Opinion ID: 419207
Heading Depth: 1
Heading Rank: 1

Heading: Interaction of the Motor Carrier Act and the Fair Labor Standards Act

Text: 6 We are required to examine the interrelationship of two federal statutes. The FLSA provides that employees in interstate commerce shall be paid at one and one-half times their regular hourly rate for hours over forty in any work week. 29 U.S.C. Sec. 207(a)(1). The MCA authorizes the Secretary of Transportation, in the interest of safety, to establish qualifications and maximum hours of service for employees of motor carriers like Robert's. 49 U.S.C. Sec. 304(a)(1). Thus, the FLSA provides for overtime pay for employees generally, while the MCA authorizes the Secretary to establish maximum hours for certain employees in a particular industry. However, the FLSA excepts from its overtime provisions any employee with respect to whom the Secretary of Transportation [formerly the Interstate Commerce Commission] has power to establish qualifications and maximum hours of service pursuant to the provisions of [the Motor Carrier Act]. 29 U.S.C. Sec. 213(b)(1). 7 Where the MCA applies, the FLSA does not. Levinson v. Spector Motor Service, 330 U.S. 649, 661, 67 S.Ct. 931, 938, 91 L.Ed. 1158 (1947); Marshall v. Union Pacific Motor Freight Co., 650 F.2d 1085, 1089 (9th Cir.1981). Thus, as a general rule, employees of motor carriers are subject to the MCA and not the FLSA. This simple rule of MCA supremacy was complicated by an MCA provision that gave the Interstate Commerce Commission (ICC) the authority to exempt qualified intrastate motor carriers from MCA regulation. 49 U.S.C. Sec. 304(a)(4a). 2 In 1960, the Commission exempted motor carriers in the state of Hawaii. 84 M.C.C. 5 (1960); 49 C.F.R. Sec. 1050 (1967). 3 That exemption was in effect during much of the time for which the plaintiffs seek compensation. The principal question before us then is whether FLSA overtime protections applied during the period the motor carriers were exempt from the MCA. 8 No reported case has dealt squarely with this issue. There is direct authority, however, for the view that during the period when an MCA exemption is in effect a motor carrier is not subject to the Act. In IML Sea Transit, Ltd. v. United States, 343 F.Supp. 32 (N.D.Cal.) (three judge panel), aff'd sub nom. Interstate Commerce Commission v. IML Sea Transit, Ltd., 409 U.S. 1002, 93 S.Ct. 433, 34 L.Ed.2d 295 (1972), the issue was whether Sea Transit was a freight forwarder within the Interstate Commerce Act and therefore required to obtain an ICC license. To be subject to ICC regulation, a freight forwarder, inter alia, must use the services of a carrier subject to the MCA. Sea Transit employed Hawaiian motor carriers to deliver shipments in Hawaii. These carriers were included within the same certificate of exemption that covered Robert's. During the investigation, the ICC examiner took the position that since the ICC had granted the exemption and retained the continuing power to revoke it in whole or in part, the carriers were still subject to the MCA. The court rejected this analysis, holding that while the exemption was in effect, the carriers were not subject to the MCA. The court said, 9 The intervenors ... contended that only Congress can exclude them from the purview of the Act itself. The court rejects this argument. Under [the Motor Carriers Act,] 49 U.S.C. Sec. 304(a)(4a), the ICC has the power either to attach to such certificate [of exemption] such reasonable terms and conditions as the public interest may require or to revoke all or any part thereof. The ICC has chosen to do neither. Until such time as the ICC actually exercises its power to condition or revoke the certificates of exemption it has granted to the Hawaiian motor carriers, they are not subject to the [MCA]. 10 343 F.Supp. at 38. 11 The Commission followed the holding of IML Sea Transit in IML Freight, Inc.--Control & Merger--Freightmaster Corp., 122 M.C.C. 458 (1976). There, the ICC dismissed for lack of jurisdiction a joint application filed by IML Freight, an interstate motor carrier, and Freightmaster, an exempted Hawaiian motor carrier, for the former to acquire control of the latter. As the concurring opinion pointed out 12 [s]ince [the provisions of the Interstate Commerce Act regulating motor carrier mergers apply] only to transactions between carriers subject to parts I, II, and III of the Act [including the MCA], and Freightmaster Corporation, an exempt Hawaiian carrier, is not subject to any part of the Act, [citing IML Sea Transit ], it can only be concluded that the proposed transaction ... does not constitute a transaction within the scope of [the Act], and that application should be dismissed. 13 122 M.C.C. at 473 (Taylor, C., concurring). These cases directly support the view that the Commission's exemption of a motor carrier from MCA coverage suspends the applicability of the MCA completely. 14 In an early FLSA case, the Supreme Court strongly implied that employees exempted from coverage under the MCA are indeed subject to the provisions of the FLSA. In Morris v. McComb, 332 U.S. 422, 68 S.Ct. 131, 92 L.Ed. 44 (1947), the Court held that a class of employees was subject to the MCA rather than the FLSA even though the Commission had not yet adopted regulations covering those employees. The Court said that it is the existence of the Commission's power to regulate that is determinative of the question whether FLSA overtime protections apply. Id. at 434, 68 S.Ct. at 137. However, the Court reached this conclusion only after first finding that [t]he Commission [had] made no exception ... that would exempt drivers of the petitioner from [the requirements of the MCA] as a class. Id. 15 The language of the exemption provision was mandatory: if the Commission found that a carrier's activities did not substantially affect interstate commerce, it was required to grant an exemption. See 49 U.S.C. Sec. 304(a)(4a). Even where no party has suggested that an exemption was necessary, the Commission had a statutory duty to issue exemptions sua sponte. Id. Thus, whenever the prerequisites of subsection 304(a)(4a) were met, an exemption was mandated; and so long as there was no change in circumstances, the Commission had no power to regulate under the MCA. Where no such power existed, there was no bar to application of the FLSA. 4 16 We are persuaded that a certificate of exemption, until revoked or conditioned, completely removed exempted carriers from the jurisdiction of the Motor Carrier Act. Once the Hawaiian carriers were exempted from MCA regulations they became subject once again to the Fair Labor Standards Act. Accordingly, we affirm the holding of the district court: during the period when Robert's enjoyed a certificate of exemption from the MCA, its employees were entitled to overtime compensation pursuant to the provisions of 29 U.S.C. Sec. 207. 5 17 Plaintiffs filed a cross-appeal contending that the district court erred in limiting their recovery to the period before October 1, 1974, the date on which the Secretary of Transportation revoked the Hawaii certificate of exemption (to the extent that it pertained to maximum hours of service and driver qualifications). While the duty to regulate hours and qualifications was transferred to the Department in 1966, 49 U.S.C. Sec. 1655(e)(6)(C), there was no specific transfer of the duty to issue or revoke exemptions from such regulations. 6 Plaintiffs argue therefore that the Secretary had no power to revoke the Hawaii certificate. In support of their argument, they contend that Congress intended all but specified powers to remain under the aegis of the Commission. 49 U.S.C. Sec. 1655(f)(1). 18 Preliminarily, we note that Congress provided that certificates of exemption in effect at the time the Department of Transportation Act was passed would remain in effect until revoked. See Pub.L. No. 89-670, Sec. 12(a), 80 Stat. 931, 949 (1966). The question then is whether Congress intended to leave the power to revoke outstanding exemptions affecting maximum hours and qualifications with the Commission--despite the fact that it no longer had the authority to regulate maximum hours or qualifications--or whether it intended the power to reside in the Secretary, who did have that authority. We think the answer is evident. We hold that under section 12(a) the Secretary had the power to revoke the Hawaii exemption insofar as it pertained to maximum hours and qualifications. 7