Driving employers up the wall: FLSA overtime pay exemptions for FSEs driving trucks
July 24, 2014
Many employers consider only the Fair Labor Standard Act (“FLSA”) when drafting compensation policies. However, a recent case from the Fifth Circuit Court of Appeals demonstrates that the peculiarities of the employer’s industry and the interrelation of various regulatory schemes applied to that industry are equally important and merit thoughtful consideration.
In Allen v. Coil Tubing Servs., L.L.C., No. 12-20194 (5th Cir. June 13, 2014), a divided panel of the Fifth Circuit Court of Appeals determined that certain oil field services employees engaged in safety-affecting interstate commerce activities are exempt from FLSA overtime pay under the Motor Carrier Act (“MCA”).
Allen involved employees who worked for Coil Tubing Services (“CTS”) in four districts: Alice, Texas; Angleton, Texas; Bridgeport, Texas; and Broussard, Louisiana. While the employees’ titles and duties varied by position, most of the employees had similar-enough job duties to be grouped together as “Field Service Employees” (“FSEs”). The employees alleged that CTS wrongfully denied them overtime pay under the FLSA because the employees worked more than 40 hours in a given week.
Generally, the FLSA requires an employer to pay overtime compensation to any employee working more than 40 hours in a workweek. However, under the MCA, employees are exempt from FLSA overtime pay if:
1. Their employer is subject to the Department of Transportation’s (“DOT”) jurisdiction; and
2. The employees are engaged in activities of a character directly affecting the safety of operation of motor vehicles in interstate commerce.
The parties did not dispute that CTS satisfied the first requirement—i.e., that it was subject to DOT’s jurisdiction—because CTS is a motor carrier that engages in interstate commerce. Rather, the dispute focused on how to determine whether the employees met the second requirement—i.e., that the employees were engaged in activities that affected the safety of operations of motor vehicles in interstate commerce. The employees argued that a district-by-district analysis of the employees’ duties was appropriate to determine whether the MCA exemption applied, while CTS argued that a company- wide analysis was proper.
The district court conducted a company-wide analysis and concluded that only FSEs who worked on land-based wells engaged in activities affecting motor safety. The evidence demonstrated that these FSEs either drove CTS’ trucks or could have been asked to drive CTS’ trucks. When the district court measured the interstate activities of land-based FSEs on a company-wide basis, it found that 7% of projects required FSEs to drive across state lines. Because such trips were assigned at random, the land-based FSEs had a “reasonable expectation” that they “could be assigned to drive interstate.” As a result, the district court concluded that all land-based FSEs were exempt employees under the FLSA and not entitled to overtime pay.
In a 2-1 decision, the Fifth Circuit agreed with the district court and CTS that a company-wide analysis was proper. The Court found that the employees were not employed by the various districts. Instead, CTS was the employees’ only employer during the relevant time period. Moreover, the districts operated under a single DOT number, were not independent legal entities, borrowed personnel and equipment from each other and solicited and accepted projects outside their geographic areas. As such, there was insufficient evidence and legal authority to treat the districts separately instead of conducting the MCA exemption analysis based on CTS as a single employer. The Court ultimately affirmed the district court’s use of a company-wide analysis on the interstate activities of the employees.
Employers who employ individuals who drive or who may be asked to drive across state lines should take particular notice of Allen and its implications on FLSA overtime pay.