A federal judge has ruled that Total Quality Logistics — the second-largest freight brokerage in the U.S. — violated federal law and owes overtime pay to thousands of former employees who worked more than 40 hours a week.
Judge Michael Barrett of the U.S. District Court for the Southern District of Ohio issued his ruling on Sept. 26, almost 18 months after a 12-day bench trial ended in early March 2022. He ordered TQL to pay overtime wages to the employees but also ruled TQL must pay an additional amount equal to the actual damages.
Barrett also found Ken Oaks, chief executive and co-founder of TQL, personally liable.
Bruce H. Meizlish, the lead attorney from Cincinnati, called Barrett’s ruling a “huge win” for more than 4,500 members of the class-action suit against TQL.
“At this point, we don’t know what the actual damages number could be,” Meizlish told FreightWaves. “We are going to argue that they are owed time and a half for every hour worked over 40.”
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Members of the class, who include more than 4,500 logistics account executive trainees (LAETs) and logistics account executives (LAEs), worked for TQL in Ohio from September 2008 to mid-April 2016.
These trainees are expected to spend at least six months conducting sales calls for freight brokers, earning between $36,000 and $38,000, before they are even considered to make the move from salary to a commission-based pay system.
However, former TQL employees told FreightWaves that only around 5% actually make it once they transition to a commission-only system.
Former employees told FreightWaves they were expected to work more than 60 hours per week to meet sales goals. They were also expected to be available 24 hours per day, seven days a week to “increase TQL’s customer base” and to respond to customer problems or questions at all times.
It’s been 13 years since Meizlish filed suit against TQL and Oaks in September 2010.
“TQL tried to decertify the class multiple times,” he said.
Oaks turned to TIA for guidance about exemption
In his testimony during the 12-day bench trial, Oaks acknowledged it was his idea to classify LAETs and junior LAEs as salaried employees and exempt from overtime after conducting “research” and seeking guidance from the Transportation Intermediaries Association (TIA), a trade group that represents thousands of freight brokers in the U.S.
“I did my research and that’s what the association advised us, their experts advised us, and that’s what other top brokers in the industry did,” Oaks said during his cross-examination.
Reached for comment about the possible impact the ruling against TQL could have on its freight brokerage members with similar business models, Anne Reinke, president and CEO of TIA, said, “TIA is disappointed with the judge’s decision in the class action lawsuit against TQL, as it relates to the Fair Labor Standards Act and the Ohio Minimum Wage Standards Act.”
“This unfortunate precedent could stifle hiring and innovation among TIA members,” Reinke told FreightWaves in a statement. “TIA will continue to track the progress of this case as it proceeds.”
In his testimony, Oaks said he wasn’t sure if he consulted with TIA’s attorneys or with TIA staff members prior to his decision.
“TIA is kind of like … I don’t know what you call them … the governing organization of brokers in the United States,” Oaks said.
The plaintiffs’ attorney responded, “It’s a trade organization, right?” to which Oaks responded, “That is correct.”
As of publication late Wednesday, TQL had not responded to FreightWaves’ request for comment.
What ruling means for brokers?
Matthew Leffler, known as the Armchair Attorney, said this is a major ruling against TQL and claims it “will have substantial fallout” for TQL and other freight brokerages that exempt trainees from overtime pay.
“This could be the beginning of the end of their business model,” Leffler told FreightWaves.
TQL argued that its LAETS and junior LAEs were exempt from the FLSA overtime requirements because the tasks they performed were administrative duties.
However, Leffler said TQL failed to prove that their jobs were directly related to the management or general business operations of TQL and its customers.
“These people had little independence over their ability to make a living,” he said.
“The question is what these people are actually doing,” Leffler said. “They are making cold calls, they are really out there prospecting to get business and they’re managing transportation to an extent from their mentor’s book of business,” he said. “The judge found that their job duties are not directly related to the management or general business operations of TQL or TQL’s customers.”
TQL, which is a privately held firm, posted revenues of around $8.8 billion in 2022. As of 2016, Oaks was listed as Cincinnati’s wealthiest person, with a net worth estimated at $980 million, according to Forbes.
Meizlish said the suit is considered a hybrid action because he sued under federal and state law. The Fair Labor Standards Act provides for liquidated damages, which is an amount equal to the amount of actual damages recovered, but the state statute — the Ohio Minimum Wage Standards Act — doesn’t permit for the recovery of extra damages.
In Barrett’s ruling, he directed the parties to meet and confer and file a joint submission outlining the briefing schedule for damages, pre-and post-judgment interest and costs and reasonable attorney’s fees.
Meizlish joked that he had hoped to be retired by now but that it isn’t happening anytime soon.
“This case has dragged on for 13 years so I really don’t have a clear timeframe for what happens next,” he said. “I feel bad for these people. Oftentimes, this was their first employment experience and they all seem kind of scarred by it.”