Federal labor laws require most US employers to pay employees time and a half for every hour they work over 40 hours in a week. However, there are some exceptions to the general rule, and one is for employees who are subject to the Motor Carrier Act (MCA). The MCA applies to commercial transport that crosses state lines.
The Fair Labor Standards Act (FLSA) exempts employers from paying overtime when an employee engages in activities that fall under the jurisdiction of the Department of Transportation (DOT), which is responsible for enforcing the Motor Carrier Act. A recent decision by the Fifth Circuit Court of Appeals says employees who only transport goods inside one state (intrastate) may still be considered to be engaging in interstate commerce (and not entitled to overtime pay) based on the intent of the employer who initiated the original transport of the goods.
Federal Law Requiring and Exempting Overtime Pay
Chapter 8 of Title 29 of the United States Code (USC) governs Fair Labor Standards. Section 207 requires employers to pay employees at least “one and one-half times the regular rate” for every hour an employee works beyond 40 hours in one week – unless an exemption applies.
Section 213(b) creates some exemptions to the maximum hour requirements of section 207. In particular, section 207 does not apply to employees for whom the Secretary of Transportation has the authority to establish maximum hours of service.
Chapter 49 of the USC governing Transportation gives the Secretary of Transportation the authority to establish maximum hours of service for transportation by motor carrier of passengers or goods that are transported between:
- A place in one state and a place in another state
- A place in one state and a place back in the same state if another state line was crossed in the process
Transporting people or goods across state lines is known as ‘interstate’ commerce because it involves more than one state. The Motor Carrier Act only applies to interstate commerce and not to intrastate commerce.
Application of the Overtime Pay Exemption for Motor Carriers
Employers governed by the Motor Carrier Act are persons who are compensated for providing transportation or who have rights in property that is being transported for a commercial purpose. Employees subject to the overtime pay exemption can be hired drivers, driver helpers, loaders, and mechanics who are associated with the motor vehicles that are engaged in interstate commerce.
Only employees involved in “safety-affecting activities” concerning the transport vehicle will be exempt. Other employees providing collateral support services are generally not exempt from overtime pay requirements.
Small Vehicle Exception (to the Exemption)
There is an exception to the overtime pay exemption when the transport vehicle weighs 10,000 pounds or less. In any work week that an employee of a motor carrier acts as a driver, driver’s helper, loader, or mechanic in the operation of a motor vehicle weighing less than 10,000 pounds, overtime must be paid even if the employee also engaged in transport that would otherwise exempt an employer from paying overtime in the same week.
The Fifth Circuit’s Recent Decision on When the Motor Carrier Act Applies to Exempt Overtime Pay
Knowing when the Motor Carrier Act exempts an employer from paying overtime to an employee has not always been clear cut – especially when the initial transport of goods is to a distribution center where secondary transport completes delivery to a final destination. Employers and employees have often disagreed about where interstate transport ends and intrastate transport begins. That was the issue the Fifth Circuit Court of Appeals recently tackled in Ash v. Flowers Foods.
The Facts of the Case
Flowers Food is a bakery operation that uses independent distributors to market its products in Louisiana. Distributors order, purchase, and deliver the products to customers. Some Flowers bakeries are located outside the state. Goods are shipped to warehouses in Louisiana and are picked up later by distributors who then deliver the products to customers.
Ash and the other plaintiffs in the case were distributors of Flowers’ products who claimed they were owed overtime pay under the FLSA. The distributors picked up their products from warehouses located in Louisiana and delivered them to customers without leaving the state.
The district court ruled that the plaintiff distributors were engaged in interstate commerce and thus exempt from overtime pay.
The Fifth Circuit’s Legal Analysis
Ash argued that the flow of interstate commerce was severed when the products were delivered to the warehouses in Louisiana. Therefore, they did not engage in interstate commerce, and the MCA does not apply to interstate commerce.
The court began by noting it had previously determined the MCA could apply to the intrastate transport of goods if said transport remained in the “flow” of interstate commerce. The court also pointed out the Interstate Commerce Commission has indicated that continuity of movement is unaffected by temporary storage at a warehouse if it merely permits the orderly and convenient transfer of goods on their way to the final destination intended by the shipper.
In affirming the lower court’s decision, the Fifth Circuit looked at the “totality of circumstances” to determine Flowers indeed intended that when the baked goods were sold, they would ultimately be delivered to customers in Louisiana. The stop at the warehouse was necessary to facilitate the intended disbursement to customers.
What Texas Motor Carriers Should Know About Overtime Pay
The main takeaway for motor carriers is that the MCA overtime pay exemption may apply to employees who only transport goods intrastate. The shipper’s intended destination is the deciding factor in where interstate commerce ends. Temporary breaks in transport will not likely disrupt the continuous flow of interstate commerce before it has reached the shipper’s intended destination.
The labor and employment lawyers at the law offices of Fee, Smith & Sharp serving Dallas, Austin, and Houston counsel employers on state and federal laws so they can develop policies and procedures that allow them to operate more efficiently and avoid employee-related litigation. If you run a business in Texas, Fee, Smith & Sharp is the experienced partner you can count on to handle all your legal needs. Contact us today!
