Publication Details

Snafu in Michigan Legislation Threatens Michigan Motor Carriers with Loss of Overtime Exemption

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Article Originally Published: August 2006

The information contained in this article is not intended to be legal advice. Readers should not act or rely on this information without consulting an attorney.

Recent developments involving the Michigan legislature and Governor Jennifer Granholm confront Michigan employers, including motor carriers, with the distinct possibility that overtime obligations will be expanded to a substantial group of employees previously exempt from overtime payment.

On March 15, 2006, the Michigan Senate amended the Michigan Minimum Wage Act to provide for substantial increases in the Michigan minimum wage. As a result, the state minimum wage, presently $5.15, the same as the Federal minimum wage, will increase to $6.95 effective October 1, 2006, $7.15 effective July 1, 2007, and $7.40 effective July 1, 2008.

Thereafter, a concern was expressed in the employer community that the amendment had mistakenly eliminated certain overtime exemptions provided in the Michigan Minimum Wage Act including some specified in the Fair Labor Standards Act ("FLSA"). This concern arose because the language in the Michigan Minimum Wage Act arguably conditions the application of certain overtime exemptions, including the motor carrier exemption, to the level of the Federal minimum wage in comparison with the Michigan minimum wage rate. Therefore, because the Michigan minimum wage rate would be greater than the Federal minimum wage rate, the overtime exemptions would no longer apply to Michigan employers.

In June 2006, the Michigan legislature passed additional legislation to correct this situation and to retain the overtime exceptions including the motor carrier exemption. Governor Granholm, however, threatened to veto this corrective action. It also became evident that the legislation as enacted would not be effective until April 1, 2007, six months after the increase in the Michigan minimum wage rate. Thus, the legislation was sent back to the Senate.

For these reasons, many Michigan employers, including motor carriers, must recognize that it is possible that effective October 1, 2006, they may be required to pay overtime to a substantial group of employees previously not covered by the overtime obligation.

The Michigan Chamber of Commerce estimates that 15,000 Michigan employers could face an obligation to pay overtime previously not required, thus encompassing approximately 370,000 employees previously exempt from the overtime payment, specifically including those presently covered by the motor carrier exemption.

For motor carriers, employees currently subject to the motor carrier overtime exemption include drivers subject to being dispatched to handle interstate freight and employees such as mechanics, loaders or yard personnel whose duties affect the safety of operation of motor vehicles in interstate commerce. Even for unionized carriers, contracts often do not require overtime for employees such as road drivers. Loss of the exemption would require overtime for these employees as well.

Michigan currently has no rules on how to calculate overtime for such employees. Major questions also exist on such issues as how overtime would be applied to drivers operating partly in Michigan and partly in other states or provinces.

While a legislative solution would be the most effective way of averting this troublesome possibility, the industry may soon face the prospect of needing to initiate court litigation to determine whether the legislature’s unintended actions can have the effect of undoing nearly 70 years of a uniform federal policy excluding interstate motor carriers from overtime requirements.