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finding the week-by-week analysis "inapplicable" because interstate travel was an "integral part" of plaintiff's "continuing duties"
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CIVIL ACTION NO. 03-12186-RGS.
June 29, 2005
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
Plaintiff Kevin Harrington brought this action against his employer, Despatch Industries, LP (Despatch), seeking payment of overtime wages under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq. and the Massachusetts Minimum Fair Wage Law (MFWL), G.L. c. 151, et seq. On October 29, 2004, the parties filed cross-motions for summary judgment. Harrington seeks summary judgment on the FLSA claim only, while Despatch moves for judgment on both claims, arguing that Harrington is an "exempt" employee under the "administrative" exemptions of the FLSA and the Motor Carrier Act (MCA) of 1935.
Despatch is a Minnesota limited partnership whose primary line of business is the manufacture, sale, and servicing of industrial ovens. In 1992, Harrington was hired by Despatch as its New England Field Service Engineer. On being hired, Harrington was told that in addition to his work as a service technician, he would share responsibility for the growth of the company's New England business. Despatch's employment letter explicitly stated that Harrington was being hired as an "exempt" employee. Harrington understood this to mean that he would be paid an annual salary, rather than an hourly wage. That understanding did not, however, discourage Harrington from making persistent requests of Despatch for overtime pay.
That Harrington was paid an annual salary is not in dispute, although the parties disagree over the exact amount. Harrington lists his annual earnings as $62,361.83 for 2000, $65,230.36 for 2201, and $66,722.71 for 2003 (he does not provide a figure for 2002). Despatch claims that Harrington has taken his figures from the wrong box on his W-2 forms and that the accurate salary figures are $74,589.63 for 2000, $77,806.36 for 2001, and $79,309.36 for each of 2002 and 2003.
Despatch provides Harrington with a four and one-half ton Chevrolet van to travel to customer sites. The van is equipped with tools, test equipment, and spare parts. Despatch (or a vendor) regularly ships parts to Harrington at his home in Massachusetts for delivery to its customers. While most of Despatch's customers are based in Massachusetts, Harrington drove a total of 231 hours calling upon customers in other New England states during the three years preceding the filing of the lawsuit.
In addition to its own staff, Despatch contracts with Certified Service Representatives (CSRs) to perform customer service and repair work. The CSRs work as independent contractors. Harrington typically accompanies a new CSR on his or her initial customer calls. To track time spent by employees on service and repair work, Despatch uses a "direct utilization rate." The rate is calculated by dividing the number of hours the employee records for these jobs by 40 hours. For the period June 2000 through July 2001, Despatch set a direct utilization goal of 65 percent for Harrington. In June of 2001, Harrington's job title was changed to Field Service Account Manager. For the period June 2001 through June 2002, Harrington's utilization goal was 65 percent, while his actual utilization rate was 80 percent. From June 2002 through June 2003, the goal was 65 percent, and the actual rate was 85 percent. From May 2003 through April 2004, the goal was 69 percent, while the actual rate was 64 percent.
Over time, Despatch has encouraged Harrington to become more involved in sales and to delegate as much of his service work as possible to the CSRs. At one point, Despatch told Harrington that it expected him to spend up to 60 percent of his time marketing its products and services. By all accounts, Harrington is a highly successful employee. Despatch acknowledges that he "handles customers masterfully" and has been instrumental in the growth of its New England business. The dispute is not over the quality of Harrington's work as an account manager or as a service technician. The dispute is over whether Harrington is an exempt employee under either the FLSA or the MCA (or both statutes). If he is not, Harrington claims that he is owed 1406.5 hours in overtime pay.
While the issue is not discussed in the parties' briefs, the FLSA statute of limitations is two years (three if the employer's violation was willful). 29 U.S.C. § 255(a). See McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). The MFWL also contains a two-year statute of limitations. G.L. c. 151 § 20A. While Harrington's overtime claim is based on the three-year statute of limitations, he makes no allegation of willfulness on Despatch's part.
DISCUSSION
Under the FLSA, an employer is required to compensate employees who work overtime at a rate not less than one and one-half times their regular hourly wage. (Overtime is defined as hours worked in excess of a 40-hour work week. See 29 U.S.C. § 207(a)(1)). If, however, the employee falls within one of the FLSA exemptions for managerial (salaried) employees, the employer is not required to pay overtime.1. The Administrative Exemption
Employees working in a "bona fide executive, administrative or professional capacity," are exempted under the FLSA. 29 U.S.C. § 213(a)(1). The employer bears the burden of proving that the exemption applies to an employee who is denied overtime. See Reich v. Newspapers of New England, Inc., 44 F.3d 1060, 1070 (1st Cir. 1995). Department of Labor (DOL) regulations specify either a "long" or a "short" test for determining whether an employee is exempt. See 29 C.F.R. § 541.2. Because Harrington at all times earned more than $250 per week, his employment is governed by the short test. Under this test, an employee is exempt if his primary duty (1) "consists of the performance of office or non-manual work directly related to management policies or general business operations of the employer or the employer's customers"; and (2) "includes work requiring the exercise of discretion and independent judgment." 29 C.F.R. § 541.214. (Emphasis added).
DOL interpretive regulations "subdivide the first prong of the short test into two subparts: (1) the employee must be engaged in 'administrative' rather than 'production' activity; and (2) this administrative activity must be of 'substantial importance' to management or operations." Reich v. John Alden Life Insurance Co., 126 F.3d 1, 8 (1st Cir. 1997), citing 29 C.F.R. § 542.205(a). "The administrative operations of the business include the work performed by so-called white-collar employees engaged in 'servicing' a business as, for example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control." 29 C.F.R. § 541.205(b). While "applying the administrative-production dichotomy is not as simple as drawing the line between white-collar and blue-collar workers," John Alden Life Ins. Co., 126 F.3d at 9, it is evident from the undisputed utilization rates that Harrington's primary duties are those of a repairman and service technician.
DOL regulations provide that "[i]n the ordinary case it may be taken as a good rule of thumb that primary duty means the major part, or over 50 percent, of the employee's time." 29 C.F.R. § 541.103. Harrington invariably spent more than half of his time on manual service and repair work. He trained as a repairman, and it was in that role that he gathered a following among his customers. "Perhaps the most frequent cause of misapplication of the term 'discretion and independent judgment' is the failure to distinguish it from the use of skill in various respects." 29 C.F.R. § 541.207(c).
I recognize that the First Circuit has cautioned against slavish adherence to the regulation, as "primary" should be read as meaning "principal," rather than "over half," and because a person is capable of managing others while physically doing something else. See Donovan v. Burger King Corp., 672 F.2d 221, 226 (1st Cir. 1982).
Discretionary acts are those "characterized by [a] high degree of discretion and judgment involved in weighing alternatives and making choices with respect to . . . policy and planning. . . . Discretionary acts are not those which involve the 'carrying out of previously established policies or plans.'"Whitney v. Worcester, 373 Mass. 208, 218 (1977).
While conceding that Harrington devotes a substantial part of his time to the performance of services and repairs for customers, Despatch argues that this is Harrington's personal choice and not a job requirement. Despatch maintains that the crux of Harrington's duties as a Field Service Account Manager is the oversight of CSRs and regional field service operations. In this capacity, Harrington (in Despatch's view) is required to exercise judgment and discretion by assisting individual customers in weighing purchase options, in matching the appropriate CSR to customer accounts, and in acting as the liaison between the CSRs and Despatch.
Harrington, on the other hand, maintains that his elevation in title from Field Service Engineer to Field Service Account Manager involved no change in his job responsibilities and was undertaken to place him in a higher pay bracket because he had "maxed out" of the pay scale for Field Service Engineers. Harrington notes that his utilization goal was increased from 65 percent to 69 percent after the change in job titles. Harrington acknowledges that as a loyal employee he promoted service agreements, introduced CSRs to customers, and did whatever he could to keep customers happy. However, in Harrington's view, these functions were ancillary to his primary role as a service technician, because the best way to build customer relationships is "to keep the equipment running." Harrington told Despatch that assuming increased administrative duties was "not doable" because of the physical demands of his job. Harrington denies having any supervisory authority over the CSRs and notes that prior to the filing of the lawsuit, Despatch did not hold him responsible for CSR performance. In conducting Harrington's 2001 annual review, Despatch checked off the rating category for "Work Supervision/Management" as "Not Applicable," and left the box blank during Harrington's June 2002 review.
An exemption is determined by an employee's actual duties, and not by his title or the employer's formal description of his job. 29 C.F.R. § 541.201(b); see also Ale v. Tennessee Valley Authority, 269 F.3d 680, 688-689 (6th Cir. 2001). That is the case here. However imposing Harrington's title, the record does not support the argument that Harrington has the authority to make discretionary decisions, large or small, or that he has any actual supervisory powers over the CSRs (other than scheduling their initial visits to customer sites). The FLSA administrative exemption therefore does not apply.
2. The Motor Carrier Act Exemption
The MCA was enacted in 1935 "to promote efficiency, economy, and safety in the rapidly burgeoning motor transportation industry." Friedrich v. U.S. Computer Services, 974 F.2d 409, 412 (3rd Cir. 1992). The MCA "vested in the Interstate Commerce Commission power to establish reasonable requirements with respect to qualifications and maximum hours of service of employees and safety of operation and equipment of common and contract carriers by motor vehicle." Levinson v. Spector Motor Service, 330 U.S. 649, 658 (1947). The FLSA wage and hour standards were enacted three years after the MCA with an exception for employees over "whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of [the MCA]." 29 U.S.C. § 213(b)(1).
In making an exception, Congress's purpose was to avoid a jurisdictional conflict between the Secretary of Labor and the Secretary of Transportation by giving precedence to the MCA as a public safety statute. See Levinson, 330 U.S. at 662 ("It remains for us to give full effect to the [MCA's] safety program to which Congress has attached primary importance, even to the corresponding exclusion by Congress of certain employees from the benefits of the compulsory overtime pay provisions of the Fair Labor Standards Act."). Thus, if the MCA exemption applies to Harrington's employment, the fact that he is not an exempted employee for FLSA purposes is of no relevance.
The Secretary of Transportation need not actually exert power over an employee for jurisdiction to attach. "It is the existence of the power as opposed to its exercise which Congress has said is determinative. . . ." Morris v. McComb, 332 U.S. 422, 434 (1947). Under the MCA, the Secretary of Transportation is authorized to prescribe "qualifications and maximum hours of service of employees of and standards of equipment of, a motor private carrier, when needed to promote safety of operation." 49 U.S.C. § 31502(b)(2). A "motor private carrier" is defined as
One would think that Congress meant "private motor carrier," but the term is one of art rather than description.
[a] person, other than a motor carrier, transporting property by motor vehicle when:
(A) the transportation [involves interstate commerce];
(B) the person is the owner, lessee, or bailee of the property being transported; and
(C) the property is being transported for sale, lease, rent, or bailment, or to further a commercial enterprise.49 U.S.C. § 10102(16). To fall under the regulatory jurisdiction of the Secretary of Transportation, an employee must be:
(1) employed by carriers whose transportation of passengers or property by motor vehicle is subject to his jurisdiction under section 204 of the Motor Carrier Act . . .; and
(2) engage[d] in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the MCA.29 C.F.R. § 782.2(a). "Highway transportation by motor vehicle from one State to another, in the course of which the vehicles cross the State line, clearly constitutes interstate commerce under both [the FLSA and the MCA]. Employees of a carrier so engaged, whose duties directly affect the safety of operation of such vehicles, are within the exemption. . . ." 29 C.F.R. § 782.7(b)(1).
Despatch qualifies as a motor private carrier because Harrington operates a vehicle in interstate commerce, is the bailee of property (tools and spare parts) owned by Despatch that are transported in commerce for the purpose of furthering a commercial enterprise (servicing Despatch's industrial ovens).See 49 U.S.C. § 10102(16). Thus, if some portion of Harrington's job duties impact the safety of interstate motor transportation, the MCA exemption applies and Harrington is ineligible for overtime. See Crooker v. Sexton Motors, Inc., 469 F.2d 206, 209 (1st Cir. 1972), citing Pyramid Motor Freight Corp. v. Ispass, 330 U.S. 695, 708 (1947) ("It is obvious that one who drives a vehicle in interstate commerce directly affects the safety of such operations as long as he is driving.").
Harrington contends that Despatch is not a motor private carrier under the MCA because the tools and spare parts carried in his van are not the type of property contemplated by the statute. In addition, he argues that the transportation of tools and spare parts was not the "primary purpose" of his travel, but ancillary to the more vital purpose of transporting Harrington himself to the customer site. Harrington urges the adoption of the reasoning of Reich v. New Mt. Pleasant Bakery, 1993 WL 372270 *5 (N.D.N.Y. Sept. 13, 1993), a district court case holding that the MCA exemption does not apply when transportation is not the primary business of the employer. However, the overwhelming majority of cases disagree. In Friedrich v. U.S. Computer Services, 974 F.2d 409 (3d Cir. 1992), the seminal case on the subject, the Third Circuit found that a thirty-five pound tool box and related parts and equipment constituted "property" within the meaning of the MCA, and that field engineers who carried such tools and parts in interstate commerce were exempt employees. Id. at 419. See also Harshman v. Well Service, Inc., 248 F. Supp. 953, 958 (W.D. Pa. 1964) (tools and equipment carried on trucks are "property" for MCA exemption purposes); Sinclair v. Beacon Gasoline Co., 447 F. Supp. 5, 11 (W.D. La. 1976) (same). See also Peraro v. Chemlawn Services Corp., 692 F. Supp. 109, 114 (D. Conn. 1988) (trucks equipped to provide interstate carpet cleaning services are MCA-exempted).
Harrington's argument that the transportation of tools and spare parts is not the "primary purpose" of his interstate travel is a reference to the "primary business test" set out in 49 U.S.C. § 10535 (formerly § 10524(a)), which precludes ICC jurisdiction over the transportation of property by a person engaged in a non-transportation business when such transportation is within the scope of and furthers that person's primary business. The same argument was made and rejected in Friedrich. The court held that section 10524(a) was inapplicable because its purpose is simply to relieve motor private carriers of burdensome ICC licensing, permit, and certificate requirements. Friedrich, 974 F.2d at 413. The Friedrich holding has since been adopted by the Courts of Appeals for the Ninth and Second Circuits. See Klitzke v. Steiner Corp., 110 F.3d 1465, 1469 (9th Cir. 1997) ("[Despite § 10524(a), there are] no limitations on the Secretary's power to prescribe safety requirements for employees of motor private carriers."); Bilyou v. Dutchess Beer Distributors, Inc., 300 F.3d 217, 226 (2d Cir. 2002) ("That part [§ 10535] contains provisions authorizing the DOT to enact registration and security (insurance and bonding) requirements for motor carriers, freight forwarders, and brokers. . . . Section 13505 has no bearing on the Secretary's power, as described in 29 U.S.C. § 213(b)(1).").See also McGuiggan v. CPC Int'l, Inc., 84 F. Supp. 2d 470, 482 (S.D.N.Y. 2000); Carpenter v. Pennington Seed, 2002 WL 465176 at *4 (E.D. La. Mar. 26, 2002). I see no reason to part with the majority.
Harrington argues that even if Despatch is a motor private carrier, the MCA exemption is inapplicable to his case because his connection with interstate commerce is de minimis. Although Harrington cites extra-circuit authority that is supportive of his argument, the First Circuit has squarely rejected the idea of a de minimis exception to the MCA. See Crooker, 469 F.2d at 210 ("[While the de minimis exception may apply to those whose activities do not directly affect safety], the activities of one who drives in interstate commerce, however frequently or infrequently, are not trivial. Such activities directly affect the safety of motor vehicle operations."). (Emphasis added). "It is the character of the activities rather than the proportion of either the employee's time or his activities that determines the actual need for the Commission's power to establish reasonable requirements with respect to qualifications, maximum hours of service, safety of operation and equipment."Levinson, 330 U.S. at 674-675. (Emphases added).
Harrington worked a total of 7,667 hours over the relevant three year period. Only 231 hours, or three percent of his time, was spent actually operating a vehicle in interstate commerce.
Finally, Harrington argues that if the MCA exemption is in play, Crooker's week-by-week analysis should be applied. InCrooker, the plaintiff was an employee of a New Hampshire car dealership. His primary job was to clean and polish new cars. On occasion, he would be asked to deliver or pick up a car in Massachusetts. The First Circuit held that the "continuing duties" of Crooker's job did not include driving in interstate commerce, and that he was therefore entitled to overtime for the weeks in which no such driving occurred. See Crooker, 469 F.2d at 211. In so ruling, the First Circuit relied on a DOL regulation: "If in particular workweeks other duties are assigned to [the employee] which result, in those workweeks, in his performance of activities directly affecting the safety of operation of motor vehicles in interstate commerce on the public highways, the exemption will be applicable to him in those workweeks, but not in the workweeks when he continues to perform the duties of the non-safety affecting job." Crooker, 469 F.2d at 210, citing 29 C.F.R. § 782.2(b)(3).
While the regulation is not binding on the Secretary of Transportation, it is often cited by courts in a Crooker context.
Harrington's employment is distinguishable. One of the "continuing duties" of Harrington's job is to drive the van to perform maintenance work for Despatch's customers anywhere in New England. Interstate travel, unlike the case in Crooker, is an integral part of Harrington's job, the frequency of which will increase as Despatch's customer base in New England grows. Thus, the week-by-week Crooker analysis is inapplicable. See Gerard v. Northern Transportation, LLC, 146 F. Supp. 2d 63, 67 (D. Me. 2001), citing 29 C.F.R. § 782.2(b)(3), which provides:
if the bona fide duties of the job performed by the employee are in fact such that he is . . . called upon in the ordinary course of his work to perform, either regularly or from time to time, safety-affecting activities . . ., he comes within the exemption in all workweeks when he is employed at such job.
This general rule assumes that the activities involved in the continuing duties of the job in all such workweeks will include activities which have been determined to affect directly the safety of operation of motor vehicles on the public highways in transportation in interstate commerce. Where this is the case, the rule applies regardless of the proportion of the employee's time or of his activities which is actually devoted to such safety-affecting work in the particular workweek, and the exemption will be applicable even in a workweek when the employee happens to perform no work directly affecting "safety of operation."29 C.F.R. § 782.2(b)(3). Because in the ordinary course of his work, Harrington is called upon to drive in interstate commerce, 29 C.F.R. § 782.2(b)(3) applies and Harrington is an MCA-exempt employee. See Guyton v. Schwann Food Co., 2004 WL 533942 *6 (D. Minn. 2004) (sales managers who drive delivery trucks in interstate commerce "from time to time," although not every week, fall within the MCA exemption because their activities directly affect motor vehicle safety); Carpenter v. Pennington Seed, Inc., 2002 WL 465176 *4 (E.D. La. 2002) (same).
The relevant exemptions under the MFWL are identical to those under the FLSA, 29 U.S.C. § 207(a)(1), and the same analysis applies. See Valerio v. Putnam Assocs., Inc., 173 F.3d 35, 40 (1st Cir. 1999). However, because the federal MCA preempts any contrary result under the MFWL, the statute is no more availing to Harrington than is the federal FLSA.
ORDER
For the foregoing reasons, Despatch's motion for summary judgment is ALLOWED. Because Harrington is an MCA-exempt employee, his motion for summary judgment is MOOT. The Clerk will enter judgment for Despatch.SO ORDERED.