Fifth Circuit Deals Blow to Overtime Pay with MCA Exemption
This month the federal Fifth Circuit Court of Appeals, which hears appeals from Texas, delivered a surprising appellate decision on overtime pay for workers in long haul freight transport in Allen v. Coil Tubing Services, LLC. In this case, the appellate court held that workers could be identified by class in determining whether an exemption to overtime pay applies rather than assessing the individual job responsibilities of the employee. While this may seem like a minor point, it actually has huge implications.
You can read the opinion here but I will address the court’s new rule and how it affects Texas employees in the motor transportation industry. If you are looking for more specific analysis then you should review the opinion directly. This decision has a major impact for Texas employees, particularly in Fort Worth and Dallas where we have a large trucking industry.
The Overtime Exemption in the Motor Carrier Act
The Motor Carrier Act (MCA) contains an exemption to the overtime requirement in the Fair Labor Standards Act (FLSA) when the company is engaged in transporting people or freight in interstate (or international) transport and the employee is engaged in activities that directly affect the safety of motor vehicles traveling on public highways that transport goods or people in interstate (or international) commerce. This exemption applies to employees employed as drivers, freight loaders and mechanics.
The key issue for the exemption is the employee’s work is closely tied to vehicles that cross state lines. If you work for a company driving freight from Fort Worth to Dallas but the trucks never leave Texas then it is unlikely the exemption from the overtime requirements under the FLSA applies, at least for the MCA exemption. However, if you drove trucks from Dallas to Albuquerque then you engaged in interstate commerce and the exemption would apply.
There is an exception to the exemption known as the small vehicle exception. The small vehicle exception puts the overtime requirement back if the vehicles operated or serviced weigh less than 10,000 pounds. There are then three exceptions to the exceptions that put the exemption on overtime back on the table. Those are employees servicing or operating vehicles: (1) designed or used to transport more than eight passengers for compensation; (2) designed or used to transport more than fifteen passengers not for compensation; or used in transporting hazardous materials.
The primary purpose of the exemption was to allow the busing and trucking industries to employ workers in positions that regularly require long shifts where it would not be reasonable, or even possible, to let somebody off off work after forty hours. Overtime pay is a disincentive for employers to employ workers past forty hours in a workweek. By allowing overtime pay to apply to those workers created conditions where employers almost certainly had to pay overtime. Overtime is also an incentive for employers to hire more employees so they pay less overtime. It may not be reasonable to coordinate trucking or bus routes to change drivers or mechanics based on shifts. And let’s be honest, it was a financial windfall as a result of good lobbying by those industries.
How Texas Courts Previously Determined if the MCA Exemption Applied
Prior to this month’s opinion, courts in Texas, and around the country, looked at an individual’s job requirements. That standard looked at whether the employee performed services that directly affect the safety of motor vehicles traveling on public highways that transport goods or people in interstate (or international) commerce. Courts all the way up to the Supreme Court of the United States held that even a small amount of work that directly affects the safety of motor vehicles traveling on public highways that transport goods or people in interstate (or international) commerce is enough. An assignment of interstate work among a group of employees could validate the exemption for all employees in the group.
Let’s work through some examples to give the “old method” some context. The easy situation is the driver who drives interstate routes. No question there, the exemption applies. Same goes for the mechanic who works on the vehicles that travel interstate. If we look at a mechanic who works in a unit where the work is typically on vehicles that remain in the state but sometimes vehicles come through for repair that are interstate and the mechanic’s job responsibilities include work on both sets of vehicles then that mechanic would fall under the exemption even if the mechanic never actually worked on an interstate vehicle.
The exemption applies because the mechanic’s job responsibilities include work on interstate vehicles. The mechanic had an equal chance of assignment on interstate vehicles with other mechanics that worked interstate vehicles. However, the employer could not capture the mechanic in the exemption merely by adding work on interstate vehicles as a job responsibility unless the mechanic really would work on interstate vehicles. Nor could the employer insist the exemption applies because mechanics in other parts of the company work interstate vehicles.
Then the Fifth Circuit changed its mind.
How Texas Courts will Approach the MCA Exemption after Allen v. Coil Tubing Services, LLC
The Fifth Circuit in Allen said employers can classify workers by groups of like employees within the same company to determine if particular employees fall under the exemption. Under Allen, employers can say mechanics in Unit A only working intrastate vehicles are in the same class as mechanics in Unit B working interstate vehicles. That is because the jobs are similar. Not only did the court change the analysis from employee-by-employee to a group analysis, but the court allowed loose groupings.
The court affirmed the trial court’s decision that mechanics in Texas and Louisiana, only working on intrastate vehicles in positions that only worked on intrastate vehicles, could be grouped with similar mechanics in Wisconsin who had been assigned to work on interstate vehicles involved in particular interstate but regional projects in the mid-west although the mechanics in Texas and Louisiana were not in any way associated with those projects.
This new interpretation of the MCA exemption allows employers to arbitrarily group employees together and cross-apply the exemption. MCA exemption will apply to companies engaged in interstate commerce even if employees perform no services related to interstate business. (It will also trigger more litigation to determine how loose the grouping can be under this analysis.) We can predict that all employers in the busing and trucking industries will take advantage of the new analysis. They will classify employees together to reduce overtime pay liabilities.
Hopefully, the case will be appealed and sorted out. Until that time, workers who may be affected by the decision should be on the lookout for the MCA exemption. They should not be afraid to contact a local employment attorney to assess the exemption, even under the Allen decision.