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Employers who operate businesses that involve courier, messenger, or delivery services, vending equipment stocking, on-site repairs of various types of equipment, and drop off of newspaper bundles for carriers, as well as other employment that involves driving vehicles to transport "property" in interstate commerce, have traditionally been able to claim the "motor carrier" exemption. Legislation enacted in 2005 and 2008 generally creates an overtime compensation obligation in these scenarios.
The FLSA Section 13(b)(1) exemption applied very broadly for nearly seven decades. The exemption continues to have wide application in the trucking industry and to specific types of passenger transportation. However, many drivers and other safety-affecting employees are now subject to the overtime standards. The overtime provisions apply even to exempt employees under certain circumstances. This obviously results in a back wage liability if these employees have not been paid overtime compensation. Drivers are often paid on a commission or mileage basis, but - when the overtime standards apply - it is necessary to compute and pay the overtime premium compensation in addition to incentive earnings.
Examples of employment scenarios that are now generally subject to the overtime compensation standards:
Courier and/or messenger services, runners for law firms, and similar employment
Delivery services such as package/parcel delivery, private mail delivery services, and delivery of appliances or televisions
On-site repair or installation of various types of equipment (e.g., computers, copiers, industrial or medical equipment, heating/air conditioning systems, swimming pool mechanical equipment, etc.)
Floor covering (carpet, tile, hardwood, etc.) delivery and installation
Moving and storage of household goods (mixed fleet; some vehicles less than 10,001 pounds)
Vending equipment stocking or repair
Stocking of newspaper and/or magazine racks
Transportation of special orders, such as automotive or appliance parts, windows, mirrors, other construction materials, etc.
Rental firms: delivery of furniture and appliances from a central warehouse
Transportation of human organs, tissue, or blood
Transportation of human or animal specimens for laboratory analysis
Newspaper transportation by employees of a publisher, distributor, or contractor (for example, dropping off bundles of newspapers where carriers* begin their routes)
*Newspaper delivery to the consumer qualifies, under certain circumstances, for an exemption from the FLSA child labor, minimum wage, and overtime compensation standards.
A complicating factor for many affected employers is that they have traditionally paid wages on some basis other than hourly (salary, commission, mileage, or per delivery). In fact, numerous employers are not even aware of the "motor carrier" exemption; they erroneously believe that they are not required to pay overtime wages because of the method of compensation. Achieving compliance requires becoming educated regarding FLSA intricacies, and meticulously following the rules.
It is a very costly mistake to refrain from complying with the FLSA merely because it is common practice in the industry to pay wages on an incentive basis without paying the required overtime premium.
Another consideration is that many previously exempt workers have traditionally been classified as "independent contractors." There is no provision in the statute indicating that ownership of a business-use vehicle automatically creates an independent contractor relationship. An owner-driver of an automobile, van, SUV, or light truck, performing work primarily for one firm, is likely to be treated (by the DOL or the courts) as an employee of the firm for FLSA purposes. The Wage and Hour Division of the DOL has, for more than sixty years, applied a six-factor test to determine employment relationship. The IRS approach, and that of other agencies, is irrelevant for FLSA purposes. The FLSA broadly defines "employ," and there is no "safe harbor" in the event of misclassification. Failure to pay correctly computed overtime wages to owner-drivers sets the stage for an assertion of a substantial back wage liability.
Plaintiffs' attorneys are actively litigating employers who do not pay overtime wages. These suits often involve owner-drivers. DOL also litigates when necessary. A 1998 DOL case in one U. S. Court of Appeals Circuit held owner-drivers of a courier firm to be "independent contractors," based on the evidence presented. However, such determinations are so fact-specific that each employer must decide whether it is worth the risk to "go out on a limb" with regard to FLSA compliance.
If your workers use their own vehicles or other equipment in connection with employment, overtime compensation might not be your only FLSA problem. Minimum wage compliance will require careful scrutiny. If an employment relationship may be asserted under FLSA rules, owner-driver expenses (depreciation, insurance, interest, maintenance, repairs, fuel, etc.) must be reimbursed to the extent that they erode the minimum wage.
At "first blush," it can seem impossible to comply with the FLSA overtime standards (as well as minimum wage and record keeping provisions) with regard to owner-drivers, especially when the method of pay is commission or another incentive computation. However, it can be done. Achieving compliance stops the back wage accrual, and there are other advantages. Morris is able to guide employers in setting up a compliant record keeping and pay plan, with minimal disruption.
Calculation of Wages for Drivers Paid Commission, Mileage, per Delivery, etc.
Once an employer makes a decision to achieve FLSA compliance, it is vital to ensure that the method utilized in the computation of overtime pay results in the actual payment of overtime wages. Morris has worked with several employers who thought that they were complying, but scrutiny of the underlying payroll calculations revealed flaws that resulted in back wage liabilities. FLSA rules regarding overtime pay are quite explicit and there is no room for ingenuity on the part of an employer. The records may look great, and a DOL Wage and Hour Division investigator might have even refrained from asserting violations because of ineptness or failure to explore the actual methodology, but a subsequent investigation is likely to result in an assertion of concealment and willful violations.
Morris has the experience and expertise to examine precisely how you are dealing with overtime calculations and determine whether your approach, though well meaning, leaves you vulnerable. You will be informed of the flaws and how to correct them. More importantly, your new comprehension of the rules will enable you to explain how overtime pay has been properly computed if you are subjected to a Wage and Hour Division investigation.
Services are available nationally (via telephone conferences and email), including FLSA,Service Contract Act, and Davis-Bacon Act consultation, compliance assistance, DOL investigation guidance, self-audit coordination, and litigation support as a consulting expert.