mahoney

The Department of Labor Gets Into the Act

Fri, 16 Dec 2022 16:35:07 GMT

The Department of Labor again wants to change how it defines independent contractors under the Fair Labor Standards Act. It has proposed a new independent contractor rule for 2023.

For so many employers who consider independent contractors an essential part of their workforce, the announcement will impact your workers’ status in so many ways.

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, EEOC claims, discrimination, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

Just about every industry, and certainly transportation, classifies many workers as independent contractors. Onboarding contractors makes businesses more competitive during surges or for projects and doesn’t require us to gear up our HR departments with complex requirements for workers’ compensation, unemployment insurance, PTO, vacation and other regulations applying to employees – not to mention new pay disclosure rules (see California, below).

What’s the rule presently?

The current rule, adopted less than two years ago (January 2021), simplified the traditional multifactor test and focused on two key issues:

a worker’s control over their work, and
their opportunity for profit and loss.

Courts can (and they all do, which also confuses HR) consider other factors in determining a worker’s status, “control,” and “profit and loss,” which will show up in agencies’ decisions.

Don’t even think about how the DOL believes the current rule has a “confusing and disruptive effect on workers and businesses … due to its departure from case law[.]” We’re in for many more court and ALJ departures from case law in applying the new multifactor economic reality test. It could get rough in the waters.

So, what’s the new rule?

If adopted next year, the new rule will be a shift to a six-factor economic reality test, similar to California’s “ABC” test, which presumes that most workers are employees, especially when they don’t perform “work that is outside the usual course of the hiring entity’s business.” (Why hire them then?)

See also: John Kingston (Freightwaves) interviews Jim Mahoney on "Wrestling with Proposed DOL Rule on Independent Contractors"

The components of the DOL’s “totality of the circumstances” analysis to determine a worker’s status are as follows:

Opportunity for Profit or Loss Depending on Managerial Skill. Does the worker exercise managerial skill that affects that worker’s economic success or failure in performing the work? Does the worker determine compensation? Does the worker accept or decline jobs? (OK, we can cover this with our ICOAs (Independent Contractor Operating Agreement for Owner-Operators.)

Investments by the Worker and the Employer. Is the worker making an investment in capital? Is it entrepreneurial? What is the investment of the worker relative to the employer? (So very subjective. We can cover this in the ICOA, but it may be a bone of legal contention to certain agencies that will require strong legal and factual arguments. Is sweat equity an investment? What about experience?)

Degree of Permanence of the Work Relationship. Is the work relationship sporadic? Is it specific or indefinite in duration? (Not a problem, generally speaking).

Nature and Degree of Control. Does the employer control the performance of the work? Who sets the worker’s schedule? Who supervises? Does the employer limit the worker’s ability to work for others? (Oh boy, here we go educating everyone about FMCSA regs requiring control. Not so easy – but doable).

Extent to Which the Work Performed Is an Integral Part of the Employer’s Business. Is the work critical, necessary, or central to the employer’s principal business? (Gee, I’ve never ever seen a licensed motor carrier company have a CDL or drive a truck. And if you hire a temp worker, does that make the work somehow more or less integral to your business? More educatin’ the agencies).

Skill and Initiative. Does the worker use “specialized skills” in performing the work? Does applying those skills indicate initiative consistent with the worker having an independent business, or is the worker economically dependent upon the employer? Does the worker depend upon the employer for training? (Should be fairly easy to argue to a court).

The DOL says this new approach is based upon decades of court decisions and that no one factor carries more weight than another. (Count on piles and piles of more and varied decisions).

It’s important to note that the explanatory comments to the new rule claim not to affect how states define an “independent contractor.” (Oh yes, just ignore the $2 billion provided by the American Rescue Plan Act, which is meant for states to prevent and detect fraud, promote equitable access, ensure timely payment of benefits and reduce backlogs … and the other various DOL grants empowering workers.)

What should employers do?

I highly recommended that employers audit their existing independent contractor and employee classifications before the rule’s anticipated adoption in 2023 and evaluate compliance under the revised test. I've got a strong ICOA if you need one ...

CALIFORNIA’S NEW PAY TRANSPARENCY LAW

California Gov. Newsom has signed a new pay transparency law for January 1, 2023, that will require significant changes in how employers draft job postings and how they report pay data to the State. Regardless of whether you have workers in California, start preparing now.

Job postings must include wage ranges. Employers with 15 or more employees must include a position’s salary or hourly wage range in any internal or external job posting, even those posted by an agency you hire.

Expansion of pay scale disclosures upon request. Under existing California law, after an external applicant has completed an initial interview for a position, an employer must provide the position’s salary or hourly wage range upon the applicant’s reasonable request.

Starting in January, SB 1162 expands this requirement to cover current employees who request the pay scale for the position in which they are currently employed. This new requirement will apply to all employers in California, including those with fewer than 15 employees.

Beginning in May 2023, this law expands reporting requirements for each job category , to include the median and mean hourly rate, broken down by race, ethnicity and sex.

Presently no California employer can ask about salary history, but you can ask about salary expectations. Expect these trends to continue to expand to other states.

To prepare for new job posting requirements, you'll need a process for publishing wage range information in job postings, and preserve a record to prove compliance. Develop one now.

Consider an internal audit of current wages to ensure there aren't significant inequities. Multistate employers should consider a national policy for including wage ranges in job postings and/or providing wage ranges to applicants.

OSHA's Many Applications to the Trucking Industry

Mon, 03 Oct 2022 21:14:05 GMT

OSHA, the Occupational Safety and Health Administration, has been around since 1970. It’s part of the U.S. Department of Labor.

For the majority of its investigative and corrective penalty work, OSHA focuses on company non-driving activities. But it does cover motor carrier and transportation industries that involve safety, generally at stationary work sites such as warehousing, loading docks, and freeway safety.

Of course, it doesn’t intrude on FMCSA regulations about CMV drivers on the road, but it does oversee loading, unloading, and construction site heavy truck use.

Your indemnity clauses with shippers, receivers, and brokers are always in play. So, you must take account of them in situations involving OSHA regs as you do with simple roadway load moves. Even more so: experience teaches about indemnity language you may not think of when executing contracts.

OSHA Regulations that Influence Trucking Operations

Generally ensuring a safe and hygienic workplace.

Hazardous material marking, labeling, and handling.

Cargo tiedown tools and material.

Inspection of fire safety and first aid capabilities on a site.

Ensuring all safety procedures are followed during loading or unloading. Collisions and back overs are an ever-present danger at loading docks.

Train drivers on “driveaways” and “trailer creep” that occur when trailers separate from docks, creating a gap that workers and equipment can fall through.

Same with guiding a driver backing into a tight dock. Drivers may need guidance, but they need to get out of the cab and walk to the back of the trailer and then use a spotter to maintain safety.

A hidden trouble spot you may not always anticipate is that OSHA protects whistle blowers reporting alleged unsafe conditions, whether they are activity problems or exposure to toxic material.

OSHA has a lengthy list of citations for the transportation industry and diligently investigates reports of unsafe conditions. They do thorough investigations.

Share Information and Train on Safe Practices

How does OSHA affect bodily injury or death cases?

OSHA safety guidelines are designed to make trucking safer, even when a truck is on the road. Loading, securing, and hazardous material handling procedures are not always taught or followed.

Opening a barn-door trailer with a load falling on a dock worker increases a motor carrier’s chances of being implicated in the loss. Even if it was a shipper’s load.

Crushing a dock worker who isn’t warned off from a backing trailer ensures a motor carrier and receiver will engage in protracted indemnity litigation.

If a driver attempts to climb onto the dock without using the available stairs, you, the motor carrier who happily signed that contract with the shipper /receiver might find yourself losing a client and defending a lawsuit because of poorly worded indemnity language.

So:

Don’t blissfully sign a contract with a counter-party without legal help.
Do train your drivers and dock workers on OSHA regs.
Learn the methods of OSHA investigations and know the defenses to OSHA violations before they occur.

The "Guaranteeing Overtime for Truckers" Bill: A Bad Idea in a Nutshell

Thu, 22 Sep 2022 15:36:33 GMT

The proposed federal legislation would repeal the motor carrier exemption of the Fair Labor Standards Act of 1938 and provide drivers with overtime after 40 hours.

Massachusetts Sen. Edward Markey said in a press release, “Outdated labor regulations have denied these vital workers overtime, leading to high turnover and supply chain disruptions."

Really? Is a lack of overtime pay really causing driver turnover and supply chain disruptions? Nah.

Congress is more to blame, not to mention the absolute animosity against trucking that the FMCSA seems to be displaying lately.

As recently as September 16, 2022, the Agency decided it wants comments on what’s wrong with ELD usage and how the DOT's lack of control over ELD manufacturers to provide technical support affects motor carriers and drivers.

Hmm, I hope the Agency’s servers are up to the onslaught of comments. I guess it’s just easier to hand out HOS violations because of the poor ELD services competing with enticingly low pricing.

The DOT’s February 2022 " Freight and Logistics Supply Chain Assessment " called for, among other things, the removal of the motor carrier exemption to the Fair Labor Standards Act.

The Owner-Operator Independent Drivers Association (OOIDA) likes the thought.

In a press release , OOIDA stated, “Shippers, receivers, and carriers have never been forced to account for all the hours that they keep drivers waiting, since it costs them nothing to do so. By repealing the FLSA exemption, this bill would help make sure that drivers are compensated for all the hours they work.”

Really? Is this another trickle-down theory? Do shippers or receivers really care? Will carriers have the nerve to ding a customer for overtime driver pay? Not bloody likely.

Yes, as your correspondent (that’s me) has said, something must be done about losing drive time to detention . There will be, of course, costs and unknown unintended consequences should overtime come into play.

Enforcing extra pay against shippers or consignees sounds simple. I just don’t see it in the dog-eat-dog motor carrier industry. But take heart. The Bill has been stuck in Committee for five months. And it’s not likely to get much bipartisan support.

With so many pay models in the industry, hourly, mileage, salaries, percentage pay, it should be simple, right? Nah. But then again, doesn't the DOT know trucking best?

ATRI Releases Its Trucking Cost Update for 2022

Fri, 12 Aug 2022 20:21:11 GMT

The American Transportation Research Institute (ATRI) has released its 2022 update to An Analysis of the Operational Costs of Trucking.

Here are some of the highlights:

Costs. The total marginal cost of trucking increased by 12.7% in 2021 to $1.855 per mile, the highest on record.

Leading contributors to this increase were fuel (up 35.4% from 2020), repair and maintenance (up 18.2% from 2020), and driver wages (up 10.8% from 2020). On a cost-per-hour basis, costs increased to $74.65.

Total driver compensation was $0.809 per mile, 10% higher than two years earlier.

Fleets with 100 or fewer trucks spent 4.9 cents more per mile than fleets with more than 100 trucks. Smaller fleets also spent more than larger fleets for insurance premiums per mile.

Deadhead mileage decreased to 14.8%.

Truck fuel economy increased to 6.65 miles per gallon.

Productivity . A critical efficiency bottleneck occurs when drivers are waiting at shipper and receiver facilities. Though loading or unloading freight necessarily expends time, driver detention occurs when shippers or receivers lock up trucks outside of loading/unloading periods.

The average dwell time at facilities for all fleets was 1 hour and 54 minutes per stop.

Refrigerated carriers – which have longer waits at shipper and receiver facilities due to the sensitive commodities they transport – had an average dwell time of 3 hours and 16 minutes.

LTL carriers are able to secure a lower average dwell time of 1 hour.

Fleets with 25 or fewer trucks experienced the highest dwell time, averaging 2 hours and 23 minutes per stop.

Driver turnover indicated that small fleets in specialized and truckload sectors have the lowest driver turnover.

A 12-Minute Cure for the Driver Shortage

Thu, 11 Aug 2022 17:03:52 GMT

The ongoing driver shortage and its correlation to supply chain disruptions is a topic that has been on the minds of many supply chain professionals. As drivers continue to struggle for better working conditions, shippers are seeing challenges of their own.

Thanks to extensive research performed by the MIT FreightLab , Dr. David Correll and his team have effectively debunked the theory that the supply chain is experiencing a labor shortage in the trucking sector. MIT’s data shows that our supply chain is in crisis due not to a lack of drivers, but to the misutilization of available truckers.

The industry cites many reasons for this perennial problem, but an overlooked cause is that – somewhat perversely – the existing driver workforce is not getting enough work. Moreover, initial findings suggest that a relatively small increase in the number of working hours could make up for the current shortfall in driver numbers.

Leaking hours. At the core of the driver shortage crisis is that interest in the job of moving things by truck isn’t keeping up with demand. The lack of interest is reflected in the job’s demographics. The American Trucking Associations (ATA) estimates that the average age of over-the-road drivers is 46, and the average age of new drivers under training is 35.

There is much speculation about why the job has become less attractive. One oft-cited reason is that truck driving is a difficult job, with a work-life balance that is unacceptable to many younger people. Another issue is inadequate pay, especially compared to other opportunities such as driving for Uber or Lyft. Also, as more people spend more time and money on schooling, they are less likely to see truck driving as a job that will give them the financial return they need to recoup their investments in education.

All of the above reasons, along with several others, could be true – but another reason that tends to attract less attention is that drivers are unable to work enough hours.

Truck drivers don’t get to drive all day. Based on industry data and conversations with logistics professionals, it is estimated that over-the-road drivers spend about 6.5 hours per working day driving their vehicles. By law, they can drive for 11 hours – and it isn’t by choice that drivers leave three to four money-making hours on the table each day. Surprising amounts of time are spent waiting to be loaded and unloaded by shippers and consignees.

There are about 1.8 million truck drivers working in the United States. Assuming that the ATA’s most recent estimate of a 60,800 shortfall in driver numbers is accurate, the workforce deficit amounts to 3.4%.

One way to close this deficit is by hiring new drivers, and efforts are continuously underway to recruit more people. Another approach is to secure more money-making hours for the existing workforce. To make up the 3.4% deficit in the current population of 1.8 million drivers who drive an average of 6.5 hours per day, there should be an increase to their driving hours to 6.7 hours per day on average – an increase of 0.2 hours or 12 minutes.

The question is: Where can these extra 12 minutes come from?

Find me 12 minutes. MIT is currently studying this question and welcomes the participation of carriers. Its initial research looked at the working practices of about 1,500 over-the-road drivers over a two-year time frame. Based on these initial results, three working hypotheses have emerged to explain where drivers lose revenue-earning hours.

First, it appears that weekends matter. While drivers are leaving three to four hours per day on the table during weekdays (the least number of hours on Tuesdays), it is on Sundays and Mondays that four to five hours are abandoned. Perhaps this finding reflects weekend staffing levels at distribution centers and warehouses across the supply chain network.

The second hypothesis concerns the system for setting appointments for trucks at cargo handling facilities.

There are two main distinctions in the nature of driver appointment types: pickup and drop-off, or live load and drop-and-hook. Live load/unload, as we well know, is when a truck waits at each location to have cargo loaded or unloaded. Drop-and-hook is when a driver simply drops one trailer off in a yard and, generally, hooks his or her tractor to another before getting back on the road.

Maybe the numbers of hours drivers lose vary according to the type of appointment at cargo facilities. Intuitively, live-load appointments appear to show higher average duration time than drop-and-hook equivalents. However, when pickup and drop-off are compared, pickup is considerably longer.

Why is this?

There may be two reasons. The first reason relates to the way ELDs (electronic logging devices) are used in practice. Much of the time before arrival at pickup is attributed to the load when it is assigned to truck drivers by dispatchers. Second, pickup moves need to be staged much more than drop-off moves. Consequently, sometimes the cargo is not ready yet, and the drivers are compelled to sit and wait.

Another possible source of missing hours is that the weakest links in the supply chains served by trucks diminish driver utilization. Some destinations show far longer appointment duration times than do others. Reducing these so-called dwell and detention times can make a shipper a “shipper of choice.” Some poorly run facilities can ruin utilization for an entire tour, meaning the time between mandated 34-hour resets.

In addition to these working hypotheses, we know that the time spent finding en route parking spaces and to navigate traffic congestion are definite drains on drivers’ productive time.

Functional knowledge. In the final analysis, we’re looking for a mere 12 minutes! However, to gain that time requires a comprehensive understanding of the roles truck drivers play in the U.S. economy. Acquiring that knowledge, and using it to increase the number of revenue-earning hours for drivers, will yield multiple benefits.

When Are Freight Brokers Liable in Cargo Claims?

Mon, 08 Aug 2022 16:27:40 GMT

Freight brokers and carriers often find themselves in a game of hot potato when determining who will shoulder the cost of lost or damaged cargo. Here’s what’s important to know when navigating the complexities of freight broker liability in cargo claims.

When are brokers liable? Under the Carmack Amendment to the Interstate Commerce Act, a carrier is liable for damage or loss incurred during a shipment of goods, but a broker – who only arranges the transportation – is not liable.

So, in the strictest sense, brokers should not have to pay out cargo claims. But in the evolving transportation industry, it can be hard to tell the difference (legally speaking) between a freight broker and a motor carrier. Additionally, the Interstate Commerce Act has expanded the definition of “motor carrier” to be anyone providing motor vehicle transportation for compensation, which could easily encompass brokers.

A determination of liability is often left up to the courts, which results in case-by-case decisions that gradually provide some clarity – or perhaps more confusion for brokers, carriers, and shippers. Some recent court decisions reflect just how much the landscape is shifting as to what qualifies as broker liability:

Essex Insurance Co. v. Barrett Moving & Storage, Inc. : The Court concluded that Barrett “acted as a motor carrier, not a broker” and was liable for damages.
Mecca & Sons Trucking Corp. v. White Arrow LLC : “White Arrow [carrier] is liable to Mecca [broker] under the Carmack Amendment for the losses incurred by the rejected cheese.”
Tryg Insurance v. CH Robinson Worldwide Inc. : “CRWH was ruled to be a carrier rather than a broker and therefore liable for the damages caused to the miniature chocolate liqueur bottles.”

Tips for brokers to protect against cargo claims. With so much gray area between broker and carrier liability in cargo claims, it’s critical for brokers to understand their biggest risks and how to insulate against them. Here are some basic tips to keep in mind:

Realize that the Carmack Amendment isn’t foolproof protection. You can be liable under various state law causes of action, such as negligence, breach of contract, etc.
Be cautious of how you market and perform your services. Advertising as an “all in one” transportation solution may bring in more customers but can aid legal arguments that your company “held itself out as a carrier” and is therefore subject to the Carmack Amendment.
Address cargo liability in your terms and conditions of service, such as including language that disclaims liability altogether or accepts liability in instances of proven malfeasance but then caps that liability.
Invest in all-risk insurance to protect your business against claims for loss or damage. You can customize the coverage to suit your specific needs.

AB5, Owner-Operators, and Motor Carrier Relations in California

Thu, 07 Jul 2022 22:11:26 GMT

California's "Assembly Bill 5," which went into effect June 30, 2022, reclassifies large numbers of workers as employees rather than independent contractors. It affects all motor carriers regardless of the state of domicile.

Under AB5’s three-point “ABC test,” a worker is assumed to be an employee unless they meet all three of these criteria:

They are free from the control and direction of the hiring entity when performing their work.
The work performed is outside the usual course of the hiring entity’s business.
The worker is customarily engaged in an independently established trade, occupation, or business.

Impact to California trucking companies. Motor carriers operating in California now have to either reclassify as employees thousands of drivers who are currently independent contractors or move their business out of California – and still be cautious about the percentage of miles run in California.

Impact to the entire trucking industry. Even though it’s technically a concern only for California owner-operators (O/Os), as a practical matter it’s a concern for all motor carriers who may run close to 50% of their miles in California with owner-operators. Thus, AB5 is having major impact on the entire trucking industry. For O/Os in the U.S., it effectively creates two separate labor pools: one in California and one in the rest of the country. It may yet spread fully across the country.

Options for trucking companies. At this point, the realistic options are few in number.

Cease doing business in California – not a realistic scenario, considering that California is one of the world’s largest economies.
Shift to an employer-employee model – not a great option for carriers who truly use O/Os for seasonal capacity, not to mention the effect on operating margins for higher costs for employees.
Separate brokerage from carrier business. This would truly require creating two distinct businesses – not just an arm of the motor carrier, but a separate company, even going as far as to create a separate office away from the motor carrier, with separate payroll, etc. The brokerage would tender loads to O/Os who have their own authority – i.e., who can accept or decline a load based on their own preferences (rate, destination, etc.,) and who accept loads from other sources.
Not run more than 50% of O/O miles in California.
Have O/Os deadhead out of California.
Pursue the B2B exemption. This course of action holds promise (see "The Best Option?" below). There is an exemption in the AB5 law for independent contractors. To receive this exemption, a company and contractor must meet all of 12 detailed requirements (see below).

Since AB5 became effective on June 30, it’s yet unclear as to how the almost absolute prohibition against motor carriers using California-based owner operators can be avoided and how to avoid lawsuits brought by “exclusive leased owner operators” – those that lease units from California-based motor carriers and are bound largely to run exclusively for the motor carrier (or its leasing arm).

The Best Option? As of now, the best option appears to be using a separate brokerage entity. The brokerage is best operated by a separately licensed (DOT and MC numbers) legal entity. (Do not allow cross-dispatching into California by the motor carrier.)

Right now – and until some plaintiff lawyer group attempts to challenge it and is successful all the way up to the Ninth Circuit Court of Appeals – brokering to a non-California O/O is not affected. You would be hiring “true” owner operators who have their own DOT/MC numbers and who are truly independent, running their own business, and taking loads from multiple sources (load boards, brokerages).

Large brokerage houses are taking this route, but the final curtain may not have fallen.

Some advisors are saying that using a California-based O/O who runs on an exclusive lease but has more than 50% of its mileage outside California would pass AB5’s ABC test. However, that spells trouble via attention that California would give to proving non-California miles, IFTA reports being considered.

The “Business to Business” exceptions mentioned is an “out,” but there will be litigation challenging motor carriers that do not meet all exceptions and any court interpretations are allowed, but I would avoid trying that until more dust settles.

Obviously, this whole mess is affecting the industry. No one can be absolutely certain of what workaround will prevail, but I do believe the brokerage option is safe. If you want to add to or create a new broker-carrier agreement that beefs up the language about business into or out of California, regardless of where the motor carrier is domiciled or has terminals, we can work on that together.

These are the 12 exceptions to AB5 from the text of AB 2257 that codified the law:

T he business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
The business service provider is providing services directly to the contracting business rather than to customers of the contracting business. This subparagraph does not apply if the business service provider’s employees are solely performing the services under the contract under the name of the business service provider and the business service provider regularly contracts with other businesses.
The contract with the business service provider is in writing and specifies the payment amount, including any applicable rate of pay, for services to be performed, as well as the due date of payment for such services.
If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
The business service provider maintains a business location, which may include the business service provider’s residence, which is separate from the business or work location of the contracting business.
The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
The business service provider can contract with other businesses to provide the same or similar services and maintain a clientele without restrictions from the hiring entity.
The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
Consistent with the nature of the work, the business service provider provides its own tools, vehicles, and equipment to perform the services, not including any proprietary materials that may be necessary to perform the services under the contract.
The business service provider can negotiate its own rates.
Consistent with the nature of the work, the business service provider can set its own hours and location of work.
The business service provider is not performing the type of work for which a license from the Contractors’ State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Busi ness and Professions Code.

This seems to come down to a well-defined contract that complies with 49 CFR 376. We draft these all the time.

FMCSA Safety Ratings, DataQ Criticisms, Insurance Problems and More

Mon, 09 May 2022 20:57:24 GMT

Safety Ratings by the FMCSA are trending negatively because of the huge increase in off-site desk reviews.

Most desk reviews, in contrast to prior years, have resulted in negative outcomes; a majority have resulted in “Conditional” ratings.

The upgrade process to go from "Conditional" back to "Satisfactory" has resulted in a 90% denial. Instead, a carrier may receive, at best, “No rating.”

You can't get there from here. The upgrade process is now outrageously difficult:

FMCSA “policy” states “Satisfactory ratings can only be issued upon a comprehensive investigation,” generally a “full on-site audit.”
Sometimes a single critical HOS violation is enough to get a Conditional rating.
The two common critical violations are “form and manner” and “false reports of duty status” – often improper use of “personal conveyance,” the most misunderstood duty status.

Conditional Ratings in 2021 were the majority of all ratings issued to carriers.

Complaints to the Agency say a revision of its safety rating methodology is needed because critical HOS violations are overly reliant on e-log enforcement, a battle that carriers are bound to lose.
Efforts to reform CSA have been non-existent.
Who loses? Carriers lose shipper and broker clients.
The FMCSA uses the carrier’s rankings within the CSA program to target fleets for off-site safety audits.
The small carriers receive the largest share of targeted audits, with little time to submit a laundry list of demanded documents.
How to avoid the audit letter? Review, review, and review your CSA scores. Review crash accountability. Reward drivers with cash for clean roadside inspections.

DataQ: red tape, deaf ears

DataQ is the principal – if not the only - method to challenge/correct DOT information collected on carriers.

It is a flawed system. Thousands of reasonable challenges are rejected with some challenges requiring multiple submissions over months.
Many rejections are based on “word vs. word” Does the motor carrier’s word trump the officer who wrote the violation?
There are no viable methods of appeal.
Insurers believe CSA scores are infallible.

Top Ten Audit Violations and DataQ challenges:

Not using right “line” to record hours of service (HOS)
Falsifying HOS
Driving without a CDL
Lack of maintenance records
Driving before pre-employment test results
Insufficient HOS supporting documents
Failure to inspect vehicles annually
Absence of drug and alcohol program
Absence of random driver testing
Failing to keep driver records

Your key: electronic records

With off-site audits now one of the FMCSA’s primary enforcement tools, carriers must be conversant with the method of uploading compliance documentation quickly.

Driver qualification files, drug and alcohol testing programs, Hours of Service records, and vehicle maintenance files are where the most acute and critical violations are found.
But be prepared to also upload proof of insurance, accident register, driver handbook with progressive discipline measures; also, oddly, I’ve seen requests for profit and loss statements, tax returns, personal and real property records.
Standing alone, your HOS records without supporting documents can bring a downgraded safety rating; then combined with other violations, carriers face an “unsatisfactory” rating, heavy Notice of Claim fines, or orders to cease operations.

Weaponizing insurance costs

It doesn’t take much to make a small carrier cease business.

Insurance premium costs per mile increased by 47% in 10 years.
Crash frequency is not even the main culprit.
“Small verdicts” are now in the $400K range; with litigation pressuring insurers.
Litigious states produced payouts 50% larger than the national average.
Insurers have left the market or allocated capacity to less risky sectors.
Real world impact of insurance costs causes small fleets to cut corners on safety, decrease coverage levels to $1 million, leaving companies exposed to significant crashes.
Excess coverage availability for large fleets is declining due to high risk, social inflation.
Improvement in carrier safety performance YOY has no effect to lower premiums; we know insurers want 3 to 5 years of loss runs.

Understanding "nuclear verdicts"

We’ve always had them. Now they have a nickname: “Reptile theory.” Around for 10+ years, it paints defendant as a menace to jurors themselves who are urged to punish violations of safety rules, even those rules that are not causally related to the crash.

Plaintiff lawyers scare insurers to settle for 38% larger settlements than juries award, even considering counsel fees and expenses of trial.
Looking ahead: trends in trucking insurance are expected to remain consistent; rate increases should continue: small fleets pay $0.125 per mile; very large fleets pay $0.037.

Important: retention of records

Improve your CSA scores:

Hire carefully (easier said than done) and document with PSP.
Train drivers, even seasoned ones; train them continually.
Hand audit HOS records and keep 6 months from hand in.
Maintain vehicles; keep pre- and post-trip records of repair.
Reward drivers with cash for “clean” DVERs.
Contest obvious violation errors; be conversant and persistent with DataQ appeals.

Audit-Ready: Roadside Inspections and FMCSA Violations

Wed, 16 Jun 2021 22:13:01 GMT

Records show that 94% of roadside inspections result in at least one FMCSA regulatory violation.

So, which violations alleged are going to draw the FMCSA’s attention to your company? The following seem to draw almost instant attention to your business:

speeding (6 to 10 mph over the posted speed limit)
failing to use a seat belt
using (or appearing to use) a cell phone while driving
exceeding the 14-hour on-duty limit
failing to obey a traffic control device (or weigh station)
false record of duty status.

Once the FMCSA decides to audit your company, what are they going to hunger over?

DQ files
drug and alcohol records
applications
your safety policies.

Offsite audits are quickly replacing the traditional onsite audit.

The FMCSA can perform 10 times the number of offsite audits by having the motor carrier submit material electronically, instead of visiting a motor carrier for one or more days for an onsite audit.

The offsite audit requires motor carriers to be even more audit-ready than in the past.

The New Inspection Process

First, instead of a DOT auditor giving you 48 hours’ notice that they will show up at your place of business to review your compliance materials, the auditor will contact you via mail, phone or email and give you a laundry list of materials to submit to them electronically – and with little lead time.

The required items will likely include a list of all of your drivers; proof that your drivers are enrolled in a drug and alcohol testing program; and almost all material from your drivers’ DQ files.

If the “intervention” occurs as a result of a collision, you’ll probably be asked for your “accident” register; written company discipline program (progressive discipline); equipment maintenance files - particularly for the involved vehicle(s).

If you cannot meet their deadline, or if you have the nerve to be out of town, extra time – maybe a week – will be stubbornly granted.

If the auditor really starts to dislike you or your company, he may run amok, asking for rather strange, out-of-context production, e.g., your real property ownership documents and your tax and financial records.

In such a case, you may need the services of a seasoned DOT lawyer to call a stop to this abuse. Through your attorney or directly, it may be necessary to complain to the auditor’s superiors, or to your Senator or Member of Congress, or the FMCSA’s internal affairs office.

Beware of Violations Without Citations

You may have noticed that roadside inspections that result in a violation do not always trigger citations to your drivers. That might seem to be a good thing, but it is not.

Citations allow you to contest the violations in court, and they mirror the FMCSA regulations. Discussions with the local prosecutor often result in either dismissal or reduced criminal or civil charges from the ticket – and reduced CSA numbers.

Violations without court citations mean your company and your driver are pretty much sunk. Your only realistic option is to appeal to Data Q to try to have the violation removed, and that is kangaroo court at its worst.

Will the officer correct himself? No. Will the Data Q representative at the FMCSA believe you or the officer? Only if the proof you offer is some strong written proof. So, no again.

That’s why CSA scores are skyrocketing. This must be addressed by your state Trucking Association, or the mothership - the American Trucking Associations, or OOIDA. So, complain – loudly.

Ready to Roll? Drug Testing and Driver Impairment

Thu, 29 Apr 2021 18:48:30 GMT

As legal marijuana use spreads, detecting driver impairment takes on growing importance and new challenges for trucking companies.

Drug test refusals account for 13% of pre-employment violations in the DOT Drug & Alcohol Clearinghouse. This finding comes from data released in the FMCSA’s Summary Report – the second such report the agency has released since the DOT Clearinghouse went into effect.

For companies engaged in commercial transportation, important considerations include the prevalence of driver impairment (according to University of Central Arkansas study, the total could be as high as 300,000 nationwide), the effectiveness of various testing methods, and how to deal with the moving target of lingering marijuana presence in the human body.

The belief is that most drug test refusals are by drivers trying to avoid a positive test result for marijuana use – something that some drivers have been able to successfully achieve with urinalysis.

Marijuana is usually detectable in bodily fluids for up to 30 days after last use. As with other drugs, it may be detectable in hair for several months (see more on hair follicle testing below) . The detection time depends on how much the user smokes or ingests, as well as how often.

The testing methods below seem to belie impairment. An impairment test must be developed that measures the number of legal and medical marijuana users are in the truck driver population. These tests for metabolites, which do nothing to determine impairment, may accomplish little more than triggering a barrage of carrier discrimination lawsuits filed by persons who stopped using long ago or have medical cards.

As the following bullets indicate, higher doses and more frequent use are associated with longer detection times.

Urine Testing

Occasional users (up to three times a week): 3 days
Moderate users (four times a week): 5-7 days
Chronic users (daily): 10-15 days
Chronic heavy users (multiple times a day): more than 30 days

Blood Testing

Detectible in blood for 1 to 2 days

Saliva Testing

Occasional users: 1 to 3 days
Chronic users: 1 to 29 days

A Case for Hair Testing. In contrast to the above testing methods, hair follicle tests can reveal drug use for up to 90 days.

Unlike urinalysis, it’s virtually possible to cheat a hair follicle drug test, which also provides a much more thorough look at a driver’s drug use over the previous 90 days. This enables employers to look for patterns of drug abuse that aren’t available through a urine test alone.

While not yet an approved DOT testing method, hair follicle drug testing is used by a few large carriers that want to ensure that, prior to putting them behind the wheel, new drivers don’t have a history of drug use.

Factors Affecting Marijuana Retention

Several factors affect how long marijuana stays in a person’s system. Some of these factors, such as age, gender, and body mass index (BMI), aren’t related to the drug itself, but to how the user’s body processes and metabolizes the drug.

Other factors are related to marijuana and how you use it. As the testing methods described above indicates, factors include how much the person uses at a time and how often. Higher doses and more frequent use tend to increase the amount of time it takes to eliminate marijuana from the system.

More potent marijuana, or extracts, which are higher in THC, may also stay in the system longer. Similarly, ingested marijuana may also remain in the system slightly longer than marijuana that is smoked.

Is there anything to do to metabolize it faster?

There is little that a user can do to shorten the time required for marijuana to leave their system. The body needs time to break it down; exercising, eating healthy, and staying hydrated might help, but not drastically.

Several detox remedies and kits are available on the internet. Many require drinking a lot of water to dilute urine, and then using herbal supplements such as creatinine or vitamin B-12 to mask the dilution. Generally, those kits are not considered to be very reliable.

How long does it take to feel the effects?

Marijuana’s effects appear quickly, usually within 15 to 30 minutes after smoking. After ingestion, it can take one or two hours to feel the effects. Marijuana’s active ingredients produce a short-term “high,” with common effects that include:

sense of well-being/ sense of relaxation
feeling that time is slowing down
giggling or chattiness
altered sensory perception Other short-term effects include:
inability to focus
increased appetite
coordination problems
sleepiness
restlessness
rapid heart rate
dry mouth and eyes
confusion
feeling sick or faint
anxiety or paranoia

How long does it take for the effects to wear off?

Marijuana’s short-term effects start to taper off after one to three hours. Some effects, like memory problems or sleeplessness, can last a few days. There is no consensus among researchers as to how long the effects of chronic use last, with estimates ranging from a few days to months after marijuana use has ended.

Reliable Testing

As legal marijuana use spreads, detecting driver impairment takes on growing importance and new challenges for companies engaged in commercial transportation.

If your company is focusing heightened attention on drug testing, you would be wise to gain a greater understanding of marijuana detection times and the effectiveness of testing methods available to you.

A Must to Avoid: Bad Contract Provisions

Fri, 09 Apr 2021 17:20:23 GMT

Many legal departments review contracts by demanding uninsurable or unenforceable terms. Rational, measured reasoning generally works out some of these problems.

We all receive draft contracts from our customers with clauses that are absolutely or mostly uninsurable and often unenforceable – and many are so often throwaways. Some terms to avoid … and suggested alternatives:

"You shall defend, indemnify, and hold harmless [Customer], its officers, directors and employees from and against any and all claims, damages, causes of action, or allegations in any way arising out of or relating to your work on the project." Your liability policies may only provide coverage, including a legal defense, for your negligence. I can count on one hand the number of times insurers have willingly picked up a defense that’s this broad.

"You shall perform the services in accordance with the highest standard of care." This proposed language changes the coverage standard — it essentially requires perfect performance. Insurers are not in the business of insuring against a sure thing. Use alternative language.

"You shall name [Customer] as an additional insured on all policies." Not all policies allow this – workers comp, professional E&O, etc., have exclusions for several reasons, including insured-vs.-insured battles.

"You warrant that the [service, project, etc.] will comply with all laws, codes and regulations." Much more palatable: You shall make reasonable efforts to comply with applicable laws, codes, and regulations.

"You shall inspect the work to ensure that it is in strict accordance with the contract documents." To the extent that this contractual language amounts to a guarantee of the work, it is very possibly uninsurable. There is alternative language.

"You shall report all safety hazards at the job site to us." Sounds innocent enough, but by agreeing to this language, you are possibly taking responsibility for a duty that belongs to the owner to protect visitors or its own employees.

Then there’s the ominous clause:

"Prevailing party shall be awarded its attorneys’ fees and costs." Delete the clause. There are no great alternatives here. Are “we” really going to go to the mattresses all the way to verdict? Negative. We want to fix anything certainly before suit and very little gets to verdict. What does “prevailing” mean in that regard?

TAKEAWAY

When negotiating contracts, the argument that a clause is “not fair” may be of limited value, kind of like the playground arguments that usually fell on deaf ears.

It’s much more effective to point out that the customer has as much interest as you in having liability insurance coverage for the scope of work under the contract. That’s a valid argument, and that’s easy for me to say but sometimes difficult to get across. Many large and small legal departments review contracts by demanding these uninsurable or unenforceable terms. Rational, measured reasoning generally works out some of these problems.

California Continues to Grind Out New Employee Benefit Laws

Fri, 06 Nov 2020 16:43:16 GMT

Effective January 1, 2021, California employers with five or more employees are required to provide family and medical leave to their employees.

The updated California Family Rights Act (CFRA):

reduces the employee threshold from 50 employees to just five;

expands the definition of “family members” for whom a covered employee can seek leave;

eliminates certain use restrictions; and

entitles some employees to up to 24 weeks of unpaid protected leave in a 12-month period.

The new CFRA provisions eliminate CFRA’s current exception to coverage for employers with fewer than 50 employees within 75 miles of the employee’s worksite. However, the other current leave qualifications — that an employee must have at least 12 months of service with the employer and must have worked at least 1,250 hours in the 12-month period before taking a leave — remain in place.

The new CFRA, like its predecessor, still requires that employers guarantee employees reinstatement to the same or a comparable position upon return from CFRA leave. However, the new CFRA eliminates the “key employee” exception, which permitted an employer to deny CFRA leave to employees who are among the highest-paid 10% of their workforce, if “necessary to prevent substantial and grievous economic injury” to the employer’s operations.

Who Is a “Family Member”?

Under existing law, employees are entitled to CFRA leave to bond with a new child or to care for the employee’s own serious health condition or that of a “family member.” Presently, family members include minor children, adult dependent children, spouses, and parents.

Going forward, family members also will include siblings, grandparents, grandchildren and domestic partners. In addition, family members will include all adult children, regardless of whether they are dependents of the employee, and the children of domestic partners.

“Baby Bonding” Leave

The new law also eliminates the CFRA mandate that both parents, if they are employed by the same employer, may take only a combined total of 12 weeks to bond with a newborn child or newly adopted child or foster care placement.

Starting January 1, 2021, if both parents are employed by the same employer, they each will be entitled to take 12 weeks (or 24 weeks total) of unpaid protected “baby bonding” leave.

CFRA Compliance for Small and Large Employers

Employers that have five to 49 employees and are not covered by the CFRA need to adopt new policies and procedures. Also, supervisors and human resources personnel should be trained to properly implement the requirements of the new CFRA.

Employers with 50 or more employees need to revise existing policies to address the January 1 changes and ensure that all appropriate employees are trained on the new requirements.

In addition, small and large employers need to examine or re-examine how they will track leave under the federal Family Medical Leave Act (FMLA) and CFRA, as the two will not always run concurrently.

Unionization 101: Tips for Keeping Your Company Union-Free

Wed, 12 Aug 2020 14:50:31 GMT

If you communicate openly and honestly with employees, and your workplace fosters good employee relations, your employees might find little value in union representation.

Labor unions lead employee groups into the unionization process by introducing questions and suggestions such as these:

Are you being unfairly targeted or treated with disrespect?

Do you feel your pay is lower than others in your industry?

You have the right to organize. You also have the right to wear and distribute union materials such as buttons and t-shirts.

If you think you’re not the only one with these concerns, talk to a few of your co-workers who may be interested in organizing.

Once you gather enough support, you can start assembling your committee.

You cannot be fired or penalized in any way for joining a union or participating in any union-related activities.

You’ll want your committee to consist of various departments, jobs, genders, and ethnicities so you can have fair representation. These committee members must then be educated on the issues at hand and proper union organizing policies and principles. For now, you’ll want to keep all discussions and meetings private, although you should know your rights.

Discussing union matters at work, however, may be not be the best place to do it, as your employer can limit work hours to just that. And employers can confiscate union flyers and material from breakrooms and prevent organizers from outside the company from soliciting workers at the entrance to the terminal.

Once an organizing committee is formed, it will develop a list of demands or issues, known as an “issues program.” Committee members will then solicit employees to back their union.

Campaign . To become eligible for an election, at least 30% of employees must show support, although some committees delay announcing representation until 50% or more of employees sign. At that point, the campaign will likely be public, and employees can start handing out flyers, pamphlets, and other informative materials.

Election . After employees meet the minimum threshold required for organizing, they will submit a petition to the National Labor Relations Board (NLRB).

The NLRB will conduct an investigation into the union’s legitimacy. Once the union is qualified, NLRB agents will facilitate an agreement between the employer and members of the union to determine the setting for a union officer election. This includes date, time, place, and ballot language. A union becomes certified if it wins a majority of votes cast.

Negotiation . By the time the union gets to this step, it has won its election and will start preparing to negotiate its issues. This is where the real work begins, as the bargaining process can be time intensive and requires a solid issues program. During negotiation, pressure to meet demands is placed on both sides, and compromises are sometimes made. If bargaining is successful, both sides will sign a union contract outlining the negotiated changes.

TIPS FOR HEADING OFF UNION ORGANIZATION

Employees have issues, and heading off union organization involves understanding those issues.

One good way to head off a union drive is to investigate how satisfied employees are with your workplace. You can send out a questionnaire and ask for anonymous responses to questions such as:

How responsive is management to employee concerns?

How happy are employees with their compensation level?

Are there health and safety concerns that they want addressed?

Consider instituting a grievance procedure. That’s a formal process that employees can use to make complaints. You should also include the grievance process in your employee manuals and handbooks. By providing for a grievance process, employees will feel like their voices are heard at work. Make sure that supervisors and managers have an “open door” policy, and make clear to everyone in the company that no retaliation will take place for lodging a complaint.

Create a grievance committee. This committee is then tasked with investigating and resolving disputes. Create a flowchart of who the employee should contact, and state clearly the steps an employee must take. For example, you might require that the employee try to work out the dispute on their own before contacting their direct supervisor. If the direct supervisor does not resolve the dispute, the employee’s next step would be to contact the grievance committee.

Explain unpopular decisions. Every business has ups and downs. If you need to make an unpopular business decision — such as cutting employee benefits, laying off employees, or no longer giving employees free coffee — you should be transparent as to your reasons.

Employees want to be treated fairly. They also understand that businesses sometimes have to make difficult decisions. The worst thing you could do is try to hide the reason why you made the unpopular decision.

Explain why the action was necessary for the business’s health and future. If you fail to explain the actions, then employees may speculate and think the worst of management.

Recognize employee contributions. You can try to prevent disgruntled employees from forming a union by creating bonus/incentive plans. Bonus plans might include lump-sum bonuses for employees who hit certain targets.

You can also award other productive behavior, such as perfect attendance. Let the employee know why he or she is receiving the bonus. In this way, the employee feels like their efforts have been recognized. You also create an incentive for the employee to continue the good behavior.

Other Steps. Some employers have avoided unionization by:

Analyzing and addressing the company’s weaknesses.

Reviewing and updating outmoded or unfair policies.

Benchmarking wages and benefits.

Training management on positive employee labor relations.

Implementing a risk/response protocol.

Preparing a first round of union avoidance materials.

To elaborate on some of these proactive steps:

Communicate to employees not only why a union might be bad, but why the company is good.

Unions often promise more money, so be ready with benchmarking data to explain how wages are paid fairly.

Help employees see management’s desire to remain union-free and the reasons behind it.

BEWARE OF UNFAIR LABOR PRACTICES

While unions have a tremendous amount of freedom to solicit employees, make promises and “organize,” management is much more restricted. The acronym “TIPS” can help remind employers not to:

Never threaten to retaliate against employees by terminating them or reducing pay or benefits.

Do not interrogate employees about their activities or activities of co-workers.

Do not promise anything to employees, such as promotions or benefits, in exchange for not supporting the union.

Never spy on union activities. Employees have the right to meet with the union representatives and “hear them out” without management interference.

A POSITIVE APPROACH TO REMAINING UNION-FREE

Employers can and should talk to employees about why they think the workplace can do without the union. Emphasize the policies, practices and culture that are already in place and that make your company a great place to work. Let your employees hear your side of the story so that they can make an educated decision about how bringing a union into the workplace will affect them.

The bottom line is that if you communicate openly and honestly with employees, and your workplace is truly one that fosters good employee relations with fair and consistent policies and practices, your employees might find little value in union representation.

Truckers, Don't Let Your CDL Violations Grow Up to Be CSA Problems

Tue, 24 Mar 2020 23:09:30 GMT

Successfully contesting the questionable citations arising from roadside inspections or traffic stops will now allow us to clean up your CSA scores

Successfully contesting the questionable citations arising from roadside inspections or traffic stops will now allow us to clean up your CSA scores. DataQ has been modified to adjust the data according to court outcome.

If we are successful in defeating the court citation, we then follow up in DataQ with certified court documents showing the better outcome or dismissal in court. We're very proud to offer help to you and your drivers in all Arizona courts and then wiping out the CSA violations thru the DataQ process (if we win, of course).

Under 49 CFR 350.201(s), States must “establish a program to ensure that accurate, complete, and timely motor carrier safety data are collected and reported, and ensure the State’s participation in a national motor carrier safety data correction system prescribed by FMCSA.”

Well, we now have the process; and let's use it to correct errors and apply some justice to driving records.

Here's how the Agency expects the changes to appear after resolution of citations: if successful and we get the citation or criminal charge dismissed or the client is found not guilty or not responsible, the CSA violation will be removed from PSP and SMS scoring; if there's a plea to a lesser charge, the weight will be reduced to 1.

We were recently successful in winning the dismissal of a double log criminal charge. We argued to the court that the "search and seizure" of the alleged double logs was unconstitutional.

Call if we can help you or your driver.

Equipment Ownership by a Separate Entity: Tax Issues for Trucking Companies

Tue, 14 Jan 2020 21:36:05 GMT

Avoiding IRS passive loss limitations under the self-rental rule requires proper structuring of the entity that owns the equipment.

Example

In Veriha v. Commissioner, 2012 WL 3205250 (U.S. Tax Court 2012), the motor carrier company owned no rolling stock; it leased trucks and trailers from two entities of which the taxpayer was the principal owner. The motor carrier leased equipment from no one else, and the two owning entities leased to no one other than the motor carrier.

One of the entities generated a net loss, which the taxpayer treated as a passive loss on his return. However, the IRS re-characterized the income amounts as non-passive, under Treas. Reg. Sec. 1.469-2(f)(6). The IRS argued that each tractor and trailer held by the two entities constituted a single item of property because each was leased to the related trucking company in separate agreements at an independently determined monthly rate.

The Tax Court agreed with the IRS that each individual tractor or trailer was an "item of property" based on the facts of case, and only the income was re-characterized as non-passive.

Rental Activity Exceptions

Together with your tax advisor, you may look to qualify for one of the exceptions to the definition of a rental activity if you operate this way:

(1) Qualify as "extraordinary personal services," where the rental activity is incidental to the services provided by the owner and the operations therefore are not truly rental activities.

(2) Qualify for "grouping" the rental activity with the trade or business activity to which it rents property. Any reasonable method for making the grouping determination can be utilized, but certain factors are given the greatest weight in determining whether activities should be grouped or kept separate:

similarities or differences in types of businesses;
extent of common control;
extent of common ownership;
geographic location; and
business interdependence.

The election to group activities is made by filing a statement with the taxpayer's original income tax return for the taxable year.

(3) Group items into fewer rental agreements, so that the "item of property" could be, for example, "160 tractors and trailers" rather than individual rental agreements for each tractor and trailer.

Please note that this article is not intended as tax advice; it is merely a heads-up on an issue that should be properly addressed with your tax advisors.

Uninsurable Trucking Contract Clauses to Avoid

Wed, 25 Sep 2019 21:35:50 GMT

Many legal departments review contracts by demanding uninsurable or unenforceable terms. Rational, measured reasoning generally works out some of these problems.

Then there’s the ominous clause:

"Prevailing party shall be awarded its attorneys’ fees and costs." Delete the clause. There are no great alternatives here. Are “we” really going to go to the mattresses all the way to verdict? Negative. We want to fix anything certainly before suit and very little gets to verdict. What does “prevailing” mean in that regard?

When negotiating contracts, the argument that a clause is “not fair” may be of limited value, kinda like the playground arguments that usually fell on deaf ears. “It’s my ball. If you want to play, you gonna play by my rules.”

It’s much more effective to point out that the Customer has as much interest as you do in having liability insurance coverage for the scope of work under the contract. That’s a valid argument and that’s easy for me to say, but sometimes difficult to get across. Many large and small legal departments review contracts by demanding these uninsurable/unenforceable terms. Rational, measured reasoning generally works out some of these problems.

Freight Broker Liability

Sat, 16 Feb 2019 20:23:10 GMT

If you broker freight, you may be sued, and probably for certain, considering the low limits purchased by even some of the larger motor carriers.

This is not a new twist to the law; it is an old twist. It is not ingeniously applied by the plaintiffs’ bar. The freight broker exposure is the result of limited recoveries of only $1 million for catastrophic losses from underinsured motor carriers; by the need to find additional sources of recovery; by the ease of entering the brokerage business without any control over the carriers used; and by the newer prevalence of motor carriers engaging in freight brokerage without sufficient or proper controls.

CHR argued that the hired motor carrier was an independent entity and CHR exerted limited controls over the carrier and its driver; and that the evidence overwhelmingly demonstrated CHR had no right to control her actions in transporting the load, certainly nothing in regard to the crash itself.

Unfortunately for CHR, the evidence was quite the opposite: CHR took about as much control as any motor carrier would over one of its own drivers, but nothing that would shock us in the industry. The Load Confirmation Sheet had special instructions concerning the reefer load. The driver was familiar with these special instructions, such as requiring her to meet the appointment window; make daily check calls to CHR (somewhat unusual for a broker); and stay in constant communication with CHR dispatchers (again, too much control).

The driver was instructed to continually pulp the load during her trip and call in if the temperature varied. CHR enforced its special instructions with a series of deductions from the agreed upon freight charge. The driver testified that the instructions stressed her out and imposed upon her to get to the final without regard to safety (I can hear this testimony now… “it wasn’t my fault…it was their fault”).

In considering the jury verdict, the Illinois appeals court said, “These extensive requirements, coupled with tying compliance with driver fines and financial penalties, compelled the driver’s conduct during the movement. The performance control supports the jury finding that CHR had the right to control [the means] and manner in which Henry performed her job.”

What to do now: Please don’t wait to review your brokerage operations. There may be a fine line between customer satisfaction and controlling the load, but there is a line you can put in place.

You may soon be visited by a scary lawsuit that will (a) take up too much of your time; (b) expose you to covered and possibly uncovered insurance claims; and (c) force you to change your method of operations anyway. Call for a tune-up.

Driver Coercion and STAA Whistleblower Complaints

Fri, 09 Nov 2018 21:41:28 GMT

If you’re reading this and engaged in interstate transportation of goods by motor carrier – or if your insured client does this — there is exposure to STAA whistleblower claims.

Transportation intermediaries and motor carriers — the entire spectrum of entities involved in interstate cargo movement, such as third-party logistics firms, leasing agents, forwarders and freight brokers - are exposed to liability under the STAA — the “anti-retaliatory” provisions of the Surface Transportation Assistance Act of 1982, based on perceived or actual “control” over “employees.”

Under the STAA, the definition of employee is broadly interpreted to include a driver of a commercial motor vehicle, including an independent contractor, or a mechanic, a freight handler, or an individual who is not an employer who directly affects commercial motor vehicle safety or security in the course of employment by a commercial motor carrier. The term includes any individual formerly performing the work or an applicant for such work.

Any such entity can be an employer because of the apparent degree of control the company has over the “employee.” Even the appearance that you can influence the disciplining of another company’s employee has become sufficient evidence of the requisite degree of control – think of a freight broker pushing a motor carrier’s driver to meet an appointment - and that’s enough for this type of claim for the broker to be considered a “joint employer.”

Your revenue is at risk.

The stakes are high – awards aren’t covered by insurance and can include reinstatement, back pay plus interest, medical expenses - loss of medical coverage at termination can be significant - compensatory damages and punitive damages. Also, the entity may have to take affirmative action to abate the violation, including a variety of measures such as posting notices about STAA orders and rights, as well as expungement of adverse comments in a personnel record. Where the employer is shown to have used a reckless or callous disregard for the complainant’s rights as well as intentional violations of federal law, the STAA allows for an award of up to $250,000 in punitive damages.

Claims are not difficult to make.

After the employee makes a prima facie case – which can be done relatively easily by using circumstantial evidence that the retaliation / discipline occurred contemporaneous to the alleged complaint - the respondent company may only avoid liability if it demonstrates by clear and convincing evidence that it would have taken the same adverse action in any event. “Clear and convincing” evidence is evidence indicating that the thing to be proved is highly probable or reasonably certain — a difficult burden.

Complaints can be filed and awards made for any adverse personal action. Of course, termination is the main reason, but complaints can also be made on being blacklisted, demoted, denied overtime or promotion, disciplined, denied benefits, not being hired or rehired, intimidated, being the recipient of threats, reassignment affecting promotions, or receiving reduced pay, fewer hours or crummy loads.

The STAA regulations prohibit discriminatory action by an employer because an employee has engaged in activities falling into two categories: complaints, which can be as simple as reporting a violation of the regulations to a supervisor and the driver’s refusal to operate a vehicle because of the regulation — a “refusal to drive” is protected under the STAA.

49 U.S.C. § 31105(a)(1)(B)(i) requires an employee show that he refused to operate a vehicle because the operation violated a regulation, standard, or order related to commercial motor vehicle safety, health, or security. Think of claims of “fatigue” or “illness” or HOS limitations, or hazardous weather, or the absence of a medical card — there are many regulations to choose from.

49 U.S.C. § 31105(a)(1)(B)(ii) looks at whether a person in the same situation would conclude that there was a reasonable apprehension of serious injury to the employee or the public because of the vehicle’s or driver’s dangerous safety or security condition.

If you’re reading this and engaged in interstate transportation of goods by motor carrier – or if your insured client does this — there is exposure to STAA whistleblower claims.

Take preventive action now.

You need to vigorously and strategically (uh, immediately) respond to such allegations by hiring a transportation attorney to represent you. Knowledge of operations and the FMCSR’s is paramount. You need to preserve attorney-client privileges and respond to the DOL’s lawyers / investigators. Training of dispatchers, freight brokers, driver managers – anyone who can be viewed as supervisory - should be on your short list; and also review your handbooks to encourage workers to report incidents of perceived non-compliance or unsafe conditions internally.

[1] In considering my own personal work life, I now realize that I’ve been coerced to perform certain objectionable, unsafe work practices since I started work at age 14. At that time I was forced by my employer to pick up trash thrown to the ground by sun-dried mahjong players (leathered, older women in unbecoming “bathing suits”) at a “beach club” along the East River in NYC (there was no beach to swim from, the River having been declared polluted about 100 years before).

Not only were the visages of these ladies offensive to the eyes of a 14 year boy (which still causes me emotional distress), but the trash was either half-crushed cigarette butts or dirty diapers literally thrown at my feet. “How’s business? Picking up?” they would call out to me, laughing… Talk about stressful coercion.

The Distinction Between "Carrier" and "Broker" in Cargo Losses

Sat, 09 Jun 2018 21:49:59 GMT

A discussion of brokering in the context of cargo liability.

Under the statute, a "broker" is "a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation." 49 U.S.C. § 13102(2).

In contrast, a "motor carrier" is "a person providing commercial motor vehicle . . . transportation for compensation." Id. § 13102(14).

The implementing regulation provides that “[m]otor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.” See 49 C.F.R. § 371.2(a).

It’s crucial to keep this in mind and get legal advice if a cargo claim is made against you.

Graves Amendment Preempts Vicarious Ownership Liability

Tue, 05 Jun 2018 21:32:56 GMT

The federal Graves Amendment, which became law in 2005, essentially bars vicarious liability claims against car rental companies for injuries caused by their customers, unless the injured party can show that the company was negligent or that its actions caused or contributed to those injuries.

Subsection (a) preempts any state law that imposes liability on lessors “by reason of being the owner of the motor vehicle.” When a statute’s language is clear, courts must enforce it according to it terms. United States v. Ron Pair Enterprises (1987) 489 U.S. 235.

This federal statute preempts conflicting state laws, and it unambiguously prohibits liability of persons and companies engaged in the business of renting or leasing vehicles to others based solely on owning the motor vehicle whose operator negligently caused a loss. As a result, rental companies are not vicariously liable under state vehicle ownership statutes for their renters’ negligence.

Graves (b)(1) and (b)(2) exempts from preemption state laws that impose:

financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or

liability on business entities engaged in the trade or business of renting or leasing motor vehicles for failure to meet the financial responsibility or liability insurance requirements under state law.

49 U.S.C. § 30106(b)(1)-(2).

The importance of the Graves Amendment is clear. States may require insurance or its equivalent as a condition of licensing or registration or may impose such a requirement after an accident or unpaid judgment. 49 U.S.C. § 30106 (b)(1).

In addition, states may suspend the license and registration of, or otherwise penalize, a vehicle owner who fails to meet the requirement, or who fails to pay a judgment resulting from a collision. 49 U.S.C. Section 30106 (b)(2).

However, they may not impose such judgments against rental car companies solely based on the negligence of their lessees. 49 U.S.C.§ 30106 (a).