Newhouse v. Robert's Ilima Tours, Inc.

• Decision Date: 13 June 1983
• Docket Number: 81-4580,Nos. 81-4569,s. 81-4569
• Citation: 708 F.2d 436
• Parties: 26 Wage & Hour Cas. (BN 352, 98 Lab.Cas. P 34,400 Paul R. NEWHOUSE, Jr., Suki R. Kuresa and Elwin L. Adarna, Plaintiffs-Appellees, Cross-Appellants, v. ROBERT'S ILIMA TOURS, INC., Defendant-Appellant, Cross-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 436

708 F.2d 436

26 Wage & Hour Cas. (BN 352, 98 Lab.Cas. P 34,400

Paul R. NEWHOUSE, Jr., Suki R. Kuresa and Elwin L. Adarna Plaintiffs-Appellees, Cross-Appellants, v. ROBERT'S ILIMA TOURS, INC., Defendant-Appellant, Cross-Appellees.

Nos. 81-4569, 81-4580.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 19, 1982.

Decided June 13, 1983.

Susan Ichinose, Robert Patrick Jaress, Mukai, Ichiki, Raffetto & MacMillan, Honolulu, Hawaii, for plaintiffs-appellees, cross-appellants.

Barry W. Marr, Torkildson, Katz, Jossem & Loden, Honolulu, Hawaii, for defendant-appellant, cross-appellees.

Appeal from the United States District Court for the District of Hawaii.

Before CANBY, NORRIS, and REINHARDT, Circuit Judges.

REINHARDT, Circuit Judge:

This case is before us for a second time. The plaintiffs are former drivers for Robert's Ilima Tours, an Hawaiian corporation providing transportation services for tourists on the island of Oahu. Robert's practice was to compensate its drivers for actual driving time only, not for time spent on-call waiting for assignments. In August 1975, plaintiffs brought an action to recover overtime compensation under the Fair Labor Standards Act (FLSA), 29 U.S.C. Secs. 206, 207, and 215 (1976), and under the Hawaii Wage and Hour Law, Hawaii Revised Statutes Secs. 387-2 and 387-3 (1976).

After a bench trial, the court determined that the plaintiffs were entitled to overtime pay under the FLSA and to an award of $7,900.00 for attorney's fees. On the first appeal, defendant argued that the FLSA simply did not apply to the plaintiffs' claims. Plaintiffs rejoined that it was unnecessary for us to reach that question because, in their view, the district court rested its judgment alternatively on the Hawaii Wage and Hour Law. In an unpublished decision, we remanded for the district court to clarify the basis for its decision. 654 F.2d 731 (9th Cir.1981). We also asked the court to reconsider its attorney's fees award in light of Kerr v. Screen Extras Guild, 526 F.2d 67, 70 (9th Cir.1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1726, 48 L.Ed.2d 195 (1976).

On remand, the district court stated that its decision to award plaintiffs overtime was based solely on the FLSA. The court then limited overtime compensation to the period before October 1, 1974. In so doing, the court reasoned that the Motor Carrier Act (MCA), 49 U.S.C. Secs. 301-325 (1963), precluded application of the FLSA overtime protections to Robert's employees after the time the Secretary of Transportation revoked the certificate exempting Hawaiian motor carriers from regulation under the MCA. In addition, the court increased the attorney's fees award to $25,000 to reflect appellate and post-remand services, and found that costs and interest on the back pay award from the date of the complaint should be added. ¹

Both parties have appealed. Robert's appeals the district court's finding that the overtime provisions in the FLSA covered its employees before October 1974. Robert's also challenges the costs and interest awards, and the amount of the attorney's fees award. Plaintiffs appeal from the court's conclusion that FLSA coverage ceased on October 1, 1974.

I. Interaction of the Motor Carrier Act and the Fair Labor Standards Act

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).

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.

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,

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]."

343 F.Supp. at 38.

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

[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.

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.

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.

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

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...