New York employees often bring overtime claims under both the federal Fair Labor Standards Act (FLSA), and the New York Labor Law (NYLL). While there are similarities and overlap between the two laws, they also differ in critical respects. One such difference relates to overtime exemptions. While some employees are exempt under both statutes, others may be exempt only under one or the other. An example of this is the motor carrier exemption, which appears in the FLSA but not the NYLL.

The recent Second Circuit case, Hayward v. IBI Armored Servs., No. 19-1863-CV, 2020 WL 1647176 (2d Cir. Apr. 3, 2020), addresses whether and to what extent employees who satisfy the motor carrier exemption can still bring overtime claims under the NYLL. In a per curiam opinion, Second Circuit Judges Susan Carney, Dennis Jacobs, and Rosemary Pooler held that while New York law precludes those employees from recovering overtime at one and one-half times their hourly wage, employers remain obligated to pay overtime at one and one-half times the minimum wage. This decision could have far reaching implications as it theoretically applies to all overtime disputes involving exemptions under §13 of the FLSA, not just motor carrier exemption cases.

Overtime Exemptions Under the FLSA and NYLL

Under the FLSA and the NYLL, employees are generally entitled to overtime when they work more than 40 hours in a week. Overtime is typically calculated at one and one-half times the employee's hourly rate. This is referred to as "time and one-half."

But not all employees are overtime-eligible. As relevant here, "exempt" employees are not entitled to overtime because they satisfy certain statutory exemptions. For example, doctors and lawyers are not entitled to overtime because they are exempt under both the FLSA and the NYLL. So are high level executives and administrators.

One exemption contained in the FLSA but not the NYLL is the motor carrier exemption, which covers certain employees who fall under the jurisdiction of the U.S Secretary of Transportation. Multiple judges in the Southern District of New York have read the NYLL to incorporate the motor carrier exemption. After Hayward, those holdings are no longer good law.

'Hayward' in the District Court

New York's overtime laws are largely contained in a series of minimum wage orders. The most generally applicable wage order is the Minimum Wage Order for Miscellaneous Industries and Occupations (the Miscellaneous Wage Order).

The Miscellaneous Wage Order addresses the interaction between federal overtime law and New York overtime law. It states:

An employer shall pay an employee for overtime at a wage rate of one and one-half times the employee's regular rate in the manner and methods provided in and subject to the exemptions of sections 7 and 13 of 29 USC 201 et seq., the Fair Labor Standards Act of 1938 …

In addition, an employer shall pay employees subject to the exemptions of section 13 of the Fair Labor Standards Act, as amended … overtime at a wage rate of one and one-half times the basic minimum hourly rate.

12 N.Y.C.R.R. §142-2.2.

The motor carrier exemption is contained in §13 of the FLSA. Based on the first sentence of §142-2.2, employees who satisfy the motor carrier exemption are not entitled to time and one-half of their regular rate under New York law when they work more than 40 hours in a week.

The question in Hayward was whether, based on the second sentence of §142-2.2, those same employees are entitled to the more limited measure of overtime at one and one-half times minimum wage under New York law when they work more than 40 hours in a week.

The district court answered that question with a "no." Hayward v. IBI Armored Servs., No. 17-CV-02944, 2019 WL 1573150, at *3 (E.D.N.Y. April 11, 2019). It held that §142-2.2 "clearly expresse[s]" the "intent" that the NYLL incorporate the motor carrier exemption.

In reaching this conclusion, the district court acknowledged that the Miscellaneous Wage Order says nothing about the motor carrier exemption. That omission is "of no consequence," the district court reasoned, because the motor carrier exemption is "embraced by the FLSA and therefore need not be cited in isolation." On the district court's reading, the Miscellaneous Wage Order "expressly includes all exemptions to the FLSA."

'Hayward' at the Second Circuit

The Second Circuit reversed the district court based on the "plain meaning" of §142-2.2. Interestingly, while the district court and the Circuit arrive at different conclusions, both courts believe that their reading is the "clear" reading of §142-2.2.

The Second Circuit reasoned as follows: The second sentence of §142-2.2 states (with exceptions not relevant here) that employees exempt under §13 of the FLSA are entitled to "overtime at a wage rate of one and one-half times the basic minimum hourly rate." The motor carrier exemption is contained in §13 of the FLSA. Therefore, employees who are covered under the motor carrier exemption are entitled under New York law to overtime calculated at one and one-half times the minimum wage.

A different reading of the second sentence offered by the defendants made little sense. According to the defendants, the term "subject to the exemptions of section 13 of the Fair Labor Standards Act" in the second sentence of §14-2.2 operates as a carveout from the rule that employees are entitled to overtime based on the minimum wage. The Second Circuit rejected that reading for two reasons.

First, the phrase "subject to the exemptions …" appears in §142-2.2 right after the term "employees." That placement "suggests that the phrase modifies 'employees.'" It follows that employees subject to the §13 exemptions are entitled to overtime at one and one-half times the minimum wage.

Second, if plaintiffs were correct, the second sentence would "have no additive value." That is because "[t]he first sentence's requirement to pay employees at a rate of one and one-half times the employees' regular rate applies equally to those earning minimum wage and those earning more."

Conclusion

Hayward is about the motor carrier exemption, but it is about more than that. It is about all of the exemptions contained in §13 of the FLSA that do not appear in the NYLL. There are several such exemptions, including one for "salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements" and one for employees "employed by an establishment which is a motion picture theater."

Under Hayward, employees in the Second Circuit who are exempt under the §13 of the FLSA but are not exempt under the NYLL are now definitively entitled to overtime at one and one-half times the minimum wage.

Michael H. Reed is a counsel at Yankwitt LLP in White Plains, N.Y., where he practices complex litigation with an emphasis on employment cases. He can be reached at [email protected].