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Traveling Intrastate? Don

Traveling Intrastate? Don't Rule Out the Motor Carrier Overtime Exemption

The Transportation Newsletter
(June 18, 2013)

Paying overtime to drivers for intrastate routes? You may be missing an opportunity to use the Motor Carrier Exemption (“MCE”). A 2005 Opinion Letter issued by the US Department of Labor Wage and Hour Division is sometimes overlooked and remains instructive. Bottom line: it says that goods may travel interstate even when drivers don’t. And, depending on the circumstances, this “practical continuity of movement” of goods across state lines may be sufficient to result in an overtime exemption for your driver, even if your driver’s segment of the journey takes place entirely within the state.

First, the basics. The MCE applies to drivers, driver’s helpers, loaders, or mechanics whose duties affect the safety of operation of motor vehicle transportation on public highways in interstate or foreign commerce. The Department of Labor emphasizes that transportation “involved in the employee’s duties” must be in interstate commerce (across state lines) or connect with an intrastate terminal (rail, air, water or land) to “continue an interstate journey of goods that has not come to rest at a final destination.” The Motor Carrier Exemption does not apply to employees who are not engaged in “safety affecting” activities, such as dispatchers, office personnel, employees who unload vehicles, or those who load but are not responsible for the proper loading of the vehicle.

In January 2005, the Administrator of the Wage and Hour Division issued an Opinion Letter that helps to explain how the MCE might apply to intrastate drivers. An associated group of common carriers of petroleum products wrote to ask whether the MCE applied to drivers who travel only intrastate. They carry shipments of gasoline, kerosene, home heating oil, diesel fuel and ethanol that have previously moved across state lines by pipeline, rail or ship. The drivers pick up the petroleum products at various terminals or storage facilities after their previous movement and transport them over the last leg of the delivery journey. The common carriers asked whether the drivers were covered by the MCE for this intrastate movement.

In some cases the out-of-state producer/shipper had designated the shipment to fill the order of a specifically named customer. Other shipments were the result of standing orders or historical demand that the producer/shipper knew it could expect in the other state. The producer/shipper did not name a final destination at the time of shipment, but it had no “fixed and persisting transportation intent” for the good to stop moving at the storage facility. Consequently, when the common carrier’s driver took the petroleum products the last (intrastate) leg of the interstate journey, the MCE applied.

The Department has provided these seven factors to use to determine whether a producer / shipper has a “fixed and persisting transportation intent” that the merchandise continue in interstate commerce at the time it was sent to the storage facility:

  1. Even if the shipper does not know the ultimate destination of specific shipments, it bases its determination of the total volume to be shipped through the storage facility on projections of customer demand that have a factual basis, rather than a mere plan to solicit sales from the storage facility. This may include historical sales in the State, actual present orders, and relevant market surveys of need.
  2. No processing or substantial product modification occurs a the warehouse (repackaging is okay).
  3. The products remain subject to the shipper’s control while in the warehouse.
  4. Modern tracking systems allow tracking and documentation of most, if not all, of the shipments coming in and out of the warehouse.
  5. The shipper pays the transportation costs (even if it repays the warehouse or distribution center).
  6. The warehouse is owned by the shipper (not required).
  7. The shipments move through the warehouse pursuant to a storage in transit provision.

The fact that the shipper may not know the specific final destination at the time the shipment leaves its out-of-state origin will not defeat the MCE if the volume of the shipment is based on historical sales figures, no substantive processing occurs at the storage facility, the shipper stays in control of the goods, and the shipper pays for the transportation costs incurred to get the product to its final destination.

Take away? Even if your drivers travel intrastate and themselves do not cross state lines, the goods they are carrying might. If you can show that your drivers are participating in the interstate journey of the goods they are carrying, they, too, might be characterized as “interstate” drivers for purposes of the Motor Carrier Exemption from Overtime.

Click here to view the full June 2013 Edition of the Transportation Newsletter.

Julianna Theall Earp
T (336) 378-5256
F (336) 378-5400
Associated Industries

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