Third Circuit Applies Motor Carrier Exemption to Drivers of Interstate Routes

Practical Law Legal Update 8-612-9465 (Approx. 6 pages)

Third Circuit Applies Motor Carrier Exemption to Drivers of Interstate Routes

by Practical Law Labor & Employment

Background

Employer Krapf's Coaches, Inc. (KCI), a Pennsylvania motor coach company:

Provides bus and shuttle services on 32 set routes, four of which cross state lines.
Generated between 1.0% and 9.7% of total Transit Division revenue by interstate routes between 2009 and 2012.
Employs, in a given month, between 36 and 62 drivers who are trained on multiple interstate and intrastate routes.
Retains the discretion to:
- assign a driver to any route he has been trained on, including interstate routes; and
- discipline a driver who refuses to drive an assigned route.
As a "common carrier by motor vehicle" authorized to engage in interstate commerce, is subject to Federal Motor Carrier Safety Administration (FMCSA) regulations, and therefore:
- possesses a US Department of Transportation (DOT) registration number;
- requires that each driver possess a Commercial Driver License (CDL);
- maintains a "Driver Qualification File" for each driver that includes FMCSA-required documentation;
- submits to DOT audits to ensure its compliance with FMCSA regulations;
- provides each driver with a "Federal Motor Carrier Safety Regulations Pocketbook" detailing the driver's responsibilities under DOT regulations; and
- provides a handbook making clear that drivers "are expected to meet" FMCSA regulations.

The class of plaintiffs are Transit Division drivers who, during the relevant time period, worked more than 40 hours in a week without receiving overtime pay. During the relevant time period, the plaintiffs drove 13,956 total trips, of which 178 required them to cross state lines (1.3%). Only 16 plaintiffs never crossed state lines, eight crossed state lines only once, and five crossed state lines fewer than five times.

In this collective action under the FLSA and PMWA to recover unpaid overtime, the District Court granted:

The request to conditionally certify a class of "individuals who were employed by defendant as Transit Route drivers who worked over 40 hours during any workweek within the past three years."
KCI's motion for summary judgment, holding that the plaintiffs are ineligible for overtime under the MCA exemption to the FLSA and PMWA (29 U.S.C. § 213(b)(1); 43 Pa. Cons. Stat. Ann. § 333.105(b)(7)).

The plaintiffs appealed to the Third Circuit.

Outcome

The Third Circuit affirmed the orders of the District Court, holding that because KCI is an employer under the jurisdiction of the DOT and plaintiffs are members of a class of employees who could reasonably be expected to drive interstate routes as part of their duties:

The MCA exemption to the FLSA applies.
Plaintiffs are ineligible for FLSA overtime wages.

In its analysis, the Third Circuit noted that there are two requirements for MCA exemption:

The employer must be a carrier subject to the DOT's jurisdiction.
Employees must be members of a class engaging "in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the [MCA]."

(29 C.F.R. § 782.2(a).)

The parties agree that KCI is a "motor carrier" subject to DOT jurisdiction. The Third Circuit therefore examined the second requirement, noting that:

The District Court answered yes to the second requirement based primarily on Morris v. McComb (332 U.S. 422 (1947)).
The relevant inquiry under Morris is whether the plaintiffs reasonably could have expected to drive interstate. The Third Circuit considered whether the carrier (employer):
- does any interstate work;
- assigns drivers randomly to that drive; and
- maintains a "company policy and activity" of interstate driving.
(Morris, at 422.)

In response to this inquiry, the Third Circuit concluded that:

The District Court properly found no genuine dispute of material fact regarding whether plaintiffs reasonably could have expected to drive interstate because the undisputed evidence establishes that during the relevant time period:
- 6.9% of all trips were interstate;
- as much as 9.7% of the Transit division's annual revenues derived from interstate routes;
- KCI always operated at least one interstate route per month; and
- KCI had a "company policy" of training its drivers on as many routes as possible, retaining discretion to assign a driver at any time to any route he had been trained on, including interstate and intrastate routes, and disciplining any driver who refused.
Unrefuted evidence reflects KCI's adherence to federal regulations regarding the drivers; for instance, KCI:
- requires that each driver possess a valid CDL, comply with FMCSA drug testing requirements, submit to regular DOT physical examinations and provide a pre-employment "Safety Performance History Record";
- maintains DOT-required "Driver Qualification Files" for all drivers, which the FMCSA audits for compliance on a recurring basis;
- issues all drivers a "KCI Handbook" advising them of KCI's expectation that they meet these requirements, as well as a separate "Pocketbook" detailing the FMCSA regulations; and
- has required, since 2012, all drivers to complete a "Self Certification Form" wherein they check a box describing themselves as "NI-Non-Excepted Interstate Transportation: Interstate Drivers Who are Subject to the Federal Physical Qualifications and Examination Regulations."

Finally, the Third Circuit declined to apply the de minimis exception to the application of the MCA (29 C.F.R. § 782.2(b)(3)), due to:

The undisputed facts concerning KCI's interstate operations, which accounted for 1% to 9.7% of its Transit Division's revenue.
The plaintiffs' occupation as drivers.

In reaching this conclusion, the Third Circuit noted that:

Although the Supreme Court "has recognized a de minimis exception to the application of the MCA," the Third Circuit has noted that "[a] number of courts have held that drivers should seldom, if ever, fall within [it] (Friedrich v. U.S. Computer Servs., 974 F.2d 409, at 416, 417 (3d Cir. 1992))."
The DOT has recognized courts' resistance to applying this exception to drivers (DOT Notice, 46 Fed. Reg. at 37,903).
The only binding authority regarding the de minimis exception concerns employees handling freight which:
- does not affect the safety of operation of motor vehicles in interstate commerce; and
- does not come within the kind of loading contemplated under the MCA.
(Pyramid Motor Freight Corp. v. Ispass, 330 U.S. 695, 708 (1947); see also, Reich v. Am. Driver Serv., Inc., 33 F.3d 1153, 1157 (9th Cir. 1994).)
Walters v. Am. Coach Lines of Miami, Inc. suggests that:
- "a company's interstate business is de minimis if it constitutes less than 1% of the overall trips taken by the company;" and
- no cases apply the de minimis exception to an employer that "has the appropriate federal licensing and [where] there is undisputed proof of some transportation that crosses state lines."
(575 F.3d 1221, 1228 (11th Cir. 2009).)

Practical Implications

This case confirms that the MCA exemption to the FLSA applies even for employees whose interstate trips make up a very small percentage of their total trips, as long as they reasonably could have expected to drive interstate.

Third Circuit Applies Motor Carrier Exemption to Drivers of Interstate Routes | Practical Law