Washington State Tightens Background Check Rules and Adjusts Salary Standards

In 2025, Washington State enacted two major updates to its labor and employment laws: the Fair Chance Act Amendment (“Amendment”) and the Minimum Wage and Salary Threshold Adjustment Plan (“Adjustment Plan”). The Amendment imposes stricter limits on employer background-check practices, taking effect July 1, 2026 for medium and large employers and January 1, 2027 for small employers. The Adjustment Plan, addressing minimum wage rates, exempt-employee salary thresholds, and non-compete requirements, will take effect January 1, 2026. Together, the two measures will significantly reshape recruitment procedures, pay structures, and compliance standards for Washington employers, making early preparation essential.

If you require policy interpretation or legal support for recruitment and payroll compliance practices in Washington State, please contact the ILS legal team at contact@consultils.com. Our team can assist you in streamlining your recruitment processes, payroll structures, and document templates, and develop a comprehensive compliance strategy that complies with the amendments and adjustments, ensuring a smooth transition and stable operation for your company before the new regulations take effect.

The Washington Fair Chance Act Amendment

Enacted in 2018, the Fair Chance Act has long served as the foundation of Washington’s “ban-the-box” policy, prohibiting employers from asking about an applicant’s criminal history before issuing a conditional offer of employment. The law was designed to ensure that individuals with criminal records have a fair opportunity to obtain employment.

Over time, lawmakers identified ambiguities in the original statute—particularly regarding which employers were covered, when background checks could occur, and how assessments should be conducted. To clarify these issues and strengthen anti-discrimination and anti-retaliation protections, the legislature adopted the 2025 Amendment, which sets clearer procedural obligations for employers during candidate screening and background checks.

The Amendment aims to:

• Define when and under what conditions employers may inquire into criminal records;

• Standardize the assessment process to prevent automatic disqualification based on criminal history;

• Strengthen notice and appeal rights, improving transparency and fairness in enforcement.

Key Changes

By expanding provisions of the original Act, the Amendment further regulates how employers may access and use criminal background information concerning applicants and employees. The core requirements include:

• Timing of background checks: Employers may conduct background checks only after issuing a conditional offer of employment. If an applicant voluntarily discloses a record earlier, the employer must provide a copy of the Act and the Attorney General’s guidance.

• No automatic rejection: Employers may not automatically disqualify candidates based on arrest or conviction records; any adverse decision must be supported by a legitimate business justification.

• Individualized assessment: Before rejecting a candidate due to a criminal record, employers must complete a three-step evaluation process:

  1) Provide written notice identifying the specific record and the reason it relates to the job;

  2) Allow at least two business days for the candidate to correct the record or submit evidence of rehabilitation or work history;

  3) Issue a written decision explaining the evaluation process, rationale, and supporting evidence.

• Coverage and exemptions: The Amendment applies to all employers doing business in Washington, regardless of where the company is headquartered, and covers both applicants and employees. Exemptions apply to:

  1) Employers holding federal contracts;

  2) Positions involving unsupervised contact with minors, vulnerable adults, or legally defined vulnerable populations;

  3) Industries where federal or state law expressly authorizes or requires criminal-record checks (e.g., financial institutions). Employers should consult counsel to determine whether an exemption applies.

Implications for Employers

• Recruitment redesign: Background checks must shift from early-stage screening to the post-offer stage. Any discussion of criminal history during interviews or initial screenings may now constitute a violation.

• Increased compliance risk: Failing to follow the individualized assessment process, neglecting to provide required notices, or relying on automated disqualification systems could trigger investigations by the Attorney General and expose employers to damages and attorneys’-fee liability.

• Record-keeping burden: Employers must retain all documentation related to background checks—including notices, applicant responses, assessment reports, and written decisions—for potential inspection.

Compliance Recommendations

• Review third-party contracts: Consult counsel to audit agreements with background-check vendors and ensure compliance with both federal and state fair-credit reporting laws.

• Update document templates: Revise offer letters, background-check disclosures, and adverse-action notices to include required information and reference the official employer-applicant guide under the Fair Chance Act.

• Audit recruitment materials: Remove any criminal-history questions from application forms or interview scripts that occur before a conditional offer.

• Conduct internal training: Provide HR and hiring managers with training on the new assessment process, exemptions, and procedural requirements.

The Washington Minimum Wage and Salary Threshold Adjustment Plan

The Adjustment Plan updates wage-and-hour compliance across the state by revising minimum-wage standards, exempt-employee salary thresholds, non-compete eligibility requirements, and pay rules for specific occupations. The core updates below:

• Minimum wage and special occupations: Starting January 1, 2026, the state minimum wage will rise from $16.66/hour to $17.13/hour. Cities such as Seattle and Bellingham maintain higher local minimums; employers must prioritize compliance with those local standards.

• Overtime-exemption salary thresholds: To qualify as exempt from overtime, an employee must meet both the salary threshold and the duties test (applicable to executives, administrators, professionals, and computer employees). Beginning January 1, 2026, the minimum salary threshold for exempt employees will be 2.25 × the state minimum wage, or $80,168.40 per year. The threshold will increase annually, reaching 2.5 × the state minimum wage—approximately $89,076 per year—by 2028.

• Non-compete eligibility: Non-compete agreements will only be enforceable if:

  The employee earns at least $126,858.83 annually, or the independent contractor earns at least $317,147.09 annually. Special pay rules :

  1) Youth workers (ages 14–15): $14.56/hour (85% of the state minimum wage).

  Rideshare drivers:

  2) Seattle area: $0.70/min + $1.63/mile, minimum $6.12 per trip.

  Other Washington areas: $0.40/min + $1.38/mile, minimum $3.55 per trip.

Implications for Employers

• Higher labor costs: Increased minimum wages and salary thresholds will raise payroll expenses. Employers with large numbers of hourly or exempt employees (executives, professionals, etc.) must recalculate labor budgets.

• Risk of invalid non-competes: Existing agreements will become unenforceable if compensation falls below the new thresholds, potentially resulting in talent loss or exposure of confidential information.

• Greater compliance complexity: Regional wage variations, hybrid pay formulas (e.g., per-minute + per-mile for rideshare drivers), and dual qualification tests for exemption increase compliance challenges and the risk of disputes.

• Heightened litigation risk: Wage-and-hour and non-compete litigation is on the rise in Washington. Employers failing to adjust pay scales or contracts in time may face lawsuits, penalties, or damages.

Compliance Recommendations

• Monitor local ordinances: Establish a state-to-city wage tracking system, focusing on jurisdictions like Seattle with independent wage rules.

• Verify pay structures: Ensure all hourly rates meet the applicable minimums and confirm exempt-employee salaries meet or exceed $80,168.40 (and higher thresholds in future years).

• Update non-compete agreements: Conduct a legal review of existing contracts, identify workers below the threshold, and amend or terminate unenforceable agreements.

• Revise documents and train staff: Work with counsel to update employee handbooks and offer letters to reflect new wage and exemption rules, and conduct HR training on pay calculations and contract compliance.

  
  

Conclusion

Washington’s two new laws impose heightened compliance obligations on employers across two core dimensions: recruitment background checks and wage-and-hour standards. The Amendment focuses on protecting applicant rights and restructuring how employers conduct criminal-background reviews, while the Adjustment Plan raises pay standards and clarifies non-compete validity thresholds, driving employers to refine pay structures and contract management.

Given the limited compliance window and substantial penalties for violations—including fines, damages, and litigation—employers should promptly begin internal audits, align hiring and compensation processes, and consult experienced employment counsel to ensure all adjustments, documentation, and training are completed before the effective dates.

If you require policy interpretation or legal support for recruitment and payroll compliance practices in Washington State, please contact the ILS legal team at contact@consultils.com. Our team can assist you in streamlining your recruitment processes, payroll structures, and document templates, and develop a comprehensive compliance strategy that complies with the amendments and adjustments, ensuring a smooth transition and stable operation for your company before the new regulations take effect.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949