TRANSPORTATION AND LOGISTICS COUNCIL

43RD ANNUAL CONFERENCE HENDERSON, NEVADA

IMPACT OF NEW LAWS AND REGULATIONS MODERATOR: BRIAN WHITSON

PANELISTS: HENRY SEATON AND MILES L. KAVALLER

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MAP-21 Broker Regulations • $75,000 bond amount is a non-issue. • 4½ years later, no implementing regulation. • Fraud unabated. • Double brokerage continues. • Shippers do not ensure carrier named on bill makes the

pickup. • Chain of custody problems persist:

• Theft • Double payment • Uninsured cargo losses

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• What’s lost? • Convenience interlining lost. • Constructive trust in regulations waived. • Issue of intermediary vs. carrier liability for cargo claims

• Why rules are needed: • How to distribute money when broker is in default. • Law would create more red tape – make brokers like FMCSA intermediaries.

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URS – Unified Registration System To err is human. Computers in the hands of the government can be fatal.

• Old school/file application on paper or by fax

• OP-1 with regulation for change of name and transfers

• U.S. DOT issued on filing of MCS-150

• For-hire (regulated) / file OP-1, agents, liability and cargo insurance

• All tracked on Licensing & Insurance

• For-hire (exempt) no insurance or agents on file

• Private – no insurance or agents on file.

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So what is status of URS? • The “wizard” is accepting new applications.

• URS filing deadline extended for the fourth time -

“Computer problems.”

• Separating broker/carrier authorities and abolishing MC Numbers - pending.

• System malfunctions and a call center in Kentucky.

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Safetea-Lu - §4120(c) (2005)

• Authorizes the FMCSA to establish financial limits and filing requirements for exempt private carriers.

• URS 12 years later: • Not fully implemented • Will require “all operators of commercial motor vehicles to file evidence of

agents and insurance but what amount of insurance must a private carrier prove it has?

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Answer

Zero federal requirement for private non-hazardous and $1,000,000 for hazardous.

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Other Regulatory Initiatives

• HOS – status quo ante, finally.

• ELD – under the wire/not caught up in Congress revenue process, seems likely to proceed.

• Speed limiters – a bad idea that is probably off the table.

• Paying for highways – urban transit, the budget is “Eisenhower dead or will technology save us?”

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What are the two biggest issues for Trucking?

(1) State/Federal – federalism/preemption under the commerce clause • Tort liability – can the shipper escape liability by using a

federally licensed and insured carrier? • Does owner-operator status under federal law trump otherwise

applicable federal and state employment?

(2) Uber, Amazon, Telemetrics

• The unknown future

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NEW STATE LABOR LAWS AND REGULATIONS AFFECTING WAGES, OVERTIME AND

INDEPENDENT CONTRACTORS

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INDEPENDENT CONTRACTORS • HISTORICALLY: OWNER –OPERATORS AS INDEPENDENT CONTRACTORS

• FMCSA REGULATION: 49 C.F.R. 376.2(d): “Owner. A person (1) to whom title to equipment has been

issued, or (2) who, without title, has the right to exclusive use of equipment, or (3) who has lawful possession of equipment registered and licensed in any State in the name of that person.”

• FMCSA REGULATION: 49 C.F.R. 376.12: “Truth-in-Leasing” “(c) Exclusive possession and responsibilities. (1) The lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease. (4) Nothing in the provisions required by paragraph (c)(1) of this section is intended to affect whether the lessor or driver provided by the lessor is an independent contractor or an employee of the authorized carrier lessee. An independent contractor relationship may exist when a carrier lessee complies with 49 U.S.C. 14102 and attendant administrative requirements.”

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RECENT DEVELOPMENTS: An ongoing struggle between the trucking industry and the regulators and labor groups – one that may have major implications for freight companies’ operational expenses.

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CALIFORNIA LEADS THE ASSAULT ON INDEPENDENT CONTRACTORS

Since 2011, California port truckers have filed roughly 800 wage claims with the Labor Commission, part of the California Dept. of Industrial Relations, alleging that they have been misclassified as independent contractors and denied benefits including wages, overtime pay, unemployment insurance and workers’ compensation. Drivers have won more than $35 million in over 300 cases, and there are still 196 wage claims pending.

Some drivers – and the union representatives hoping to organize them – say their interactions with carriers mirror employee-employer relationships allege that trucking companies hold all the power, commanding drivers where to go, when to go and what to do once there. Drivers who claim misclassification allege that their lack of employee status allows carriers to bypass minimum wage requirements, meal and rest breaks, health coverage and other work related expenses.

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Recent Court Decisions In the last 2 months two federal judges ruled that truckers should be categorized as employees unless their working conditions meet specific requirements that qualify them as independent contractors. • Legal Test: I/C Not Carrier Must Control the Manner and Means

of the Service Provided. • California: Borello v. DIR, (1989) 48 Cal.3d 341 , 256 Cal.Rptr. 543;

769 P.2d 399. • CTA v. Su; • Swift Transportation. Also—Must Comply with FLSA Minimum

Wage. .

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OTHER CASES

• New Jersey: PDX North America v. Wirths, Commissioner of Dept. of Labor

• Central Refrigerated Service of West Valley City, Utah, class action lawsuit: An arbitrator ruled that lease operators for Central Refrigerated are employees as a matter of law and not independent contractors.

• Other California Cases: The Ports cases in particular, but others as well, uniformly have held that California law applies to workers in California, regardless of the domicile of the carrier, and that the drivers are employees.

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SOLUTIONS

• Those Carriers Who Want to Use I/C Must Contract With O/O Who Truly want to be I/C and understand the Benefits.

• Courts Are Unlikely to Change This Trend. • Because the laws in the States vary, uniformity is needed and that can

only be accomplished by Congress. • ATA and others are likely to promote legislative agenda with Trump

administration.

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CALIFORNIA AIR RESOURCES BOARD (“CARB”)

• HEAVY-DUTY TRACTORS: 13 California Code of Regulations: Division 3. Air Resources Board

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TEMPERATURE REFRIGERATION UNITS (“TRU”)

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LITIGATION A federal lawsuit filed by trucking, oil and construction companies and related trade groups could have an outsized effect on environmental regulation during the Trump administration. The lawsuit, which will be considered by the U.S. 9th Circuit Court of Appeals this year, challenges the EPA’s granting of waivers that give California the ability to write environmental regulations that preempt federal rules.

The outcome could be critical for environmental regulation, as state agencies such as CARB work to maintain policies that reduce carbon emissions and increase vehicle fuel economy – initiatives that President Trump and his cabinet nominees are considering reversing. Scott Pruitt, now head of the EPA, questions the degree and extent of global warming and was part of a coalition of state attorneys general suing to block the EPA’s Clean Power Plan.

Because of California’s recalcitrant air pollution conditions, the Clean Air Act of 1970 allows the state to issue its own vehicle emissions standards as long as they are as

• Because of California’s recalcitranr

stringent as the federal standards and the EPA has granted a waiver. To earn the waiver, California has to demonstrate that it has “compelling and extraordinary that can only be mitigated by its own regulations.”

California’s environmental rules –crafted by CARB – can be nearly as influential as EPA policy. The Clean Air Act allows other states to enact the same environmental regulations for vehicles and certain types of equipment if California already has a waiver for those rules. Nine states and the District of Columbia, for example, have adopted CARB’s zero-emissions vehicle mandate, which uses a complex environmental credit system that will require automakers to sell about 2 million electric cars and trucks by 2025.

Environmental groups believe California’s ability to issue rules that can be adopted by other states could act as an important check on a Trump administration looking to reverse regulation.

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FAST Act – December 2016

• Required removal of SMS methodology from website.

• Required National Academy of Sciences review.

• Answer GAO, IG and independent study criticism and report to Congress before proceeding with SFD.

• Require industry impact study before any major new rule.

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What was agency’s response?

• File NPRM for Safety Fitness Determination Rule using SMS roadside inspections.

• Proceeded to use SMS as basis for “investigations” rather than audits as required by existing rules.

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What was industry’s response?

• Congressional petitions – Now 62 signers including T&LC, ATA, OOIDA bus industry

• Chao petition pending to declare SFD invalid and require the agency to start over.

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The Rest of the Story: What our FOIA Request Proved

[CATEGORY NAME]

[PERCENTAGE] [CATEGORY NAME]

[PERCENTAGE]

[CATEGORY NAME]

[PERCENTAGE]

[CATEGORY NAME]

[PERCENTAGE]

[CATEGORY NAME]

[PERCENTAGE]

Carriers by Number of Crashes

Crashes of Carriers SMS/Roadside inspections ID as unsafe

53% - 0 crashes 76% - 1 or less 83% - 2 or less 89% - 3 or less

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Six Reasons why SMS ≠ Valid Measurement of

Safety Performance

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1. There is no correlation between % scores and individual performance.

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FMCSA Regression of Averages – Fatigued Driving

(HOS) Fatigued Driving – Plot of

35,933 Carriers

2. Unsafe Driving BASIC

• Geographical anomalies • Carriers operating in high probable cause states and

speed trap states pick up more violations than others.

22.4

10.5

1.770.45 0.46

0

5

10

15

20

25

MI IN TN TX PA

Unsafe Driving Points by State

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3. Each of the “BASICs” is actually a broken thermometer

(a) Hours of Service • Form and manner violations • Over 50% of points are paperwork errors ≠ to fatigue • ELD will destroy this BASIC

(b) Equipment Maintenance • Tire wear, trailer lights and non-out-of-service

account for the majority of violations • Peer group anomalies in dray carriers

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4. The Law of Large Numbers

• Over 90% of carriers have too few roadside inspections to be measured.

• GAO agrees with Gimpel Study – need a minimum of 20 data points to be statistically accurate.

• SFD proposes 11 points.

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Crash Ratios and the Law of Large Numbers • 10 truck operator involved in 2 non-preventable accidents is over 1.6

million crashes per million threshold.

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10

0 20 40 60 80 100

Acci

dent

s / M

illio

n M

iles

Power Units

Carriers with 3 Alerts

49% of small carriers with 3 had no accidents in past 2 years. Proves volatility point, the larger the size, the less fluctuation.

5. Inaccurate and Under-Reporting

• Infraction points divided by number of inspections is raw score.

• Number of inspections is inaccurately reported.

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What are factors that cause bad inspection data?

(1) PrePass (2) Profiling (3) Non-MCSAC reports (4) “Not paid to write good reports” (5) Coalition study confirms

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6. Crash BASIC • The BASIC even the Agency admits is too squirrelly to print.

• 3 out of every 4 crashes are caused by non-commercial motor vehicles.

• Agency claims past crashes are the best predictor of future

performance, but cannot or will not call “balls and strikes” on 180,000 crashes.

• Agency can never afford to administratively determine fault with due process – attempt to determine preventability is proof.

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Trump has asked agencies to initiate a plan for reducing regulation and saving money.

• Has the time come to look for an alternative?

• Is now the time to seek to restore federalism to reestablish uniformity in interstate trucking?

• Eliminate lack of uniformity in independent contractor and vicarious liability between the states.

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