Freight brokers are appropriately concerned following the Southern District of Ohio’s recent decision in Hendricks v. Total Quality Logistics, LLC, et al. In Hendricks, the Court found that Total Quality Logistics (TQL) violated the Fair Labor Standards Act (FLSA) and Ohio law by misclassifying its Logistics Account Executive Trainees (LAET) and Junior Logistics Account Executives (Junior LAE) as exempt under the FLSA’s administrative exemption. TQL and its owner is now potentially on the hook for hundreds of millions in unpaid overtime, liquidated damages, and attorneys’ fees. Hendricks is a stark reminder of the costs of misclassification.
Generally speaking, the FLSA requires employers to compensate employees at 1.5x their regular rate for all hours worked over 40 per workweek. Three noteworthy exemptions from this rule are the executive, professional, and administrative exemptions. Establishing whether an exemption applies rests on the employer, who must show the job meets the salary basis test, the salary threshold test (currently, $684/week), and the primary duties test.
The central issue in Hendricks was whether TQL’s LAETs and Junior LAEs met the primary duties test for the administrative exemption. TQL maintained that LAETs and Junior LAEs were entrepreneurs who ran their own businesses by selecting industries and customers, prospecting, exercising discretion and independent judgment in covering and building loads and negotiating rates. However, according to the...
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