Updated Executive Duties Test under Washington Law

Yesterday, we posted about Washington’s new salary requirements for exempt employees. Today, it’s time to talk about the new duties test for executive employees. Washington’s new law expands the definitions of certain terms to clarify the kind of work an executive must perform to be exempt.

The new law provides that an executive shall mean an employee “whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof.”  While this is similar to the old law, the new law includes a detailed definition of “management.”

“Management” includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

The new law also clarifies that a “customarily recognized department or subdivision” must have a permanent status and a continuing function,” and that:

  • A recognized department or subdivision need not be physically within the employer’s establishment and may move from place to place.
  • When an enterprise has more than one establishment, the employee in charge of each establishment may be considered in charge of a recognized department or subdivision of the enterprise.
  • Continuity of the same subordinate personnel is not essential to the existence of a recognized department or subdivision with a continuing function.

The duties of an exempt executive still require the employee to customarily and regularly direct the work of two or more other employees.  The new law explains, however, that the “two or more employees” requirement can mean two full-time employees, or one full-time and two half-time employees, or four half-time employees. But, hours worked by an employee cannot be credited more than once for different executives.

Finally, the new law states that the executive exemption includes any employee who owns at least a bona fide twenty percent equity interest in the enterprise in which the employee is employed, regardless of whether the business is a corporate or other type of organization, and who is actively engaged in its management. Note, the new salary requirements do not apply to these executive employees.

Stay tuned, information about the administrative exemption is next.

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