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Scopelitis L & E News: February 2019

by A. Jack Finklea, Sara L. Pettinger, David D. Robinson, Donald J. Vogel

February 11, 2019

Attacks on the Exempt Status of the Freight Broker Position

Recent class action complaints should serve as a signal to freight brokerage companies to take a fresh look at their classification of freight brokers as exempt v. non-exempt from the payment of overtime under the Fair Labor Standards Act (FLSA).  These cases focus on the role performed by employees variously referred to as freight brokers/sales agents/account executives – whose primary duty is to connect shipping customers with transportation providers.

Historically, it has been quite common for freight brokerage companies to pay these employees a salary plus commission, and to classify them as exempt employees under the FLSA.  In most cases, these companies rely upon the Administrative Exemption.  In order for a worker to qualify for the Administrative Exemption, the following requirements must be met:

  1. The worker must be paid a salary of at least $455 per week;
  2. The worker’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  3. The worker’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

It is this second requirement that has proven to be an area of vulnerability.  In discussing this requirement, the FLSA regulations focus on the distinction between “the running or the servicing of the business” and laboring “on a manufacturing production line or selling a product in a retail or service establishment.”  29 C.F.R. § 541.201(a).  In simplest terms, plaintiffs will argue that freight brokers are production employees and not management employees because they are the source of the very service that the brokerage operation provides.

These attacks seem to be gaining momentum and we have noticed an uptick in class action filings.  Because so many of these cases have settled, we do not have much in the way of definitive judicial guidance on this subject.  In this environment, we urge freight brokerage companies to carefully examine their classification decisions and consider whether an exempt classification would withstand scrutiny.

For questions relating to classification decisions, please contact Don Vogel, Sari Pettinger, Jack Finklea, or David Robinson.  

 

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Scopelitis practice area newsletters are intended as reports to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

© Scopelitis, Garvin, Light, Hanson & Feary, P.C. 2018. All rights reserved. 

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