By: Katherine Wenner & Holly Ingram
On November 17th, the Fourth Circuit published an opinion for Schilling v. Schmidt Baking Co., Inc.. The Court considered whether the District Court erred in its dismissal of Plaintiffs’ claims under the FLSA. The Fourth Circuit reversed the District Court’s dismissal and held that Plaintiffs fell within a group of “covered employees” under the Technical Corrections Act of 2008’s exception to the FLSA and thus were entitled to overtime wages for hours they worked in excess of forty hours per week.
B. Facts and Procedural History
The Plaintiffs, Ronald Schilling, Russel Dolan, and Jonathan Hecker (collectively, “Plaintiffs”), worked as district sales managers for Schmidt Baking Company, Inc. (“Schmidt”). There, they were considered nonexempt salaried employees. Plaintiffs frequently worked more than forty hours per week; however, for all hours worked Plaintiffs were paid their regular wage rate and did not receive overtime wages for hours worked beyond forty hours per week.
Schmidt provides baked goods to restaurants, grocery stores, and small business across the Mid-Atlantic. Schmidt contracted with independent operators to execute some of their deliveries. Additionally, Schmidt maintained a mixed fleet of company vehicles at each of their depots, including some vehicles which weighed under 10,000 pounds and others weighing over 10,000 pounds.
In the event that various delivery operators were unable to perform their delivery duties, Plaintiffs delivered the necessary baked goods. Plaintiffs spent between 65%-85% of their time each week performing deliveries, the majority of which were made in their personal vehicles weighing less than 10,000 pounds.
Plaintiffs filed this federal action alleging that they were entitled to payment of overtime wages under the Fair Labor Standards Act and various Maryland labor laws. Schmidt moved to dismiss the complaint for failure to state a claim for which relief can be granted and in the alternative, moved for summary judgment. The District Court treated Schmidt’s motion as a motion to dismiss, and granted it without a hearing. Plaintiffs appealed. At oral arguments, Plaintiffs conceded that were it not for the Technical Corrections Act of 2008 exception, they would be excluded from overtime compensation under the FLSA.
C. Employees driving vehicles in a mixed fleet are entitled to overtime wages under the Technical Corrections Act of 2008.
To determine whether Plaintiffs were entitled to overtime, the opinion began with an overview of the Fair Labor Standards Act (“FLSA”) and the statutory scheme at issue. The FLSA establishes a federal minimum wage to combat the dangers of long working hours, which may pose negative health implications for employees. There are, however, certain classes of employees exempt from overtime protections and one such class is employees falling under the Motor Carrier Act (“MCA”) Exemption. In 2005 and 2008 Congress amended the MCA Exemption to clarify that certain employees were subject to the FLSA’s overtime requirements. Now, FLSA overtime requirements apply to certain “covered employees,” which includes “an individual”:
(1) who is employed by a motor carrier or motor private carrier . . .;
(2) whose work, in whole or in part, is defined—
(A) as that of a driver, driver’s helper, loader, or mechanic; and
(B) as affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce . . . ; and
(3) who performs duties on motor vehicles weighing 10,000 pounds or less.
SAFETEA–LU Technical Corrections Act of 2008 Pub. L. No. 110–244 § 306(c)(1)–(3) (2008) (emphasis added). Thus, employers may be obligated to pay overtime to employees under the FLSA, if the employee is “covered.” Consequently, the central issue in this case was whether Plaintiffs were “covered employees.”
In addition to considering persuasive authority from the Third Circuit, the Court held that Plaintiffs were “covered employees” after examining the text, structure, and intent of the statute at issue. First, the Court explained that in McMasters v. Easter Armored Services, Inc., the Third Circuit concluded that when an employee spends some time driving vehicles over 10,000 pounds and some time driving vehicles under 10,000 pounds, such employees may still fall within the “covered” definition. 780 F.3d 167, 168–70 (3d Cir. 2015). The Court then proceeded to analyze the text, structure, and intent of Congress’s 2008 amendment to the MCA Exemption. It concluded that Congress mandated certain drivers be entitled to overtime compensation and that the statute allows a driver to only partially work with a vehicle under 10,000 pounds. Additionally, the Court noted that there was no evidence Congress intended for employees working in a mixed fleet to be exempt from overtime compensation. The Court did not create a strict definition of how much time is enough to constitute “in part,” but its decision indicates that employees operating in a mixed fleet may be entitled to overtime pay, despite the MCA Exemption.
Here, the Court concluded that the Plaintiffs satisfied the statute’s requirements for “covered employees.” Though at times Plaintiffs drive vehicles weighing over 10,000 pounds, because they spend a majority of their working hours driving vehicles weighing less than 10,000 pounds, they easily satisfy the “in part” requirement. Thus, the Court held Plaintiffs were entitled to FLSA overtime wages.
The Fourth Circuit reversed the District Court’s dismissal of Plaintiffs’ FLSA claims. The Plaintiffs were “covered employees” under the Technical Corrections Act of 2008, thus were entitled to overtime wages under the FLSA.