important and complex first step to insure that your employment agreements do not run afoul of the laws. 

• Overtime.

 The MWA requires payment of wages to a non-exempt employee “at a rate not less than one and one-half times the regular rate” such employee earns for hours worked in excess of forty hours per workweek, unless exceptions or exemptions apply.  RCW 49.46.130(1).  Exceptions to the overtime requirements include persons “exempted pursuant to RCW 49.46.010(3)” and “Employees who request compensating time off in lieu of overtime pay.”  RCW 49.46.130(2).If your typical workweek for employees may exceed forty hours, you need to make sure that you are aware of the potential requirements for overtime pay.  You also need to account for paid and unpaid breaks provided to all employees pursuant to WAC 296-126-092, and determine the appropriate and allowable deductions pursuant to WAC 296-128-532. 

• Conclusion.

 You can find out more by visiting the Washington State Department of Labor and Industries Wage & Hour website at http://www.lni.wa.gov/WorkplaceRights/Wages/.  It is definitely a good idea to consult with an attorney versed in wage regulations to determine the sufficiency of employment agreements you intend to have with your employees, and to understand how wage regulations and other employment laws may come into play.