By: Sean F. Darke, Esq.
With the Department of Labor ("DOL") launching its "We Can Help" campaign, it is imperative that employers review their pay structure and make sure that they are in compliance with the Fair Labor Standards Act ("FLSA"). The DOL recently stated that 80% of employers are still violating some portion of the FLSA, resulting in the DOL hiring 250 more investigators to pursue them for violations. One specific area in which the DOL is concentrating its investigation relates to local truck drivers who are not being paid overtime wages. A recent Seventh Circuit Court of Appeals decision provides guidance on how to analyze whether or not a local truck driver is exempt from overtime pay, even though they drive strictly within the State of Illinois.
The Seventh Circuit Court of Appeals held that local truck drivers transporting goods to their final destination were exempt from the overtime requirements under the FLSA (i.e. time-and-a-half pay for hours worked over 40). The Seventh Circuit used the motor carrier exemption under the FLSA to determine that local truck drivers were not entitled to overtime pay, despite working over 40 hours in a week. The Seventh Circuit relied on the motor carrier exemption, which provides that "any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service" and the "transportation by motor carrier and the procurement of that transportation, to the extent that passengers, property, or both, are transported by motor carrier between a place in a State and a place in another State," will be exempt from the FLSA's overtime requirements. The motor carrier exemption provides the Secretary of Transportation authority to regulate these types of employees - not the DOL. The Seventh Circuit essentially held that even though the local truck drivers never traveled outside the State of Illinois, the goods they were transporting traveled across state lines and the local truck drivers were just continuing that out-of-state travel to its final destination. It must also be stressed that the Seventh Circuit listed several factors that must be in place in order for an employer to claim the exemption, including the "fixed and persisting transportation intent."
The Seventh Circuit reviewed the DOL's regulations, which provide that "a fixed and persisting transportation intent beyond the terminal storage point at the time of shipment" will be considered interstate commerce. The Seventh Circuit determined that the "fixed and persisting" portion of that regulation provides that the remaining travel time from the warehouse to the goods' final destination is considered continuing the interstate travel of those goods, even if those goods are being transported by local truck drivers who never traveled outside the State of Illinois. Therefore, the Seventh Circuit determined that the local drivers were exempt under the motor carrier exemption and were not entitled to overtime pay. This "fixed and persisting" factor is a major area that the DOL is going to look at to determine if an employer is actually in compliance with the FLSA.
Employers must also be aware that the above case was a fact-specific scenario and that not all local truck drivers will be exempt from the FLSA overtime requirements. Employers need to review the status of employees who may fall into this exemption and determine if they are applying the exemption correctly. It is also very important that employers realize that the DOL is increasing its efforts to find violations under the FLSA and the above scenario is only one area that the DOL will be looking to investigate. Employers must still review the FLSA's other main areas, specifically, the "white collar" exemptions, regular rate-of-pay scenarios and other pay structures to assure that they are in compliance. With 80% of employers still violating the FLSA, chances are, so is your company.
Questions? Please contact WS Senior Attorney Sean F. Darke at (312) 629-9300 or firstname.lastname@example.org