One law that continually baffles or hides from many vending operators is the federal Motor Carrier Exemption and Overtime. Many vending operators assume under this law, they do not have to pay route drivers overtime, but there are specific criteria that have to be met, including driving a vehicle that has a Gross Vehicle Weight Rating of more than 10,000 pounds. Many vending operators using this law incorrectly to determine pay for employees will find themselves in violation of the federal law.
Where the regulation came from
By way of history, Section 13(b)(1) of the Fair Labor Standards Act provides an exemption from the Act’s overtime requirements (but not its minimum wage requirements) for “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service” under the federal Motor Carrier Act.
The purpose of this provision is to avoid having two federal agencies regulating the work hours of the same employees. Essentially, the Motor Carrier Exemption means that employers need not pay overtime to route drivers of motor vehicles that are carrying goods in interstate or foreign commerce or to those mechanics whose duty is to service motor vehicles used to carry goods in interstate or foreign commerce by keeping them in good and safe working condition.
Traditionally, based upon this exemption, operators were told their route drivers were exempt from being paid overtime so long as 1) their routes crossed state lines or 2) the vending goods were delivered from out-of-state distributors and the goods did not come to rest in the warehouse before the route driver loaded his/her truck and delivered the goods to the customers’ vending machines.
While this still holds true, there is one essential added component that many operators are unaware of: do the trucks the route drivers are driving having a Gross Vehicle Weight Rating (GVWR) of 10,001 pounds or above? If the answer is NO, then it doesn’t matter whether their routes cross state lines or where the goods come from because they now do not fall under the Motor Carrier Exemption and the driver must now be paid overtime. Please note that some states (i.e., California, Colorado, Hawaii or Maine) either do not recognize the Motor Carrier Exemption at all or have certain additional requirements that must be followed, and, consequently, even if your trucks are 10,001+ pounds, the route drivers must be paid overtime.
Overtime can’t be paid with commissions
What does being paid overtime truly mean for non-exempt route drivers, especially in an industry where a 40 hour workweek is not the norm? Just paying commissions doesn’t get you there and neither does paying some additional bonuses or incentives.
If the route drivers do not meet the test under the Motor Carrier Exemption, it means that after they work 40 hours in a week (in some states over 8 hours in a day), they must be compensated overtime pay for those hours worked in excess. This could mean paying them an hourly wage and then time and a half for any overtime hours. Operators can still pay them commission only, but then need to calculate overtime pay accordingly based upon their weekly commission and hours. Operators can pay them a salary still, but then need to determine their overtime pay from there. Operators are also allowed to pay a hybrid of all these types of compensation systems — so long as they continue to pay them the required overtime pay as well.
Generally, an employee’s regular rate of pay is determined by “dividing his total [compensation, including non-discretionary bonuses, but minus any exclusions] in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.” Which is documented in 29 C.F.R.778.109. This calculation gives operators the employee’s regular hourly rate. The operator can use this rate to determine the overtime rate, which the employee is then compensated an additional one-half of this rate for all overtime hours worked since the regular rate calculation already includes the employee getting compensated for straight time for all hours worked. 29 C.F.R.778-118.
Additionally, operators must keep track of each driver’s hours worked each day, if it be a time clock or turned in time sheets, so that there is a record of their hours worked with no disputes of he-said-she-said. When an employee goes to sue for overtime compensation, his/her memory of working overtime is usually embellished — having a solid record of hours worked keeps them honest and an operator “out of jail.” If route drivers are non-exempt, it is best to meet with an employment labor counsel to confirm your way of paying the route drivers is acceptable. If not, the damages and penalties that lie ahead could be devastating to your company.
Heather A. Bailey, Esq., one of Illinois’ 2014 Super Lawyers, is a partner with SmithAmundsen LLC and a National Automatic Merchandising Association Knowledge Source Partner for over a decade. She focuses her practice on labor and employment law issues for employers. She may be contacted directly at 312-894-3266 or firstname.lastname@example.org.