On March 2, 2009, the Appellate Division of the New Jersey Superior Court upheld a New Jersey Department of Labor and Workforce Development ruling that a retailer that delivers its own products must pay its truck drivers time-and-a-half for overtime and is not entitled to an exemption reserved for businesses primarily engaged in trucking. Of particular importance to companies who are not for-hire motor carriers or suppliers of distribution services, the Court distinguished between entities whose primary business is delivery-related, to whom the exemption applies, and those for whom these are merely support functions. The three-judge panel ruled that Raymour and Flanigan is primarily a furniture retailer and that it must therefore pay its truck drivers and other delivery workers time-and-a-half for hours in excess of 40 a week.
New Jersey law, and, by extension, Federal law, generally requires employers to pay employees a 50% premium for overtime work. New Jersey and Federal law recognize a "trucking industry exemption" excluding trucking and some other distribution businesses from statutory overtime requirements. Under the exemption, a truck driver may work more than 40 hours in a week without being legally entitled to overtime pay.
In In the Matter of Raymour and Flanigan Furniture and Neil Goldberg, President and Individually, Raymour and Flanigan asserted that it was not required to pay its New Jersey based transportation and distribution employees overtime at the statutory overtime rate. Raymour and Flanigan argued that its trucking operation constituted a separate "establishment" from its retail facilities, since its trucking division was not merged into the retail portion of its business, and in fact, was segregated into facilities separate and distinct from its retail stores. Accordingly, Raymour and Flanigan asserted it was a "trucking industry employer" with respect to its transportation and distribution employees and should therefore be exempt from paying those employees overtime at the statutory rate.
The Appellate Division of the New Jersey Superior Court rejected Raymour and Flanigan's claim, finding that the "trucking industry exemption" did not apply to Raymour and Flanigan, since its primary line of business was retailing rather than trucking or distribution. The Court found that the transportation and distribution functions of Raymour and Flanigan's business exist to support the larger retail business enterprise. The Court noted that the fact that the transportation and distribution functions were physically distinct from Raymour and Flanigan's retail locations did not affect their character as being part and parcel of its retail business, and that the affected employees "were employed by the same corporate entity as are the employees who work in the retail stores." Further, the Court went on to say that "[e]xtending the exemption to retail industry employers, who conduct their delivery operations at a separate location, would be contrary to the purpose of the wage and hour legislation," by allowing the employer to "avoid paying time-and-a-half of the employee's regular wage simply by placing the trucking and delivery operation of its business in a separate building."
This decision has far-reaching implications. It is not limited to retailers, touching any entity providing for its own transportation and distribution needs and seeking to utilize the "safe haven" granted to motor carriers. The reasoning used by the Court could be extended to cover drivers for private carriers. Additionally, the decision leaves open the question of whether the statutory exemption would have applied to Raymour and Flanigan had they placed the delivery functions in a separate subsidiary whose primary purpose was transportation and distribution.
Companies should be careful to consider the holding in this case and the issues it raises in setting up and/or administering an in-house motor carrier and/or distribution function.
