Third Circuit Court of Appeals Applies an Exception to the Motor Carrier Exemption

On March 11, 2015, the Third Circuit Court of Appeals became the first Circuit Court to apply the “covered employee” provision of the SAFETEA-LU Technical Corrections Act of 2008 (the “Corrections Act”) to the Motor Carrier Act exemption of the Fair Labor Standards Act (“FLSA”). In McMaster v. Eastern Armored Services, Inc., No. 14-1010 (Precedential), the Court held that an employee of a motor carrier whose job “in whole or in part” affects the safe operation of vehicles lighter than 10,000 pounds is a “covered employee” entitled to overtime for weeks in which such employee works more than 40 hours.

The FLSA generally provides that employers must pay hourly employees 150% of their regularly hourly rate for hours worked in a workweek over 40. 29 U.S.C. § 207. The “motor carrier exemption” provides that overtime pay is not required for any employee for whom the Secretary of Transportation has the power to establish qualifications and maximum hours of service. See 29 U.S.C. § 213(b)(1). In McMaster, the Third Circuit affirmed the decision of the United States District Court for the District of New Jersey that Ashley McMaster, an employee of an armored courier company, fell squarely within the exception to the Motor Carrier exemption created by Congress’s June 6, 2008 passage of the Corrections Act. As such, the Court determined McMaster to be entitled to overtime.

McMaster was employed by Eastern Armored Services (“Eastern”) from March 2010 through June 2011, and her employment included driving an armored vehicle as well as riding as a passenger in an armored vehicle to ensure safety and security. Eastern paid her hourly, and she spent 51% of her total days working on vehicles rated heavier than 10,000 pounds and 49% of her total days working on vehicles rates lighter than 10,000 pounds. She often worked more than 40 hours in a workweek but was never paid overtime because, according to Eastern, McMaster fell within the Motor Carrier exemption to the FLSA. The District Court disagreed and granted summary judgment in favor of McMaster, entering an order that McMaster was eligible to be paid overtime wages for all hours she worked over 40 in a particular workweek. The Third Circuit affirmed the District Court’s decision. Simply put, “covered employees” are subject to the FLSA’s overtime rules, despite the Motor Carrier Act’s provisions. The Court declined to define the term “in part” and determined that “[w]hatever ‘in part’ means, it is certainly satisfied by McMaster, who spent 49% of her days on vehicles less than 10,000 pounds.”

This case demonstrates that compensating employees properly within the statutory framework of the FLSA and its myriad exemptions and “exceptions to exemptions” is a complicated task. Employers should regularly review their compensation practices with counsel to ensure compliance with the changing statutory landscape and judicial interpretation and application of new statutes.