In a closely-watched case called Bostain v. Food Express, Inc., the Washington Supreme Court announced on March 1 that for purposes of determining overtime pay under the Washington Minimum Wage Act, employers must count hours worked outside of the state of Washington as well as hours worked in the state of Washington by a “Washington-based employee.”

Typically Employees Non-Exempt Under Washington Law Are Also Non-Exempt Under Federal FLSA

Washington’s Minimum Wage Act requires overtime pay for non-exempt employees working more than 40 hours in a workweek. For purposes of counting the number of hours worked, employers who have non-exempt employees who work outside Washington state, typically pay overtime on the total number of hours over 40. They do not make a separate count of hours worked in the state versus hours worked outside the state because most employees who are non-exempt under Washington law are also non-exempt under the federal FLSA, which has the same 40-hour work week threshold for overtime pay. So, it doesn’t make any difference for overtime pay purposes whether the hours are worked in-state or out-of-state.

Some Federal FLSA Exemptions Don’t Have State Counterpart

There are situations, however, where an employee is exempt under the federal FLSA, but, there is no state law counterpart. Washington, for example, does not have a parallel state law exemption for every federal exemption. In that case, how does the employer determine whether the employee is entitled to overtime pay under state law?

A Real Life Example: Bostain v. Food Express, Inc.

In the late 1980s, a real-life example of a situation where an employee is exempt under the federal FLSA, but not the state wage/hour law, arose in the Washington state. During this period, a series of Washington appellate decisions held that the so-called federal Motor Carrier Act exemption for interstate truck drivers did not have a counterpart under the Washington Minimum Wage Act. Therefore, interstate truck drivers who worked in Washington state needed to be paid overtime pay for working more than 40 hours a week under the Washington Minimum Wage Act, even though they are exempt under the federal FLSA. However, the Washington Department of Labor & Industries, which oversees regulation of state wage and hour laws issued regulations specifying that the overtime pay requirement only applied to hours worked within the state of Washington by these interstate truck drivers. Thus, if an interstate truck driver worked 40 hours in the state in a given workweek and worked two hours outside the state in the same work week, no overtime pay was owed under the Washington DLI's regulation for the additional two hours – or at least it wasn’t until the Washington Supreme Court issued its ruling in Bostain v. Food Express, Inc.

The Washington Supreme Court’s Controversial Decision

In a close 5-4 decision, Justice Barbara Madsen, writing for the majority, stated that Washington’s Minimum Wage law “unambiguously requires that overtime be paid to a Washington employee based on all hours worked.”

In this case, Mr. Bostain was an interstate truck driver who lived in Clark County, Washington and worked out of a trucking terminal located in the same county (across the river from Portland, OR). A log audit of Mr. Bostain’s final year of work for Food Express, a California corporation headquartered in Arcadia, California, showed that he averaged 48 working hours per week but that he never worked more than 40 hours in a week within Washington state. He spent 37 percent of his driving time in Washington and 63 percent out of state. He was not paid overtime. Now, because of the Washington Supreme Court decision, he will be entitled to 8 hours overtime pay for each workweek even though he is exempt under the federal FLSA and doesn’t work over 40 hours per week in Washington.

The opinion states that Mr. Bostain was paid an hourly wage, but, if he drove over 200 miles, he was paid by the mile. The court did not comment as to how overtime pay should be calculated in this case. However, based on current state law and informal Department guidance, the use of mileage rates does not satisfy overtime pay unless there is a specific agreement to pay one and one-half times the mileage rate during hours over 40 or some other method that is “reasonably equivalent” to time-and-one-half overtime pay.

Is This the Final Word?

Probably, although the employer has 20 days to file a motion for reconsideration. Such motions are rarely granted. However, since this is a 5-4 decision, it would only take one vote to change the outcome. Also, the Washington Trucking Association, which filed an amicus brief in the case, said that it expects a further appeal to the U.S. Supreme Court on the grounds that the decision violates the Commerce Clause of the U.S. Constitution. Getting the U.S. Supreme Court to take a case is a long shot and it could take anywhere from six to 12 months to know whether the court would take the case.

Which Employers Should Be Concerned?

Employers who employ a “Washington employee” or a “Washington-based employee” (a) who is not exempt under the Washington Minimum Wage Act, such as an interstate driver, and (b) for whom the employer has not been counting out-of-state hours in calculating overtime pay are the ones directly affected.

What Is a "Washington Employee" or "Washington-Based Employee"?

There are no such terms currently in Washington wage/hour law. These terms are not defined in statutes or regulations previously issued. The Washington Department of Labor & Industries has said that Department officials are reviewing the Food Express opinion and “determining what adjustments need to be made to our policies.” In the meantime, it seems clear based on the facts in the Food Express case, that Washington courts will consider an individual to be a Washington employee if the individual resides in the state of Washington and “works out of” a Washington facility equipped as a business location where coworkers also work. In the case of an interstate driver, the court will also look to see whether the driver has a Washington driver’s license. Beyond that, the court gave no guidance except to say that analysis in other situations “will depend on factors that courts routinely use for deciding choice of laws issues.” This could lead to a series of case-by-case lawsuits. For example, what will happen if the employer maintains no facility in the state of Washington, the employee routinely spends most of his or her time outside the state, receives information by email at home, and simply chooses to reside in Washington (but is not required to do so by the employer)? What happens if the employee argues that the law of the state where there hours are worked applies (e.g., OR or CA)? Stay tuned for more details!