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Regulatory and Legislative Update - February 2021

By Dan Boaz

Contents

FMCSA has updated various guidance related to COVID-19, including guidance related to the Center for Disease Control’s order related to use of masks at “transportation hubs.” For the latest, visit www.fmcsa.dot.gov/COVID-19.

Regulation and Enforcement

Courts

Open Issues

Advocacy and Comment

 

Regulation and Enforcement

President Biden charts new regulatory course; White House freezes rulemaking

In his first day in office, President Biden signed an executive order and a related memorandum that confirm a reversal of the Trump administration’s deregulatory approach. The first executive order directly revokes various deregulatory executive orders that President Trump had signed four years earlier, saying that executive departments and agencies “must be equipped with the flexibility to use robust regulatory action to address national priorities.” The executive order (E.O. 13992), “Revocation of Certain Executive Orders Concerning Federal Regulation,” is available at https://www.federalregister.gov/d/2021-01767.

In a memorandum also signed on inauguration day, President Biden reinforced the tone of the executive order, directing the Office of Management and Budget and representatives of the various departments and agencies to develop recommendations for improving regulatory review. Biden asked that the recommendations “ensure that the review process promotes policies that reflect new developments in scientific and economic understanding, fully accounts for regulatory benefits that are difficult or impossible to quantify, and does not have harmful anti-regulatory or deregulatory effects.” The memorandum, “Modernizing Regulatory Review,” is available at https://www.federalregister.gov/d/2021-01866.

Another White House document related to regulation was completely expected. In a memorandum, Ronald Klain, White House chief of staff, directed federal departments and agencies to freeze regulatory activity, subject to exceptions, pending review. The memorandum stops the publication of rules that had not been published in the Federal Register before January 20 and postpones the effective date for 60 days beyond January 20 of any rule that had been published. During that time, agencies may reopen the comment period and/or entertain new petitions for reconsideration. The freeze applies to regulatory guidance and notices of proposed rulemaking (NPRMs) as well as final rules. For Klain’s memorandum, visit http://bit.ly/WHfreeze.

Most significant final actions taken by the Federal Motor Carrier Safety Administration during the Trump administration – most notably the recent changes in the hours-of-service (HOS) regulations – are unaffected by the regulatory freeze. The most significant rule affected by the freeze that directly relates to trucking – although it is not specific to trucking – is the Department of Labor’s recent final rule regarding worker classification. (See Regulatory Update, January 2021) That rule is not scheduled to take effect until March, and it almost certainly will not take effect, at least not as currently drafted.

Regulatory freezes and reviews are common when the White House transitions to a new political party. However, reviews do not necessarily result in reversals. The Trump administration kept in place two major trucking-related rules issued late in the Obama administration – the drug and alcohol clearinghouse and the entry-level driver training rule. The Trump administrations did, however, withdraw several ongoing Obama administration rulemakings, including carrier safety fitness determinations, minimum insurance levels, and obstructive sleep apnea.

Buttigieg confirmed as new DOT secretary, FMCSA deputy named

The U.S. Senate on February 2 voted 86 to 13 to confirm Pete Buttigieg as secretary of the U.S. Department of Transportation. The former mayor of South Bend, Indiana, had run for president in 2020 but ultimately withdrew and endorsed Joe Biden. Prior to his confirmation, Buttigieg had testified before the Senate Commerce Committee, which approved him by a 21 to 3 vote less than a week later. For a recording of the January 21 confirmation hearing, visit https://www.commerce.senate.gov/2021/1/ni.

President Biden has yet to nominate an FMCSA administrator – a position that has been vacant aside from acting executives since Raymond Martinez left the agency more than a year ago. However, the Biden administration has named Meera Joshi deputy FMCSA administrator, making her the agency’s acting executive until a new administrator is confirmed.

Joshi most recently was principal and New Your general manager with transportation planning firm Sam Schwartz. From 2011 until 2019, Joshi held senior positions with the New York City Taxi and Limousine Commission, first as deputy commissioner and general counsel and then as CEO and commission chair.

DOL withdraws opinion on safety requirements’ impact on worker status

On the final full day of the Trump administration, the Department of Labor’s Wage and Hour Division issued an opinion letter (FSLA2021-9) concluding that a motor carrier’s requirement that tractor-trailer drivers abide by safety-related mandates does not constitute control for the purposes of determining independent contractor status. However, since President Biden’s inauguration and the regulatory freeze it imposed, WHD has withdrawn the January 19 opinion letter. In its place, the website provides the following notice: “WHD is withdrawing opinion letters FLSA 2021-4, FLSA2021-8, and FLSA 2021-9. These letters were issued prematurely because they are based on rules that have not gone into effect. This withdrawal is an official ruling of the Wage and Hour Division for purposes of the Portal-to-Portal Act, 29 U.S.C. § 259, and these letters may not be relied upon as statements of agency policy as of the date of withdrawal.” Opinion letters are available at https://www.dol.gov/agencies/whd/opinion-letters/search.

The opinion letter specifically addressed four basic types of safety requirements that a carrier might impose on an owner-operator: (1) video-based onboard safety monitoring systems; (2) systems that monitor sensor and engine data to assess risky behavior; (3) installation and use of a GPS-based speed limiter; and (4)mandatory monthly safety meetings, quarterly reviews, and quarterly online safe-driving courses.

FMCSA proposes alternative vision standard to replace exemption program

In the waning days of the Trump administration, FMCSA issued a notice of proposed rulemaking (NPRM) that would adopt an alternative vision standard for physical qualification to replace the current vision exemption program. The NPRM would allow individuals who cannot meet either the current distant visual acuity or field of vision standard, or both, in one eye to be physically qualified to operate a commercial motor vehicle (CMV) in interstate commerce.

Comments are due March 15. Because the NPRM was published before January 20 but is not a final rule, the docket presumably remains open unless and until FMCSA rules otherwise. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-28848.

Proposed pilot on expanded split rest dropped from website

Less than a week before President Biden’s inauguration, FMCSA announced a proposed pilot program to evaluate allowing CMV drivers to use sleeper berth splits of 6 hours/4 hours and 5 hours/5 hours. The final HOS rule implemented in September allows a 7/3 split in addition to an 8/2 split, which had been the only sleeper berth split option for about 15 years.

The proposed pilot was not published in the Federal Register before the inauguration, and both the January 14 news release and the draft proposal notice linked to in the news release have since been removed from the FMCSA website. The action was not unexpected as the Biden White House had announced on January 20 a freeze on all rulemaking and guidance documents that had not already become final before January 20.

FMCSA last year proposed two other pilot programs – one on allowing a pause in the 14-hour driving window and one to assess the safety of younger CMV drivers in interstate commerce. Although the agency published both proposals and solicited comments on them, neither was finalized before the Trump administration exited.

Final rule on third-party CDL testing likely dead

A final rule announced in in December to loosen a longstanding restriction on commercial driver’s license (CDL) testing probably will not take effect. FMCSA in December announced a final rule that would have allowed states to permit third-party skills test examiners to administer CDL skills tests to applicants to whom those examiners also provided skills training. (See Regulatory Update, January 2020)

In its December 17 news release, the agency linked to a draft copy of the final rule, but it was never published in the Federal Register. Although the news release remains on the FMCSA website – unlike the release related to a proposed pilot program on split rest in sleeper berths – the link to the draft rule no longer works. Given the regulatory freeze imposed by the Biden White House, the rule is unlikely to be published.

Medical registry problems limit FMCSA’s oversight of driver qualifications, OIG says

FMCSA’s ability to oversee whether drivers meet physical qualification standards to operate safely is limited because of a lengthy outage of the National Registry of Certified Medical Examiners and the resulting backlog of driver examination reports that were not entered into the registry, the DOT Office of Inspector General concluded. An OIG audit also found that weaknesses associated with the accuracy and completeness of data in the registry limit the effectiveness of FMCSA’s oversight. Another problem is that the agency is not yet conducting annual eligibility audits after certification, which means that FMCSA could be missing fraud indicators or other risks, the OIG said. The DOT OIG audit report is available at https://www.oig.dot.gov/library-item/38181.

CVSA schedules International Roadcheck for May 4-6

The Commercial Vehicle Safety Alliance has set May 4-6 as the dates for this year’s International Roadcheck intense inspection event. This year’s emphasis will be driver HOS compliance and vehicle lighting violations. In the event a driver is transporting COVID-19 vaccine, law enforcement will not hold up shipments for inspection unless there is an obvious serious violation that is an imminent hazard, CVSA said. International Roadcheck traditionally was held in early June, but it had been scheduled for early May last year before it was rescheduled for September because of the pandemic.

FMCSA expands MCSAC membership, appoints new driver subcommittee

Prior to the inauguration, FMCSA announced the 2021 membership of its Motor Carrier Safety Advisory Committee and the initial appointees to the committee’s new driver subcommittee. The agency expanded the MCSAC’s membership to 25 from 18 previously. Of those 25, 16 prior MCSAC members are returning. Only Bill Dofflemyer and Leroy Taylor, law enforcement representatives from Maryland and South Carolina, respectively, have departed. New members are:

  • Michael Bray, GM Commercial Transportation
  • Adrienne Gildea, Commercial Vehicle Safety Alliance
  • David Heller, Truckload Carriers Association
  • Dawn King, Truck Safety Coalition
  • Siddarth Mahant, Mahant Transportation, LLC
  • Jaime Maus, Werner Enterprises
  • Travis Plotzer, Tennessee Highway Patrol
  • Ellen Voie, Women in Trucking
  • Andrew Young, The Law Firm for Truck Safety

The new 25-member driver subcommittee will provide direct feedback to FMCSA on various issues, including regulation, enforcement, training, parking, etc. For more on MCSAC and the driver subcommittee, visit https://www.fmcsa.dot.gov/mcsac.

FMCSA proposes changes in HHG broker disclosures

In a document published since President Biden took office, FMCSA is accepting comments until March 3 on proposal to revise information collection requirements related to the obligation of household goods (HHG) brokers to provide potential shippers with information throughout the various stages of interaction – prospecting, contact, estimate, and agreement. The agency specifically is asking (1) whether the proposed collection is necessary; (2) whether the estimated paperwork burden is accurate; (3) how FMCSA could enhance the quality, usefulness, and clarity of the collected information; and (4) how the agency could minimize the burden without reducing information quality. For the Federal Register notice, visit https://www.federalregister.gov/d/2021-02021.

 

Courts

Ninth Circuit upholds FMCSA’s preemption of California rest break rules

The U.S. Court of Appeals for the Ninth Circuit on January 15 denied petitions for review of FMCSA’s December 2018 determination that federal law preempted California’s meal and rest break (MRB) rules as applied to drivers of property-carrying CMVs who are subject to federal HOS regulations. The three-judge panel noted that FMCSA has the authority under federal law to review for preemption state laws on and regulations “on commercial motor vehicle safety” and held that the agency’s interpretation merited deference under Chevron v. Natural Resources Defense Council. Although FMCSA conceded that it’s determination departed from its own 2018 interpretation, it provided a reasonable basis for doing so, the court ruled.

The Ninth Circuit also concluded that FMCSA’s decision relied on the Congress’ stated interest in uniformity of regulation. Just because California regulated mean and rest breaks in a variety of industries does not mean that the MRB rules were not “on commercial motor vehicle safety.” The panel further said FMCSA’s determination that the MRB rules were “additional to or more stringent than” federal regulation were supported by the agency’s finding that California required more breaks, more often, and with less flexibility regarding timing than the federal rules.

The Ninth Circuit’s decision is available at https://cdn.ca9.uscourts.gov/datastore/opinions/2021/01/15/18-73488.pdf. For FMCSA’s preemption determination, visit https://www.federalregister.gov/d/2018-28325.

In November, FMCSA issued a similar preemption declaration regarding MRB rules in the State of Washington. (See Regulatory Update, December 2020) Given that Washington also falls within the Ninth Circuit’s jurisdiction, it would seem likely that FMCSA’s ruling in that situation also would be upheld.

 

Open Issues

Comment period still open on several FMCSA proceedings

Although the status of individual proceedings is unclear until FMCSA clarifies how the regulatory freeze applies to open proceedings, several FMCSA proceedings initiated late in the Trump administration remain open for public comment:

 

Advocacy and Comment

1. As anticipated, the Biden Administration has rolled back helpful Executive Orders and pending rules including the Department of Labor’s economic realities test discussed last month. The Administration’s “Modernizing Regulatory Review” document signals that the Administration will encourage agency use of its discretion in new policy initiatives granting great deference to the Agency’s purported expertise. While the Administration’s Executive Orders cannot nullify the Administrative Procedures Act or statutes intended to protect the rights of affected parties and small businesses in particular, these developments not only affect current issues, but they also have a more far-reaching effect. Whether the DOT’s final rule establishing administrative due process will be formally repudiated remains to be determined. Yet, neither the White House nor the Democratic-controlled Congress can be seen as a champion of regulatory restraint, particularly with respect to safety and labor/independent contractor issues.

2. The Ninth Circuit decision on the meal and rest break discussed above is clearly a victory for court recognition of the “federal preemption” doctrine. Yet the Ninth Circuit’s reference to “Chevron deference” is not helpful. When the Commerce Clause and federal preemption of state laws is used to trump state law in the name of uniformity, one must be careful what one asks for. “Chevon deference” refers to court precedent that holds that the benefit of the doubt goes to the Agency in any judicial appeal of an Agency decision. The new Attorney General, Merrick Garland, is a proponent of this doctrine. Accordingly, in the next four years we can expect a more difficult task in reining in major changes in regulations and guidance.

3. As noted above, eight new appointees have been named to the Agency’s MCSAC. The new members do not change the profile of the committee and includes 3 safety advocates and 2 enforcement representatives. Missing from the list are any of a number of qualified small carrier representatives that would have added needed representation for the over 500,000 small carriers the FMCSA oversees.

 

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Regulatory and Legislative Update - January 2021

By Dan Boaz

Contents

FMCSA has modified various guidance related to COVID-19. For the latest, visit www.fmcsa.dot.gov/COVID-19.

Regulation and Enforcement

Legislation

Advocacy and Comment

Regulation and Enforcement

DOL finalizes rule to clarify independent contractor status

Although the rule almost certainly will never take effect, the U.S. Department of Labor’s Wage and Hour Division issued a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (FLSA). The final rule:

  • Adopts an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee);
  • Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
    -The nature and degree of control over the work; and
    -The worker’s opportunity for profit or loss;
  • Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification:
    -The amount of skill required for the work;
    -The degree of permanence of the working relationship between the worker and the potential employer; and
    -Whether the work is part of an integrated unit of production;
  • Holds that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.

The rule’s effective date is March 8, but the chances of the rule taking effect are extremely slim. By virtue of executive action promptly after the inauguration, President Biden probably will set aside the DOL rule along with potentially dozens of so-called “midnight regulations” – rules finalized within 60 days before inauguration. This procedure is routine in a transition of the White House from one party to another.

The final rule is available at https://www.federalregister.gov/d/2020-29274.

FMCSA proposes to revise HOS guidance on yard moves

FMCSA invites comments by February 3 on proposed to revise the regulatory guidance concerning recording time operating a commercial motor vehicle as a “yard move” as it applies to commercial motor vehicle (CMV) drivers required to record their hours of service. The proposed guidance includes examples of properties that are and are not “yards.” Movements of CMVs in “yards” would be considered “yard moves” and could be recorded as on-duty not driving time rather than driving time. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-29062.

Final rule announced to allow third-party CDL examiners to test their own trainees

Although it has yet to be published formally, FMCSA on December 17 announced a final rule that would allow states to permit third-party skills test examiners to administer commercial driver’s license (CDL) skills tests to applicants to whom those examiners also provided skills training. Current regulations bar third-party CDL skills instructors authorized by their states to administer CDL skills tests from performing both the instruction and the qualifying testing for the same CDL applicant. FMCSA, which had proposed the change in July 2019, said the rule would alleviate testing delays and eliminate needless inconvenience and expense to CDL applicants without compromising safety.

The rule would take effect 60 days after publication in the Federal Register, but its fate is uncertain as it is unclear whether the incoming Biden administration would support it. Even if the rule is published before January 20, the Biden administration could vacate it among other so-called “midnight regulations.” The draft final rule is available at https://www.fmcsa.dot.gov/registration/commercial-drivers-license/ third-party-commercial-drivers-license-testers. For the July 2019 NPRM and comments submitted, visit https://www.regulations.gov/docket?D=FMCSA-2018-0292.

FMCSA implements FAST Act requirements on rules and petitions

More than five years after Congress passed the Fixing America’s Surface Transportation (FAST) Act, FMCSA has issued a final rule to change its rulemaking procedures to comply with various requirements of the law regarding how the agency conducts rulemakings, including use of advance notices of proposed rulemaking (NPRMs) or negotiated rulemakings when a major rule is anticipated and the definition of and procedures for handling petitions for rulemaking. The agency’s NPRM had been published in August 2017. The final rule, which takes effect March 1, is available at https://www.federalregister.gov/d/2020-27854. Petitions for reconsideration are due February 1.

Annual inspections of rear impact guards proposed

FMCSA has invited comments until March 1 on an NPRM to amend the Federal Motor Carrier Safety Regulations (FMCSRs) to include rear impact guards on the list of items that must be examined as part of the required annual inspection for each CMV. The agency also proposed to amend the labeling requirements for rear impact guards. It also proposes to exclude road construction controlled (RCC) horizontal discharge trailers from the rear impact guard requirements, consistent with changes made by the National Highway Traffic Safety Administration (NHTSA) to the corresponding Federal Motor Vehicle Safety Standards (FMVSS).

FMCSA said the NPRM responds to rulemaking petitions, as well as a Government Accountability Office (GAO) recommendation. (See https://www.gao.gov/products/GAO-19-264) However, Congress in the fiscal 2020 appropriations act mandated annual inspections of rear underride guards as recommended by GAO. That provision was retained in the fiscal 2021 appropriations act passed in December. To view the NPRM, visit https://www.federalregister.gov/d/2020-27502.

FMCSA proposes to drop mandate for annual driver reports of traffic violations

FMCSA has invited comments until February 12 on an NPRM to eliminate requirement that drivers operating CMVs in interstate commerce prepare and submit a list of their convictions for traffic violations to their employers annually. The agency said the requirement largely duplicates a separate provision that requires each motor carrier to make an annual inquiry to obtain the motor vehicle record (MVR) for each driver it employs from every state in which the driver holds or has held a CMV operator's license or permit in the past year. To account for drivers who might be licensed in Canada or Mexico, FMCSA also proposes to require that carriers make annual inquiries of those authorities as applicable. FMCSA said that removing the requirement for drivers to provide a list would reduce the paperwork burden on drivers and motor carriers without adversely affecting CMV safety. To view the NPRM, visit https://www.federalregister.gov/d/2020-26957.

Railroads win relief from HOS regulations during ‘unplanned events’

Despite objections raised by several trucking and labor groups, FMCSA has granted an exemption to the Association of American Railroads and the American Short Line and Regional Railroad Association and member railroads from various hours-of-service (HOS) rules to allow railroad employees subject to the HOS rules to respond to unplanned events that occur outside of or extend beyond the employee’s normal work hours. The exemption covers the regulations on mandatory minimum rest, the 14-hour driving window, the 11-hour driving limit, and cumulative work limits.

Several organizations, including the Commercial Vehicle Safety Alliance, Truckload Carriers Association, and the Transportation Trades Department of the AFL-CIO, opposed the request on safety grounds. “The Agency believes there is a public interest in ensuring that railroads clear blocked tracks and rights-of-way and restore service as quickly as possible,” FMCSA said. It acknowledged the concerns bus said it “does not believe the requested relief would compromise safety when used occasionally to respond to unplanned events.” The agency also said the exemption would not decrease drivers' responsibility under 49 CFR 392.3 to cease operations if their ability to safely operate a CMV is impaired by illness or fatigue. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-28341.

Helicopter firm seeks HOS relief for ground support operators

FMCSA requests comment until January 19 on Mountain Blade Runner Helicopters, LLC's (MBR Helicopters) application for an exemption from two provisions of the hours-of-service (HOS) regulations for its ground support equipment operators. The exemption would allow MBR Helicopters' ground support equipment operators a 16-hour window within which to complete all driving and allow them to use an eight-consecutive hour off-duty break, combined with at least two other off-duty hours during the 16-hour window within which driving would be completed, in lieu of taking 10 consecutive hours off duty. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-27966.

Netradyne receives windshield exemption for safety system

FMCSA has granted an exemption to Netradyne, Inc to allow its Driveri® Dash Cam to be mounted lower in the windshield on CMVs than is currently permitted. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-27967.

Comment period still open on TIA petition

FMCSA is accepting comments until January 25 on Transportation Intermediaries Association’s (TIA) petition for rulemaking concerning the rights of parties to a brokered transaction to review the records of the transaction and on TIA’s request that the agency issue regulatory guidance concerning dispatch services. (For details of the petitions and further discussion of it, see the September 2020 and December 2020 Regulatory Updates.) For the Federal Register notice, visit https://www.federalregister.gov/d/2020-25307. For more information, including comments submitted, visit https://www.regulations.gov/docket?D=FMCSA-2020-0150.

 

Legislation

Trucking loses legislative buffer as Democrats control the Senate

Although the results have yet to be certified, Raphael Warnock and Jon Ossoff apparently have garnered enough votes to become U.S. senators from Georgia later this month. The Warnock and Ossoff victories in runoff elections on January 5 against Sens. Kelly Loeffler and David Perdue, respectively, result in a 50-50 split among Democrats and Republicans. With incoming Vice President Kamala Harris casting a deciding vote, the Georgia results mean that Democrats will now control both houses of Congress and the White House for the first time in a decade.

For trucking, the Senate’s flip means that the Senate no longer serves as a firewall against legislation the industry opposes, especially given that a veto of such legislation is no longer a threat that serves to moderate the scope of legislation in the first place. For example, last February, the House in a highly partisan vote passed the Protecting the Right to Organize Act of 2019, or PRO Act, which would have enacted various pro-union measures, including one that would have essentially adopted the ABC test for worker classification that was adopted in California’s AB 5.

Specific to trucking, the Democrats’ control of the Senate could allow initiatives that have cropped up in recent years to become law. For example, the House version of the DOT appropriations bill for fiscal 2020 would have required FMCSA to restore public access to Compliance, Safety, Accountability (CSA) program metrics. It also would have barred FMCSA from issuing any further preemption declarations related to meal and rest breaks as it did regarding truck drivers in California in late 2018, although that prohibition likely is unnecessary in the Biden administration. Democratic control of Congress also could lead to some other controversial measures, such as mandatory speed limiters and higher minimum levels of insurance for trucking companies.

Applications for the PPP to reopen week of January 11

In late December, President Trump signed into law another round of COVID-19 relief along with funding of the federal government through fiscal 2021. Along with more funding for unemployment benefits and direct payments to taxpayers, the legislation provides up to $284 billion more money for the Paycheck Protection Program (PPP) through March 31. The latest round of PPP funding, which the Small Business Administration said would be available starting the week of January 11, allows existing PPP borrowers to apply for a “second draw” forgivable PPP loan under certain conditions.

To promote access to capital, initially only community financial institutions will be able to make “first draw” PPP Loans on January 11 and “second draw” PPP Loans on January 13. The PPP will open to all participating lenders shortly thereafter.

Congress changed the terms of PPP to add flexibility and – for “second draw” loans – target loans to businesses most significantly affected by the pandemic. PPP borrowers can set their loan’s covered period to be any length between eight and 24 weeks to best meet their business needs. PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures. Borrowers generally are eligible for a second PPP loan if they:

  • Used the full amount of their previous loans only for authorized uses;
  • Have no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

For more information on PPP, visit https://www.sba.gov/ppp.

 

Advocacy and Comment

1. Independent contractor treatment of owner operators

As the above update shows, there is much going on. The effect of the election and common control by the Democrats of the Administration in both Houses of Congress is difficult to predict. To follow are some analyses and prediction regarding key issues facing the trucking industry.

The Department of Labor’s belated issuance of the economic reality test discussed above is sure to be overtaken by events. DOL’s new test, one the owner operator model would clearly meet, is sure to be set aside by the Biden Administration. Lost was an opportunity for the outgoing Department of Labor to acknowledge that the owner operator model was established by court precedent and creates a carve-out from any DOL policy statement or rule of general application. The new DOL appointee secretary is rumored to be a former union official so friendly treatment of the IC model at the departmental level is not to be expected.

Also, the industry is likely to see reintroduction of the PRO Act in both the House and Senate which could establish a Federal standard for classifying owner operators as employees similar to California’s AB-5 and other blue states’ use of the so-called ABC standard. The worst-case scenario would be Federal or state $15 minimum wage requirements and time and a half after 40 applied to truck drivers, whether owner operators or W-2 employees.

If more draconian standards applicable to all industries apply, the driver or owner operator away from home for a week would be entitled to 16 hours per day in compensation including overtime after 40. On a 7 day away from home workweek, the minimum pay would jump to $1,995. Obviously, this result would cripple over-the-road operations, pass along unsustainable inflation and stifle any entrepreneurial incentive for small businesses. Active opposition by not only big trucking but shippers, brokers, and particularly independent contractors will be necessary to overcome this foreseeable “political realities test” which is sure to come.

2. FAST Act approved

It is important to note that the due process and regulatory reform proposals that were baked into the FAST Act four years ago have finally become law. These reforms were important push-back on regulatory abuse and so-called “Chevron deference” – judge-made precedent which has previously limited judicial restraint on active administrative guidance and rulings by the FMCSA and other agencies. How a law with helpful language on regulatory restraint fares in the judicial arena in this contentious time is hard to handicap.

3. Broker petition

As noted above, interested parties have until January 25 to comment on initiatives which would provide guidance concerning the role of dispatch services and affect the rights of parties to examine broker records concerning payment of freight charges. The Agency has already affirmed its position that dispatch services fit the definition of property brokers and should be licensed. Also, the rights of parties to see brokers’ transactional records is an important collection tool and particularly helpful in ascertaining whether brokers have maintained the constructive trust required by regulation.

There is no compelling reason for changing existing regulation and precedent with respect to either of these issues. The regulatory buzzwords “transparency and accountability,” neither requiring a dispatch service to obtain a broker’s license nor requiring a broker to maintain transactional accounting, imposes an unreasonable burden on the brokerage industry. The broker regulations certainly do not impose a significant burden when compared to the regulatory obligations of small carriers which actually provide the service.

 

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Regulatory and Legislative Update - December 2020

By Dan Boaz

Contents

FMCSA has extended its emergency declaration regarding enforcement relief for drivers and carriers involved in COVID-19 response through February 28, 2021 and has expanded the declaration to specifically include vaccines and related products within the coverage of the declaration. For details, visit www.fmcsa.dot.gov/COVID-19.

Regulation and Enforcement

Advocacy and Comment

Regulation and Enforcement

FMCSA declares preemption against Washington’s meal and rest break rules

The Federal Motor Carrier Safety Administration (FMCSA) has granted the Washington Trucking Associations’ (WTA) request for a determination that the State of Washington’s meal and rest break (MRB) rules are preempted as applied to property-carrying commercial motor vehicle (CMV) drivers subject to FMCSA’s hours-of-service (HOS) regulations.

FMCSA determined that Washington’s MRB rules are preempted because they (1) are laws on CMV safety; (2) are more stringent than the agency’s HOS regulations; (3) have no safety benefits that extend beyond those that the Federal Motor Carrier Safety Regulations (FMCSRs) already provide; (4) are incompatible with the federal HOS regulations, and (5) cause an unreasonable burden on interstate commerce. For the Federal Register notice of the preemption ruling, visit https://www.federalregister.gov/d/2020-25155.

FMCSA issued a similar declaration against California’s enforcement of its MRB rules on drivers for motor carriers of property in December 2018. See the December 28 Federal Register notice at https://www.federalregister.gov/d/2018-28325. At the request of the American Bus Association, FMCSA extended the California preemption to passenger-carrying operations in January of this year. See the January 2020 Federal Register notice at https://www.federalregister.gov/d/2020-00835.

Interim final rule clarifies definition of agricultural commodity

FMCSA has issued an interim final rule that clarifies the definition of the terms "any agricultural commodity," "livestock," and "non-processed food," as the terms are used in the definition of “agricultural commodity” under the hours-of-service regulations. For details, visit https://www.federalregister.gov/d/2020-25971. The IFR is effective December 9.

The definitions are important because under current regulations, drivers transporting agricultural commodities, including livestock, from the source of the commodities to a location within 150 air miles of the source, during harvest and planting seasons as defined by each state, are exempt from the HOS requirements. Also, the mandatory 30-minute rest break does not apply to drivers transporting livestock in interstate commerce while the livestock are on the commercial motor vehicle.

FMCSA seeks comments on TIA’s petition on reporting mandate, dispatch services

FMCSA is accepting comments until January 25 on Transportation Intermediaries Association’s (TIA) petition for rulemaking concerning the rights of parties to a brokered transaction to review the records of the transaction and on TIA’s request that the agency issue regulatory guidance concerning dispatch services. TIA argues that transparency in broker transactions is provided through other means in today's marketplace and that regulatory guidance would ensure that interested parties can distinguish between a dispatch service and an authorized broker. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-25307.

In its petition, TIA said the proposed modifications and clarifications “would eliminate an outdated regulation that dates back to 1980 that is not applicable to the current marketplace.” FMCSA currently is inviting comments on separate petitions for rulemaking that would require brokers to distribute routinely the records required by 371.3. TIA also is asking FMCSA to develop guidance “on what constitutes a legitimate ‘dispatch service’ and remove unethical and unscrupulous actors from the marketplace.” TIA said it believed that there are many illegal dispatch services that are operating illegally as unlicensed brokers and that FMCSA should prohibit these companies from offering such a service without a license.

TIA’s petition responds in large part to a proceeding that sought comment until November 18 on separate petitions for rulemaking filed by the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) to tighten the requirements on property brokers for the reporting of transactions. (For details of the petitions, see the September 2020 Regulatory Update.) For more information, including comments submitted, visit https://www.regulations.gov/docket?D=FMCSA-2020-0150.

FMCSA considers preemption request regarding Illinois carrier ID requirements

FMCSA seeks comments by January 4 regarding a petition filed by several motor carriers for a determination that certain carrier identification requirements imposed by the Illinois Commerce Commission are preempted by federal law. The petition was filed by Nationwide Freight Systems, Inc., Leader U.S. Messenger, Inc., and Stott Contracting, LLC. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-26668.

Ohio carrier obtains exemption for alternate cargo securement for metal coils

FMCSA has granted an exemption to K & L Trucking, Inc., allowing the Delta, Ohio-based carrier to secure large metal coils to its trailers using a cargo securement system that differs from that required by the FMCSRs. K&L's alternate system consists of a customized metal carrier affixed to the bed of its trailers and the use of a single large cargo securement strap. For more information on the alternate securement system, see the Federal Register notice at https://www.federalregister.gov/d/2020-26669.

Minnesota seeks reconsideration of CDL skills testing decision

FMCSA is requesting comments until December 30 on a request from the State of Minnesota for reconsideration of the agency’s May 2017 denial of an exemption for changes to commercial driver’s license (CDL) testing procedures and practices. The state had asked that it be allowed to combine the vehicle control skills and on-road driving portions of the CDL test and to be exempted from the American Association of Motor Vehicle Administrators 2005 Test Model Score Sheet and from the requirement that applicants must pass the pre-trip inspection portion of the exam before proceeding to the balance of the test. FMCSA had denied the exemption in May 2017 for various reasons.

For the Federal Register notice of Minnesota's petition for reconsideration, visit https://www.federalregister.gov/d/2020-26353. For prior action regarding the original exemption request, visit https://www.regulations.gov/docket?D=FMCSA-2016-0180.

Grote obtains exemption for pulsating warning lamps

FMCSA has granted Grote Industries, LLC a limited five-year exemption to allow motor carriers operating trailers and van body trucks to install amber brake-activated pulsating warning lamps on the rear of trailers and van body trucks in addition to the steady-burning brake lamps required by the FMCSRs. The agency has determined that granting the exemption would likely achieve a level of safety equivalent to or greater than the level of safety provided by the regulation. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-26772.

FMCSA grants windshield exemption to J.J. Keller, considers one for Bendix

FMCSA has granted an exemption to J.J. Keller & Associates to allow the company’s Advanced Driver Assistance Systems (ADAS) camera to be mounted lower in the windshield on CMV than is currently permitted. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-25889.

Separately, the agency requests comments by December 31 on an exemption application from Bendix Commercial Vehicle Systems to allow its advanced vehicle safety systems, which are equipped with cameras, to be mounted lower in the windshield on commercial motor vehicles than is currently permitted. For the Federal Register notice, visit https://www.federalregister.gov/d/2020-26477.

 

Advocacy and Comment

Proposed changes in broker regulations

Of interest are dueling petitions filed by TIA and OOIDA dealing with the longstanding broker regulations, 49 C.F.R. 371. OOIDA, in response to what it contends are egregious brokerage commissions, wants more transparency in broker commissions and markups. TIA, on the other hand, seeks to eliminate as outdated portions of the broker regulations which require brokers to keep trust accounting showing the billing of freight charges and the transmission of net carrier payments.

From the carrier perspective, it is important that the broker be generally recognized as the agent for a customer and that the accounting regulations remain as an enforcement tool to prevent fraud and misapplication of freight charges by brokers. Too often, brokers treat their gross invoices as factorable receivables that provide them free cash flow that can be diverted from the carriers which their customers intended to pay.

The broker regulations the TIA seeks to omit are important for tracing and accountability. In one current case, an alleged broker that claimed to have FMCSA authority filed a bankruptcy petition showing it owed over 3,000 carriers. Yet it effectively claimed that “the dog ate our records” and we have no money left to pay creditors.

Other intermediaries including stockbrokers, real estate brokers, and yes, even lawyers, are expected to facilitate transactions by receiving and paying transactional charges in trust. The broker regulations in 49 C.F.R. 371.3 plus the federal self-help statute gives carriers recourse to brokers’ principals for violating these regulations are important checks on the misappropriation of funds.

In this context, the idea that the carrier is extending credit to the broker alone and could be considered a mere general unsecured creditor should be rejected. Buyers and sellers of real estate, insurance and stock do not have to make credit decisions based on the balance sheets of the realtor, the stockbroker, or the insurance agent. It is anti-competitive to think that abolishing or changing the existing rules would somehow not prejudice small carriers and small brokers if every spot market load requires a broker credit workup.

TIA’s request to rescind 49 C.F.R. 371.3 substantially undermines motor carrier rights to ensure proper application of freight charges and avoid broker misapplication of freight charges, which is contrary to well established case law. See Parker Motor Freight, Inc. v. Fifth Third Bank, 116 F.3d 1137 (6th Cir. 1997). It would be best to leave the broker regulations alone.

Finally, TIA is right, though, with respect to so-called “dispatch services.” Even if they do not bill and collect freight charges, they meet the definition of brokers and can hardly be heard to complain about the cost of the bond or the difficulty in complying with the broker regulations, particularly when they otherwise claim to be unregulated entities with the power to choose to make arrangements for transportation on behalf of multiple carriers. As noted above, comments are due in this rulemaking on January 25.

Federal preemption of state labor laws

The FMCSA’s declaration that the Washington meal and rest break rules are preempted by the federal hours-of service regulations is helpful precedent. It is consistent with the agency's similar prior decision in California and may help set the stage for the legislative and regulatory battles ahead in Washington after the Georgia votes are tallied and the new administration takes over.

 

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