Payroll News

Are Paid Commuting Time, Meal Breaks Part of Overtime?

April 29, 2019, 2:04 PM

“We’re an agriculture business, so we shouldn’t have to pay overtime to our truck drivers because they transport the lumber to the mills,” said Jenny, the company payroll director. “Besides, their pay includes commuting time, so that’s basically a bonus.”

“Yes, and we’re exempt from overtime under the Motor Carrier Act because we transport our own cargo,” said James, the company’s director.

Facts: A Michigan logging company harvested raw timber from forests and transported the wood to mills for processing into paper and other products. The company had several worksites where equipment operators cut and transported the wood to a central terminal for truck drivers to transport to the mills. An office manager and mechanics also were at the terminal.

All of the company’s activities occurred in Michigan, from harvesting and cutting the lumber to transporting it to mills throughout the state.

Compensation and recordkeeping were established by the director of the company. Workers were paid hourly, daily, or by the cord of lumber cut and processed. The company recorded time worked only for hourly employees. Those whose work exceeded 40 hours in a week did not receive overtime compensation at time and one-half their regular rate of pay. The employer believed the company was exempt from paying overtime under the Fair Labor Standards Act because it operated as an agricultural business.

An investigation by the federal Labor Department’s Wage and Hour Division, which covered a period of two and one-half years, found the employer had violated overtime and recordkeeping provisions of the FLSA. Some employees were not paid a straight hourly wage, or were paid a combination of an hourly wage, day, cord rate, or piece rate, investigators said.

The Labor Department sought back wages and damages for the affected workers. The back overtime wages were calculated based on payroll records produced by the company as well as interviews with employees.

A federal district court ruled in favor of the Labor Department and awarded back wages, including overtime pay and damages, totaling about $878,875 for 50 employees. The overtime included paid time that employees spent commuting to and from work or for meal periods because the employer had an established custom or practice of compensating its employees for such time.

The employer appealed, claiming that the district court should not have ordered back overtime wages and damages. The employer claimed that its drivers were not covered by FLSA overtime provisions because of the Motor Carrier Exemption, which excludes from overtime compensation employees who meet Transportation Department requirements on the maximum number of working hours, among other rules.

Issue: Are the drivers covered by the FLSA and should commuting time and meal breaks be included in overtime calculations?

Decision: Employees at the logging company were covered by the FLSA and were owed back wages and damages, the U.S. of Appeals for the Sixth Circuit ruled. However, the district court must recalculate the amount of the award because the amount of time employees spent commuting to and from work as well as meal breaks should not have been included in determining overtime hours, the appeals court said.

Although the Portal-to-Portal Act suggests that home-to-work commutes are deemed compensable if the employer has a custom or practice of compensating for such work, it says “ordinary travel from home to work need not be counted as hours worked even if the employer agrees to pay for it.”

Other circuit courts may not have addressed this issue, but district courts have held that ordinary commuting time to and from a place of employment does not qualify as work under the FLSA, even if the employer has paid for such time, the Sixth Circuit said. Thus, the time is not subject to overtime requirements.

The general rule, the court said, “is and always has been that the FLSA does not treat ordinary home-to-job-site travel as compensable.” The same is true of “bona fide meal periods.”

The court also disagreed with the employer’s claim that the logging company was exempt from paying overtime wages under the Motor Carrier Act because it was a private motor carrier that transported its own cargo.

The employer claimed that the Motor Carrier Act applied because its trucks operated with Transportation Department registration number and its drivers had commercial licenses and drove only intrastate routes in Michigan. The court said, however, that the registration certificates authorized the employer to engage in interstate transportation and provided no information about whether the drivers drove across state lines or engaged in interstate commerce.

The registration certification and commercial licenses alone were not enough to qualify the employer as a private motor carrier, the court said.

The district court award of $878,875 was vacated by the appeals court, which sent the matter back to the lower court to recalculate the overtime pay and damages.

The case is Sec’y of Labor v. Timberline S. LLC, 6th Cir., No. 18-1763, 4/5/19.

Pointers: Travel time to and from work by employees generally does not count as hours worked under the FLSA, even if an employer chooses to pay employees for the time spent commuting. But once employees start the workday, all time spent traveling as part of their principal activities must be counted as hours worked.

When an employee’s job involves traveling from one site to another after reporting for the day’s work, the travel time must be counted as hours worked. Compensation is required even if there is a contract, custom or practice providing otherwise.

Additionally, the Portal-to-Portal Act excludes from FLSA minimum wage and overtime pay rules time spent by an employee “walking, riding, or traveling to and from the actual place of performance of the principal activity or activities,” unless such activities are compensable under the terms of a contract, custom, or practice.

Meal periods generally may be excluded from time worked when an employee is fully relieved of duty to eat a regular meal. The period must be at least 30 minutes to be excluded, although shorter periods may be allowed in some cases. Separately, snack and coffee breaks are considered rest periods, not meal periods. Rest periods are generally considered work time.

Employees are not relieved of duty if they are required to perform any duties during a meal period. For example, employees required to stay at their desks or machines during the meal period are not completely relieved of duty, so the period must be counted as time worked. Employees do not have to be allowed to leave the worksite if they are otherwise fully relieved of duties.

Although the FLSA does not require meal breaks, some states do. Rules may vary considerably from state to state.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergtax.com. To contact the editor: Michael Baer at mbaer@bloombergtax.com

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