On August 10, 2005, President Bush signed into law the Safe Accountable Flexible Efficient Transportation Equity Act – A Legacy for Users (“SAFETEA-LU.”) The act provided for a host of various programs for the Federal Government regarding transportation, highway safety, and transit funding. Buried in the act was a discrete provision that has affected thousands of employers and the manner in which they pay their employees.
Prior to August 10, 2005, employers who transported goods in interstate commerce were exempt from paying employees overtime. The exemption is commonly known as the 13(b)(1) exemption, or motor carrier exemption, and it relies on several factors, including the definition of a “motor carrier.”
Unbeknownst to hundreds of employers engaged in interstate commerce and dependent on the exemption, SAFETEA-LU amended the definition of a motor carrier, thereby eliminating the exemption for any employer operating a vehicle in interstate commerce weighing less than 10,000 pounds.
At the time of the amendment in 2005, there was no advisory from the Department of Labor or other publication indicating that SAFETEA-LU had changed the definition of a motor carrier. In other words, there was no warning, and employers were potentially left exposed and uninformed.
Since the exemption no longer existed, a rash of lawsuits under the Fair Labor Standards Act emerged across the country claiming employers had violated wage and hour law by failing to pay overtime. Under Federal and Massachusetts Law, wage and hour lawsuits are particularly dangerous because damages can include either a doubling or tripling of the wage claim, plus interest, attorney fees and costs.
Since August 10, 2005, Courts have routinely found that the 13(b)(1) exemption applied to claims before August 10, 2005 and further held that the 13(b)(1) exemption did not apply after August 10, 2005. Consequently, companies whose employees operated vehicles less than 10,000 pounds were no longer exempt from paying overtime as of August 10, 2005.
On June 6, 2008, President Bush signed into law the SAFETEA-LU Technical Corrections Act of 2008. Included in the Technical Corrections Act was relief for employers affected by the original act. First, the Technical Corrections Act provided for a limit on liability from August 10, 2005 to August 10, 2006 if the employer had violated the Fair Labor Standards Act, and as of the date of the violation (between August 10, 2005 to August 10, 2006), the employer did not have actual knowledge that the employer was subject to the requirements of SAEFETEA-LU.
In reviewing this provision, it appears Congress intended a general provision rather than one specifically regarding the motor carrier exemption. In fact, proposed amendments that appeared to make the provision specific were rejected. This provision seems to signal that Congress was aware that employers were blindsided by SAFETEA-LU and its changes to wage and hour law.
The second form of relief is the one that specifically deals with the 13(b)(1) exemption. The Technical Corrections Act redefined motor carrier returning the definition to its original terms prior the passage of SAFETEA-LU. The Technical Corrections Act specified that the change should be treated as though it had never been enacted in the first place through the passing of the Technical Corrections Act. However, it appears that a close reading of the Technical Corrections Act may have eliminated the overtime exemption moving forward from June 6, 2008.
Employers concerned about SAFETEA-LU and the Technical Corrections Act should consult with an attorney. Employers currently engaged in litigation involving the SAFETEA-LU and the 13(b)(1) exemption should consult with counsel immediately regarding this important information because it may bring costly litigation to a close.
By: Kevin V. Maltby, Esquire