New federal overtime rule set to take effect

November 17, 2016 By    

Photo: iStock

A new rule requiring employers to pay overtime to 40-hour-per-week salaried workers who earn up to $47,476 per year is scheduled to go into effect Dec. 1. Employers were previously required to pay overtime to workers who earned up to half of that annual salary.

The new rule, which the Department of Labor (DOL) announced in May, captured the attention of small business owners, including a number of propane retailers. Still, as the National Propane Gas Association (NPGA) points out, the effects of the Fair Labor Standards Act may not be as impactful on retail propane companies as originally expected.

“If you read the heading of the rule, you [are] very fearful this is changing how you treat all of your employees,” says Sarah Reboli, director of regulatory affairs at NPGA. “Once you dive into what the change is, you realize the scope of employees impacted and it’s less of an ordeal than initially anticipated.”

To Reboli’s point, the new rule includes an exemption that precludes some jobs from the law’s requirements. This “EAP” exemption is intended for executive, administrative, professional, outside sales and computer employees. Hazardous materials workers, as well as other jobs that involve repetitive manual labor, physical skill and the energy industry, are not subject to the exemption, the association says.

“For the propane industry, the folks who could be impacted are your mid-management office staff,” Reboli says. “It depends on [a company’s] pay structure and the responsibility structure of the business.”

For propane employees to be considered exempt from the rule, they must meet three standards regarding a salary basis, a salary level and duties.

In a salary-basis test, employees must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed, NPGA says. In a salary-level test, employee full-year salaries must be equal to or greater than $47,476. Nondiscretionary bonuses and incentive payments may satisfy up to 10 percent of the salary level. In a duties test, employee job duties must primarily involve executive, administrative or professional duties based on DOL definitions.

If propane retailers have not reviewed the rule already, they certainly have a lot to consider. In addition, retailers shouldn’t hold out hope for a postponement or nullification of the overtime rule, Reboli says.

“The House of Representatives has tasked something [to fight] the rule, and there is some legislation still floating in the Senate,” she says. “But I would advise groups to move forward assuming a Dec. 1 date. It’s really unrealistically optimistic to get rid of the change during a lame-duck session. Even if it did pass the Congress, it’s seriously doubtful the president is going [to sign it].”

As of now, the rule’s salary threshold will systematically increase every three years, according to NPGA. DOL received more than 270,000 public comments about the rule, including from NPGA.

Reboli wrote a letter to DOL in September 2015 sharing NPGA’s concerns over the agency’s proposal to update the salary level utilized to categorize employees as eligible for overtime pay.

“We appreciate the proposal’s intent to ensure the overtime protections enacted by Congress are fully implemented in correlation with adjustments to our economic climate,” Reboli writes in a September 2015 letter to DOL on behalf of NPGA. “We believe that DOL’s proposed increase to the salary threshold, however, is a drastic overstep that may, in fact, have an inverse negative effect on small businesses.”

Read Reboli’s full letter to DOL here.

About the Author:

Kevin Yanik was a senior editor at LP Gas Magazine.

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