On January 1, 2027, Washington will apply two different minimum salary levels for exempt employees. The amount your business owes depends on how many employees you have in the state, with a lower figure for smaller employers and a higher one for larger employers. 

2027 is the last year the split exists. The two schedules have alternated since 2021, diverging in odd years and matching in even ones. Both land on 2.5x the state minimum wage on January 1, 2028, and employer size stops mattering for this purpose. 

For owners running several related companies, the stakes run deeper than the headline numbers suggest. Your internal headcount may not be the headcount Washington uses. If the state treats your entities as a single employer, a group of small companies can land in the large employer tier without hiring one additional person. 

Exempt vs Non-Exempt 

A non-exempt employee earns overtime. Past forty hours in a week, the employer owes one and a half times the regular rate. 

An exempt employee is not owed overtime, though the exemption takes three things together. The employee must be paid a fixed salary, the salary must meet the state threshold, and the job duties must fit a recognized exempt category, meaning executive, administrative, professional, computer professional or outside sales. 

Salary alone never creates an exemption, so a well-paid employee doing non-exempt work still earns overtime. The reverse is what matters for 2027, since a manager whose duties fit the executive test but whose salary falls below the threshold becomes non-exempt on January 1, and the overtime clock starts running. 

Two 2027 Salary Thresholds 

Washington sets the exempt salary threshold as a multiplier of the state minimum wage, calculated over a forty-hour workweek. Under WAC 296-128-545, employers with 50 or fewer Washington employees reach 2.25x in 2027. Employers with 51 or more reach 2.5x in the same year. 

The gap comes to roughly $9,150 per year for every exempt employee whose salary sits between the two figures. Across a handful of salaried employees, the difference adds up quickly. 

Treat these dollar amounts as projections. Washington indexes its minimum wage to inflation, and the Department of Labor & Industries sets each year’s rate on September 30 of the year before. Confirm the final figures against the published L&I threshold table once the 2027 rate is announced. The multipliers themselves are fixed. 

How Washington Counts Your Employees 

Employer size is measured on January 1 and holds for the rest of the calendar year. An entity crossing the fifty-employee line in July does not owe the higher threshold until the following January. The count also has to be redone every year of the phase-in. 

L&I administrative policy ES.A.9.9 gives employers two ways to run the number. 

The default method counts Washington-based employees as of January 1. Minors, new hires, seasonal workers and intermittent workers all count, whether they work full-time or part-time. Bona fide exempt executive, administrative, professional, computer professional and outside sales employees do not count. Removing those exempt employees from the total can be enough to keep a borderline business in the lower tier. 

The alternative method borrows a number the state has already worked out. Every September 30, the Employment Security Department takes the headcount an employer reported on the last day of each of the four most recent quarters and averages them. The average sets the employer’s size for Paid Family and Medical Leave premiums the following year, under RCW 50A.10.030. An employer may adopt the same figure for the salary threshold rather than taking its own January 1 snapshot. One limit applies. The regulation allows reliance only where the Employment Security Department classified the employer as employing fewer than fifty people, so the shortcut can confirm small-employer status and cannot be used to claim the larger tier. 

Whichever method you use, L&I expects a reasonable, good faith determination. Applying the wrong threshold for your business size can itself violate the Minimum Wage Act. 

Why Separate Companies can be Counted as One 

This is the part most multi-entity owners have never had reason to check. Employer size is counted per employer rather than per entity. Three companies with forty employees each look comfortably small on their own. Washington may still view them as one employer with 120. 

L&I policy provides an entity exercising control over wages, hours or working conditions may be deemed the employer of those workers. Every Washington-based individual under its control is then aggregated into a single count. Franchise arrangements, management companies and pay agency structures are the usual settings for the question. 

Facts pointing toward aggregation include centralized payroll run through one entity, HR matters escalating from local managers up to a parent or affiliate, staff shared across locations to cover gaps, and hiring or termination decisions requiring approval from outside the employing entity. Most of these are simply sensible ways to run a group, and none is decisive on its own. Taken together, though, they can add up to a single employer in the state’s eyes. 

It is worth keeping this in perspective. The aggregation rule lives in L&I administrative policy rather than in the regulation, and no published Washington decision has tested it. Knowing where your group sits is still the sensible move, since the agency view is the one applied day to day. 

Check What Your Management Agreement Actually Says 

Most management services and pay agency agreements were drafted for tax reasons, often to support the paymaster deduction under RCW 82.04.43393. Employer status for wage and hour purposes was rarely on the drafter’s mind. 

The result is often a document allocating control in ways nobody has revisited since signing. Look closely at any clause letting one entity handle hiring, review and termination for another, and at payroll provisions making one entity responsible for payroll policy, taxes and benefits. Disclaimers may not save you either, since a clause saying the servicing entity’s own staff are not employees of the client entity addresses the wrong direction. The aggregation risk runs the other way. 

Amending the agreement is only half the job. Because the standard looks to actual control, a well-drafted agreement will not hold if daily practice diverges from it. Loop in tax counsel before touching payroll provisions, since solving an employment problem can create a B&O problem. 

Your Checklist Before January 1, 2027 

• Run your Washington headcount by entity, split between exempt and non-exempt staff. If the combined total still sits at fifty or fewer, aggregation costs you nothing. 

• Identify every exempt employee earning between $82,321 and $91,468, and confirm the final figures once the state publishes the new minimum wage. 

• Pull every management, pay agency and services agreement across your entities, then map who actually sets pay, approves schedules, handles discipline and makes the final call on hiring and firing. Divergence between the paper and the practice is its own risk. 

• Decide early. Preserving separate-employer status means pushing employment control down to each entity and keeping it there. Accepting aggregation means budgeting for the higher threshold and checking whether you also lose the Paid Family and Medical Leave premium exemption, which turns on the same fifty-employee count. 

Raises and reclassifications take lead time. Waiting until December leaves no room to restructure. 

Talk it Through with Us 

If you own more than one Washington entity and share payroll, staff or back-office support across them, the answer is may not be obvious from the org chart alone. Equinox Business Law helps owners work through the headcount, review the governing agreements and choose a path before the deadline arrives. Reach out and we will take a look together. 

*This content is provided by Equinox Business Law Group PLLC for general informational purposes only and does not constitute legal advice. Viewing, sharing, or responding to this content does not create an attorney-client relationship with Equinox Business Law Group PLLC or any of its attorneys. You should consult a qualified attorney for advice regarding your specific situation.