Trucking Industry Impacted by New FLSA regulations effective December 1

October 13, 2016|Thomas Schultz, Kailee Wahler

On May 18, the Department of Labor released new overtime regulations outlined in the Fair Labor Standards Act (FLSA) that go into effect on December 1, 2016.

The major FLSA rule changes are highlighted below:

  • Most notable is an increase to the salary basis test required for exemption from overtime, a change from $455 per week ($23,660 annually) to $913 ($47,476 annually).
  • The salary basis test will be revised automatically every three years following the initial implementation.
  • Other changes include updates to the total annual compensation level for highly compensated employees (HCEs). The current threshold of $100,000 will be raised to $134,004 per year.
  • Nondiscretionary bonuses, incentive payments and commissions can now be counted as up to 10% of the salary threshold ($4,747.60). However, the payments must be paid quarterly or more frequently to be eligible.
  • There are no changes to the duties tests at this time.

So, how does this apply to the trucking industry?

To understand the impact to the industry, you must first understand the exemption duties tests. This is important because an employee’s role must meet one of the duties tests AND the salary basis test ($913/week, $47,476/year). The white collar duties test are summarized in the chart below.

Wisconsin Duties Tests for White Collar Exemptions

 Executive Exemption  Administrative Exemption Professional Exemption 
The primary duty is management of the enterprise The primary duty consists of the performance of office or non-manual work directly related to management policies or general business operations of his or her employer or the employer’s customers. Work requiring knowledge of an
advanced type in a field of science or learning customarily acquired by a prolonged course of specialized
intellectual instruction and study
Customarily and regularly directs the work of two or more full-time employees Customarily and regularly exercises discretion and independent judgment with respect to matter of significance Work requiring the consistent exercise of discretion and judgment in its performance.
Has the authority or influence to hire or fire other employees Does not devote more than 20% (or in the case of an employee of a retail or service establishment who does not devote as much as 40%) of his or her hours worked in the workweek to activities which are not directly and closely related to the performance of the work described above. Work that is intellectual and varied in character, as opposed to routine mental, manual, mechanical or physical work, and for which the product or the result accomplished cannot be standardized in relation to a given period of time.
Customarily and regularly exercises
discretionary powers
  Does not devote more than 20% of his or her hours worked in the workweek to activities which are not an essential part of the work described above
Does not devote more than 20% (or in the case of an employee of a retail or service establishment who does not devote as much as 40%) of his or her hours of work in the workweek to activities which are not directly and closely related to the performance of the work described above.    

Let’s go through a few examples.

Remember, an employee must meet both the duties test and salary basis test in order to be exempt. 

  • A dispatcher spends the majority of his or her time (70%) completing the following tasks: collecting freight volumes and movements, talking with drivers or leaders of drivers, scheduling the loads, and maintaining the workload. The rest of his time is spent in other administrative tasks like emails, meetings and some customer service support. Unless the 70% majority of the time, he or she had full discretion when making decisions about the business, the work may not meet the duties tests and therefore would be overtime eligible. Keep in mind that titles like “supervisor” or “manager” do not automatically equate to exempt.
  • A driver manager is paid a salary of $40,000 per year and is responsible for a group of drivers including: service levels, safety and performance. This role would likely be exempt and meet the duties test; however, when the salary basis test increases on December 1, the role would no longer be classified as “exempt” unless the base salary is increased or combination of salary and bonus is used.
  • Operations or distribution managers who are responsible for the overall operations of the location including: hiring, terminations, staffing levels, overseeing employees, and have full discretion when making decisions about the business can be classified as exempt as long as they meet the salary basis test $47,476 (913.00 per week). The managers would meet the duties test under the executive exemption. 

What about our drivers?

The good news is that the rules for this group of employees did not change. Companies may choose to pay over-the-road drivers based on a mileage or hourly basis. The FLSA provides an exemption from overtime as outlined in Section 13(b)(1) for employees pursuant to Section 204 of the Motor Carrier Act of 1935. Carriers can reference the Department of Labor Fact Sheet #19 which states: 

“The 13(b)(1) overtime exemption applies to employees who are: 

  1. Employed by a motor carrier or motor private carrier, as defined in 49 U.S.C. Section 13102 (see Employer below); 
  2. Drivers, driver’s helpers, loaders, or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce (see Employee Duties below); and 
  3. Not covered by the small vehicle exception.”

Next steps

To be compliant by December 1, 2016, you should review your workforce and pay special attention to those who are considered exempt today and make under the $913 per week ($47,476 annually) threshold.

We understand this can be complex so we are here to help you. Please reach out to a member of our HR Consulting team and we would be happy to assist you through this process.

Thomas Schultz, PHR, is a manager – HR Consulting with Schenck and a member of the firm’s Trucking & Logistics team. He has more than 20 years of human resources experience, including building human resource systems and structures that match the changing needs of businesses. He brings a broad blend of skills in areas such as leadership coaching, employee relations, benefits, training and development, change leadership and employment law.

Kailee Wahler, human resources consultant with Schenck, builds relationships with clients and advises businesses on a wide variety of human resources matters. She provides one-on-one guidance and counsel, along with the ability to analyze and offer solutions to everyday HR challenges.