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Day Rate and Motor carrier exemption

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  • Day Rate and Motor carrier exemption

    My boss insists on paying employees a "day rate" instead of a salary. These employees are exempt from OT because of the motor carrier exemption (in my opinion not all of them are, but my boss sure seems to think so). My boss insists that there is more flexibility with the day rate because if they do not work a day, they don't get paid that day. My boss also has a friend at the wage and hour division, which has helped him pass a few labor audits. My boss also just informed me that this friend told him that if an employee only comes in for part of the day, he can take their day rate and divide it by 8 and only pay them the hourly wage for the hours worked. This whole thing is a mystery to me and very confusing. I was just wondering if anyone has any experience or information on this.

    Shine a light on this for me!

  • #2
    I have no idea whether or not the Motor Carrier exception is in play, but I will give you a pointer so you can check yourself. Lets assume that it is. Lets say that Bob falls under this exception. Lets say that Bob works 30 hours this workweek. Federal minimum wage is $7.25/hr. Under FLSA Bob must be paid at least $217.50. If your proposed method accomplishes this, there is no FLSA violatoin. If your method does not accomplish this, we have a FLSA violation.
    http://www.dol.gov/whd/regs/compliance/whdfs19.pdf

    You did not mention your state. Some states have higher minimum wage then the feds do, and could in theory have other rules as well. My answer is federal law only. State law cannot make federal law go away. If the feds (in this example) say Bob must be paid at least $217.50, there is nothing the state can do to remove that requirement. HOWEVER, state law can raise that requirement, either through a higher MW or some other method.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      I'm in Texas. I know we aren't breaking the minimum wage laws. I just feel that by paying them their "day rate" which is kind of a salary, and then on days where they only work partial days, pay them hourly, that we are taking away their exempt status. But then you throw in the motor carrier exemption and I get confused. How far does the motor carrier exemption go? I know it doesn't trump paying anyone minimum wage, but we pay some employees (helpers on the trucks) a straight rate of $8/hr. So if they work 45 hours a week, they get paid a gross of $360. Is that ok?

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      • #4
        Straight from the fact sheet linked above, the exemption applies to

        Drivers, driverís helpers, loaders, or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce

        The exemption is only from OT, not MW. As long as your drivers and helpers are making at least MW, you are fine. It doesn't matter if some days they work 4 hours at $10 an hour, or 8 hours at $80 a day, you have met the MW requirements. Stating it as a day rate does not convert it to a salary. No law requires you pay for hours not worked for employees who are paid hourly. If they work for half a day, they can be paid based on just the time worked. It matters not if the employer does it as a percentage of the daily rate (50% for 4 hours instead of 8 hours) or breaks it down into an hourly rate. Now if you are paying that same $80 per day and the employee works five 12 hour days, you have a problem as the total amount for the week divided by the hours worked would be less than MW. The DOL really doesn't care how those hours are broken down and that on some days the employee may be working at a higher or lower hourly rate, so long as at the end of the week, they receive at least MW for each hour worked on average.
        I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.

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        • #5
          I keep getting information I already know and have (as I have read and re-read the fact sheet and actual law).

          What I was referencing in my first post about not everyone he applies the motor carry exemption law to being exempt is just that he pays every warehouse worker that touches our product straight hourly wage with no OT. The law only applies to those that load the trucks and only if they load the trucks in a way that could affect the safety. We have one employee who loads the trucks. But this is beside the point I'm trying to get across and get an answer to.

          I know we are NOT breaking any minimum wage laws. The lowest day rate we have is actually $95/day. No one works more than 12 hour days. However, I see an issue with (and maybe it isn't illegal, maybe its just legal and unfair, but this is what I'm trying to figure out) paying an employee $95/day regardless of hours and then when they only work a few hours, changing it to hourly. For example, a guy works 10 hours on monday, 12 hours on tuesday, 8 hours on wednesday, 6 on thursday and then on Friday he comes in and gets sick after two hours (this is relatively close to a situation I'm currently dealing with) and goes home. He is paid $95 for Mon though Thu, and then $23.75 for Friday. Doesn't seem ok to me. Also, isn't this almost a breech of the implied employment contract? If the employer says he's going to pay $X dollars per day (and mentions nothing of hours), doesn't he have to honor this?

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          • #6
            We need to be very careful about exactly which law you are talking about. There is no such thing as an "implied employment contract" in the federal FLSA law. Maybe in TX statutory law (or not), maybe in TX common law (or not), but certainly not under FLSA. The federal FLSA law (mostly) looks at minimum wage, overtime, child labor and that is pretty much it. Minimum wage certainly applies. Overtime may or may not apply on a person to person basis depending on whether or not the specific person is subject to the Motor Carrier rule. Just because some employees fall under that exception does not mean that all employees do. Employees who feel that they are being mishandled can and should file a wage claim with federal DOL or TX TWC.

            But the feds are just fine with your day rate method as MW/OT obligations are meet. TX is not my state, but I am pretty sure that they are just fine with it also. There really is no issue there unless MW/OT rules are being violated.

            You mentioned "implied employment contract" issues. That is not a statutory labor law concept. It might be a common law concept (or not). Perhaps you could be a lot more explicit about that issue only.
            "Reality is that which, when you stop believing in it, doesn't go away".
            Philip K. **** (1928-1982)

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            • #7
              Who qualifies for the exemption is one issue. That one isn't really up for much discussion as the employee either is in a job which is specifically outlined in the regulations or they are not. What YOU do about it depends on your level of risk, position, company, ability to change policy, etc. At any time an employee can file a claim that they are being paid improperly and the company will have to deal with that as it happens. I'm all for making sure the company is in compliance before that happens but I don't know your role in this or your ability to affect change.

              As for how you are paying, as long as when you add up the total number of hours worked and the total paid, the employee received at least MW for each hour worked, you are fine. It doesn't matter if most days they get $95 and one day they only make $23.75. Fair is entirely subjective. Playing devil's advocate is it fair that one EE works 8 hours and gets $95 for the day, while a coworker only worked 2 and went home sick but also gets $95 for the day? I'd expect a lot of sudden illnesses if that is the case.
              I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.

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