The Motor Carrier Exemption under the Fair Labor Standards Act

By Lehr Middlebrooks Vreeland & Thompson, P.C.

August 1, 2019

This article was prepared by Lyndel L. Erwin, Wage and Hour Consultant for the law firm of Lehr Middlebrooks Vreeland & Thompson, P.C. Prior to working with the firm, Mr. Erwin was the Area Director for Alabama and Mississippi for the U. S. Department of Labor, Wage and Hour Division, and worked for 36 years with the Wage and Hour Division on enforcement issues concerning the Fair Labor Standards Act, Service Contract Act, Davis Bacon Act, Family and Medical Leave Act and Walsh-Healey Act. Mr. Erwin can be reached at 205.323.9272.

Although there have been some changes in the way that Wage Hour operates since the new administration took over, they have not been drastic. One change is that now the Wage Hour Administrator has begun issuing opinion letters. First, they reissued several letters that were withdrawn in early 2009 by the previous administration and recently issued several new letters, including three this month. One of the recent letters deals with “rounding” of timecards when computing the correct hours worked. All of the opinion letters can be found on the Wage Hour website.

Production Bonuses and Overtime

An opinion letter issued on July 1, 2019 should be of particular interest to employers that pay production bonuses as this letter addresses the method that should be used when computing the overtime that must be paid on a production bonus. The method that an employer uses in determining the bonus affects the method that must be used to compute the correct amount of overtime premium that is due. If the bonus is paid based on straight time hours only and covers a period longer than a workweek, the employer does not have to compute the overtime until he can determine the amount of the bonus. For example, if the bonus is paid quarterly, the total bonus must be allocated to each workweek within the quarter and the overtime must then be computed using the hours worked in each individual workweek. The payment of a bonus of $500.00 would require dividing the bonus by 13 weeks to get the weekly equivalent. Once this amount is determined, you must then divide weekly equivalent by the number of hours worked during each workweek. The overtime should be computed by dividing the equivalent amount by the number of hours actually worked during the workweek and overtime is computed at one-half time for the overtime hours worked.

The easier method to properly compute the correct overtime is to base the payment as a percentage of the employee’s gross pay (both straight time and overtime compensation) during the period covered by the bonus. Then you have correctly computed the overtime premium that is due by multiplying the bonus rate times the gross pay earned during the period.

Each method of computation of the overtime for the quarter will yield you the same gross amount of bonus due, but using the latter method is much easier and more efficient, especially if you are having someone manually compute your payrolls. The letter provides a detailed explanation of the regulations governing such payments.

The Motor Carrier Exemption

Previously, I have discussed the application of Motor Carrier exemption, but I continue to see employers facing litigation regarding the proper application of exemption. As there have been some changes in the criteria for the overtime exemption, I thought I should provide an updated overview to the requirements. Section 13(b)(1) of the FLSA provides an overtime exemption for employees who are within the authority of the Secretary of Transportation to establish qualifications and maximum hours of service pursuant to Section 204 of the Motor Carrier Act of 1935, except those employees covered by the small vehicle exception described below.

Thus, the 13(b)(1) overtime exemption applies to employees who are:

1. Employed by a motor carrier or motor private carrier

2. Drivers, driver’s helpers, loaders, or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce and

3. Not covered by the small vehicle exception.

The driver, driver’s helper, loader, or mechanic’s duties must include the performance of safety-affecting activities on a motor vehicle used in transportation on public highways in interstate or foreign commerce. This includes transporting goods that are on an interstate journey even though the employee many not actually cross a state line. Further, safety affecting employees who have not made an actual interstate trip may still meet the duties requirement of the exemption if the employee could, in the regular course of employment, reasonably have been expected to make an interstate journey or could have worked on the motor vehicle in such a way as to be safety-affecting. An employee can also be exempt for a four-month period beginning with the date they could have been called upon to, or actually did, engage in the carrier's interstate activities.

In 2007, Congress inserted a Small Vehicle Exception to the application of the overtime exemption, which severely limits the exemption, especially for small delivery vehicles such as vans and SUVs. This provision covers employees whose work, in whole or in part, is that of a driver, driver's helper, loader or mechanic affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce, except vehicles:

(a) Designed or used to transport more than 8 passengers, including the driver, for compensation; or

(b) Designed or used to transport more than 15 passengers, including the driver, and not used to transport passengers for compensation; or

(c) Used in transporting hazardous material, requiring placarding under regulations prescribed by the Secretary of Transportation;

Due to the Small Vehicle Exception, the Section 13(b)(1) exemption does not apply to an employee in any workweek the employee performs duties related to the safety of small vehicles, even though the employee's duties may also affect the safety of operation of motor vehicles weighing greater than 10,000 pounds, or other vehicles listed in subsections (a), (b) and (c) above, in the same work week. For example, this means that a mechanic who normally spends his time repairing large vehicles works on vehicle weighing less than 10,000 pounds is not exempt in any week that he works on the small vehicle. When determining whether the vehicle meets the 10,000 pounds requirement, a U.S. District Court in Missouri, confirming Wage Hour’s position, ruledthat if a vehicle is pulling a trailer, you consider the combined weight of both the vehicle and the trailer to apply the exemption.

The Section 13(b)(1) overtime exemption also does not apply to employees not engaged in “safety affecting activities,” such as dispatchers, office personnel, those who unload vehicles, or those who load but are not responsible for the proper loading of the vehicle. Only drivers, drivers’ helpers, loaders who are responsible for proper loading, and mechanics working directly on motor vehicles that are to be used in transportation of passengers or property in interstate commerce can be exempt from the overtime provisions. Further, the overtime exemption does not apply to employees of non-carriers such as commercial garages, firms engaged in the business of maintaining and repairing motor vehicles owned and operated by carriers, or firms engaged in the leasing and renting of motor vehicles to carriers.

While the DOT-covered employees are exempt from the overtime regulations, the minimum wage requirements still apply. Most truck drivers earn more than enough per mile that this is not an issue, at least when you consider their active driving time. But what about all that other time away from home? There is a large class action pending in Arkansas based in part on the theory that the DOL’s rules that employees on duty for 24 hours can have no more than 8 hours deducted for actual sleep or more (and only then with the employee’s agreement) trump DOT rules that restrict truck drivers to 14 hours on duty time during a day and specifically excluded sleeper berth time from on-duty time. A July 22, 2019, opinion letter held that the application of the DOL’s 8-hour-per-day maximum sleep exclusion was “unnecessarily burdensome” and that all time where “drivers are relieved of all duties and permitted to sleep in a sleeper berth is presumptively non-working time that is not compensable.”

Employers that operate motor vehicles should carefully review how they are paying drivers, drivers’ helpers, loaders and mechanics to make sure they are being paid in compliance with the FLSA. Failure to do so can result in a very large liability. If I can be of assistance, please give me a call.