FLSA Minimum Wage
The minimum wage increased to $7.25 on July 24, 2009.
Child Labor FLSA Penalty Assessment
Effective May 21, 2008, the maximum penalty for a child labor law violation resulting in death or serious injury to an employee under the age of eighteen is $50,000. The penalty may be doubled to a maximum of $100,000 if the violation is repeated or willful. See Child Labor.
Modifications and Technical Corrections to Various Wage and Hour Division Regulations
Proposals are under review by DOL, as explained at http://www.dol.gov/esa/whd/regulations/FLSA2008NPRMFactSheet.pdf
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FLSA Overtime Obligations: Application of the "Motor Carrier" Exemption is Now Very Limited
Employers who operate businesses that involve courier or delivery services, vending equipment stocking, and on-site repairs of various types of equipment, 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 and legally refrain from paying overtime compensation to drivers and other "safety-affecting" employees. "Interstate" transportation includes local movement of the property if it is a part of an interstate journey (e. g., there is a "practical continuity of movement" of the property in interstate or foreign commerce). Under these circumstances, the exemption applied prior to August 10, 2005 even if the transportation of property was entirely within one state and even though small motor vehicles were used to transport the property.
This exemption no longer applies in most transportation-of-property scenarios if the weight of the vehicle or the gross vehicle weight rating (GVW) is less than 10,001 pounds. Employees who were previously exempt are now subject to the payment of overtime compensation for all hours worked in excess of forty, on a workweek basis. Under certain circumstances, another exemption may apply. However, if you are affected by the described change, you should now be paying overtime wages unless you have accurately determined that an exemption applies.
A complicating factor for many employers who are affected is that they have traditionally paid wages on some basis other than hourly (per load, per item hauled, per mile, or some other piece rate, job rate, commission, or salary basis). In fact, numerous employers were not even aware of the "motor carrier" exemption; they erroneously believed that they were not required to pay overtime wages because of the method of compensation. Therefore, achieving compliance will be somewhat complex. Nevertheless, it is potentially very expensive to refrain from complying merely because expert help might be needed in order to make necessary corrections.
Another complication is that many workers who are now not exempt have traditionally been treated as "independent contractors." Even when the driver owns his/her vehicle, it is not likely (in most cases) that DOL or the courts will agree that the relationship is other than employment (for FLSA purposes). Continuing to treat your workers as "contractors" or "1099 workers" will not excuse failure to properly compute and pay overtime compensation if DOL or a court determines that an employment relationship exists or has existed during the statute-of-limitations period.
Several transportation firms have been sued regarding the above issues; drivers were allegedly treated as "independent contractors" and not paid overtime compensation.
If your workers use their own vehicles or other equipment in connection with employment, overtime compensation might not be your only FLSA problem. Whether or not the employees have been or are currently treated as "contractors," minimum wage compliance will require careful scrutiny. If an employment relationship may be asserted under FLSA rules, owner-operator expenses must be reimbursed to the extent that they erode the minimum wage. The most common expense of significance is the cost (including depreciation, insurance, interest, maintenance, repairs, fuel, etc.) of operating a personally-owned vehicle in connection with employment.
The 10,001 pound minimum weight requirement in order for exemption to apply to the transportation of property was established by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), which became law on August 10, 2005.
In addition to the SAFETEA-LU effect on the application of FLSA Section 13(b)(1) exemption to carriers operating vehicles of < 10,001 pounds GVW, there is a provision that appears to eliminate DOT's authority to regulate hours of service of operators of utility service vehicles. Therefore, it is probable that operators of utility service vehicles (even those of at least 10,001 pounds GVW) are now subject to the FLSA overtime compensation requirements. To my knowledge, DOL has not yet taken a position regarding this provision, as of the date of this web site's most recent revision.
Examples of employment that typically involves the operation of vehicles with a GVW of less than 10,001 pounds, formerly subject to the "motor carrier" exemption and now generally not exempt:
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- Courier 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.)
- Vending equipment stocking or repair
- Stocking of newspaper and/or magazine racks
- Newspaper transportation by employees of a publisher, distributor, or contractor (for example, dropping off bundles of newspapers where carriers* begin their routes)
- 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
- Merchandising firms
*Newspaper delivery to the consumer qualifies, under certain circumstances, for an exemption from the FLSA child labor, minimum wage, and overtime compensation standards.
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Technical Corrections Law Enacted June 6, 2008
The SAFETEA-LU Technical Corrections Act of 2008, enacted on June 6, 2008, preserves the 10,001 weight requirement for property transportation to qualify for FLSA Section 13(b)(1) exemption. This law also retains the passenger capacity rules established by SAFETEA-LU - for the exemption to apply (passenger transportation is discussed below).
A new development is that DOL now takes the position that the operation of (or other safety-affecting duties in connection with) smaller vehicles, transporting property in interstate commerce, defeats an otherwise applicable motor carrier exemption. The loss of exemption is on the basis of each employee and each workweek. This is a huge problem for mixed-fleet carriers, particularly with regard to loaders, mechanics, and drivers who operate vehicles that are over and under the 10,001 pound threshold.
The DOL Wage and Hour Division did not post any information on its web site, or otherwise take a public position (to my knowledge), regarding the effects of the Technical Corrections Act, until early December 2009.
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The preceding "motor carrier" exemption discussion concerns only the transportation of "property." Application of this exemption to the transportation of "passengers" hinges on very different considerations, and those rules have also changed. If you are engaged in the transportation of passengers, Morris will be able to assist you in determining whether or not your safety-affecting employees are now subject to (or exempt from) overtime standards.
The Technical Corrections Act, and DOLs interpretations and enforcement policies, affects motor carriers that transport passengers similarly to the way that property transportation is affected (see the discussion above regarding mixed-fleet transportation of property). Exemption is no longer available for transportation of passengers by a motor carrier unless a specified passenger capacity is met. When smaller vehicles are used, exemption is defeated (under the current DOL interpretation of the Technical Corrections Act).
Whether your transportation involves property, passengers, or a combination, you will find that consultation with Morris, in order to resolve your status, will be very cost effective. He can help you to arrive at determinations concerning the existence of an employment relationship, application of exemption, apparent minimum wage and/or overtime violations, and the steps necessary to achieve compliance (if changes are needed).
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