Key Takeaways:

• The Motor Carrier Act (MCA) exempts drivers of large vehicles and their helpers as well as loaders and mechanics from federal overtime compensation requirements if such employees fall under the mutually exclusive jurisdiction of the U.S. Department of Transportation.
• The U.S. Court of Appeals for the Fifth Circuit recently reaffirmed that the MCA applies not only to drivers (and other employees) who travel across state lines but also to employees engaged in the intrastate transport of goods in the flow of interstate commerce.
• Employers in the transportation industry should carefully review the classifications of their workers under the MCA, particularly drivers who may not drive across state lines but who transport goods moving in the continuous flow of interstate commerce.

The Fair Labor Standards Act (FLSA) requires that employers pay certain employees one-and-a-half times their regular rate of pay for any hours they work over 40 in a workweek. There are, however, several exemptions from the FLSA’s overtime pay requirement, one of which is the MCA.

Specifically, under the mutually exclusive jurisdiction established by Congress under the MCA, “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service” is excluded from the right to overtime compensation under the FLSA. Drivers (and other employees) in the transportation, energy, agricultural, manufacturing and other industries who fall within the scope of coverage of the MCA are, therefore, subject to this FLSA exemption and not owed overtime pay. They are, instead, subject to the Department of Transportation’s safety and other applicable regulations.

One element for establishing MCA coverage is that the employees must be involved in transportation in interstate commerce. The MCA defines transportation in interstate commerce as including, among other things, movement “between a place in … a State and a place in another State; [or] a State and another place in the same State through another State.” Accordingly, the Fifth Circuit has applied the MCA not only to the “actual transport of goods across state lines” but also to the “intrastate transport of goods in the flow of interstate commerce.”

In the recent Fifth Circuit case of Ash v. Flowers Foods, Inc., No. 23- 30356 (5th Cir. Mar. 28, 2024),the shipper (Flowers) manufactured and marketed baked goods using a “direct store delivery” system. Specifically, Flowers shipped its bakery products nightly from bakeries, some of which are outside Louisiana, to warehouses in Louisiana. Six to twelve hours after arrival at the warehouses in Louisiana, the plaintiffs – who were “independent distributors” – would pick up the products from the Louisiana warehouses and deliver them to customers in Louisiana. Because the plaintiffs undisputedly never crossed state lines while driving Flowers’ products, they claimed that they were not involved in transportation in interstate commerce and, thus, the MCA exemption did not apply to them.

To determine whether the MCA exemption applied, the Fifth Circuit did not focus on the location of the plaintiffs’ driving but instead on whether the products the plaintiffs transported were in the continuous flow of interstate commerce. Because the products were undisputedly warehoused between their interstate movement and the plaintiffs’ in-state transportation, the Fifth Circuit examined “the shipper’s fixed and persisting intent” – based on the “totality of the circumstances” – to determine whether the warehousing broke “the continuity of movement.” The Fifth Circuit determined that Flowers intended to ship the products in interstate commerce from its bakeries located outside Louisiana to customers in Louisiana– utilizing the plaintiff-distributors for an intrastate portion of that journey from the Louisiana warehouse to Louisiana customers – since Flowers “knew that the products were shipped into Louisiana for distribution to Louisiana customers.” Accordingly, the Fifth Circuit found that the products the plaintiffs transported were in the continuous flow of interstate commerce and the MCA exemption applied.

The Ash decision reaffirmed almost 50 years of Fifth Circuit precedent, which is consistent with precedent from the U.S. Supreme Court and every other circuit to examine this issue in finding that interstate commerce under the MCA includes the intrastate transportation of goods in the flow of interstate commerce. Notably, in affirming the district court’s ruling that the MCA exemption applied to the plaintiffs and excluded them from overtime coverage, the Fifth Circuit expressly found that the “district court’s analysis of the FLSA and the MCA faithfully center[ed] the statutes’ texts in determining their applicability.”

The Ash decision is a good reminder to employers with drivers who transport goods – whether across state lines or not – that the MCA’s coverage has a broader reach than just those drivers who actually drive across state lines. Instead, to determine whether the MCA applies, companies must not only examine where their drivers drive (or reasonably expect where they may be assigned to drive), but must also examine whether their drivers are transporting goods in the continuous flow of interstate commerce.

Because MCA coverage determines whether a company’s drivers are subject to the Department of Transportation’s safety and other applicable regulations or the FLSA’s overtime requirements, failure to properly classify drivers (and other employees) under the MCA can result in significant potential liability. Accordingly, employers should carefully review the classifications of their drivers (and other employees) under the MCA in light of the framework reaffirmed recently by the Fifth Circuit in Ash. 

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