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Truckload Demand Remains Higher than this Time Last Year

By Dan Boaz

Based on the latest reports on durable goods manufacturers’ shipments, orders and inventories, freight volume has yet to decline. The most recent numbers from the US Census Bureau show that orders for manufactured durable goods increased in May by 0.7% to $267.2 billion. This follows increases for seven of the past eight months.

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Regulatory and Legislative Update - June 2022

By Dan Boaz

Contents

FMCSA has extended its emergency declaration regarding COVID-19 through August 31, 2022. For the latest version and other guidance related to COVID-19 is available at www.fmcsa.dot.gov/COVID-19. Note that use of the declaration now requires monthly reporting by carriers.

Regulation and Enforcement

Courts

Advocacy and Comment

 

Regulation and Enforcement

Labor Department sets forums to explore misclassification issue

Having recently suffered a loss in the courts over its undoing of a Trump administration rule, the U.S. Department of Labor (DOL) plans a rulemaking on determining employee or independent contractor status under the Fair Labor Standards Act (FLSA). To start that process, the department is scheduling separate public forums this month for employers and workers.

Late in the Trump administration, DOL published a rule adopting an economic reality test that considers whether a worker operates his or her own business or is economically dependent on an employer for work. The Biden administration’s DOL first delayed that rule and then withdrew it in May 2021. However, in March, a federal district court vacated those actions, so the rule stands as of today and is retroactively effective to the original March 8, 2021, effective date.

The employer forum will be held 2:30 p.m. to 4:30 p.m. Eastern on June 24. To register, visit https://www.eventbrite.com/e/employer-open-forum-registration-349987621397. The worker forum will be held 5 p.m. to 7 p.m. Eastern on June 29. To register, visit https://www.eventbrite.com/e/worker-open-forum-registration-356311426067.

FMCSA seeks comments on broker, bona fide agent definitions

The Infrastructure Investment and Jobs Act (IIJA) requires FMCSA to issue guidance by November 15 clarifying the distinctions between brokers and bona fide agents, so the agency is seeking responses to various questions to inform that guidance. FMCSA noted that over the past decade it had received numerous inquiries and several petitions related to the definition of a broker.

Under the IIJA provision, FMCSA’s guidance must consider the extent to which technology has changed the nature of freight brokerage, the role of bona fide agents, and other aspects of the freight transportation industry. At a minimum, FMCSA also must (1) examine the role of a dispatch service in the transportation industry; (2) examine the extent to which dispatch services could be considered brokers or bona fide agents; and (3) clarify the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916, applicable to a dispatch service.

Comments are due July 11. For the Federal Register notice, which includes 13 specific questions for which FMCSA seeks answers, visit https://www.federalregister.gov/d/2022-12574.

Comment period on speed limiters extended until July 18

FMCSA has extended through July 18 the comment period on its advance notice of supplemental proposed rulemaking concerning the potential mandate that motor carriers use speed limiters installed on their trucks. Comments originally had been due June 3, but the agency had received requests for extensions from the American Trucking Associations and the Owner-Operator Independent Drivers Association. (For more on FMCSA’s advance notice, see the May 2022 Regulatory Update.) For the Federal Register notice extending the comment period, visit https://www.federalregister.gov/d/2022-11490. To view the advance notice, file comments, or view comments, visit https://www.regulations.gov/document/FMCSA-2022-0004-0001.

Senate panel holds nomination hearing for Hutcheson

The Senate Commerce Committee on June 8 heard testimony from and questioned Robin Hutcheson, President Biden’s nominee to be FMCSA administrator. Hutcheson currently is deputy administrator and acting administrator, having replaced Meera Joshi in that role in January. Joshi had been nominated for the post and had completed a hearing, but the Senate never confirmed her, and her nomination was returned according to standard procedures at the end of the congressional session.

Hutcheson faced few challenging questions. A majority were related in some way to the supply of drivers, and several related specifically to the younger driver initiative. Sen. Roger Wicker (R-Mississippi) questioned the Biden administration’s decision to limit participation in the congressionally mandated younger driver pilot program specifically to apprenticeship programs registered with the Labor Department. Wicker suggested that the Senate might not have agreed to the compromise apprenticeship program had that limitation been included in the provision. Sen. Todd Young (R-Indiana) also pushed Hutcheson to take faster action on allowing younger drivers to operate in interstate commerce.

Sen. Deb Fischer (R-Nebraska) pushed Hutcheson for faster progress in completing work to implement the recommendations of the National Academies of Sciences in addressing issues with safety measurement data. Fischer also said she plans to reintroduce her bill from the last Congress that would establish a standard of care for the selection of motor carriers by shippers, brokers, and others.

Hutcheson received several questions related to regulation and enforcement for livestock haulers and to hair testing as an alternative to urine testing. To view the June 8 hearing, visit https://www.commerce.senate.gov/2022/6/nomination-hearing. Hutcheson’s responses to written questions are available at https://www.commerce.senate.gov/services/files/421B6F1E-12C8-4A4D-BAE5-36DF4C22C42A.

CVSA sets August 21-27 for Brake Safety Week

The Commercial Vehicle Safety Alliance has announced Aug. 21-27 as the dates for this year’s Brake Safety Week. During week, inspectors will conduct their usual North American Standard Level I and V Inspections and capture and report brake-related data to CVSA. The results will be released in the fall.

FMCSA issues emergency declaration for baby formula, extends COVID declaration

FMCSA has issued an emergency declaration relieving carriers of certain regulatory requirements in order to expedite the delivery of baby formula and the ingredients needed for its production, including whey, casein, corn syrup, and hydrolyzed protein, as well as necessary containers and packaging. The declaration is in effect through June 30 unless revoked earlier or extended. For more information, visit https://www.fmcsa.dot.gov/emergency/emergency-declaration-under-49-cfr-ss-39023-no-2022-005.

Owner-operator seeks exemption from various HOS provisions

FMCSA is requesting comments by July 11 on an application by a leased owner-operator for an exemption from five provisions of the federal hours-of-service (HOS) regulations. The application was submitted by Leland Schmitt, Jr., who currently is leased to Clearwater, Minn.-based D&E Transport and has 30 years’ experience. Schmitt requested a five-year exemption from (1) the 10 consecutive hour off-duty time requirement; (2) the 14-hour “driving window”; (3) the 30-minute break requirement; (4) the 60 hours-in-7-days limit; and (5) the 70 hours-in 8-days limit. Schmitt told FMCSA that the mandatory 10-hour off-duty break goes against his natural sleep patterns and that his normal nighttime sleep while in the CMV is between five to seven hours. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-12467.

FMCSA renews CDL exemption for transporting certain RVs

FMCSA is provisionally renewing a 2017 exemption from the federal CDL for drivers who deliver certain newly manufactured motorhomes and recreational vehicles (RVs) to dealers or trade shows before retail sale (driveaway operations). The exemption applies when transporting RVs with gross vehicle weight ratings of 26,001 pounds or more provided that they do not have actual gross vehicle weights or gross combination weights that equal or exceed 26,001 pounds. It also applies when transporting RV trailers that weigh 10,000 pounds or less at the time of transportation. For the Federal Register visit, visit https://www.federalregister.gov/d/2022-10762.

Truck driving school seeks exemption from instructor qualification requirements

FMCSA requests comments by June 24 on an application from SBL Truck Driving Academy, Inc. to exempt two of its current employees from the theory and behind-the-wheel instructor qualification requirements contained in the entry-level driver training regulations. Specifically, SBL seeks an exemption from the requirement that instructors have at least two years of experience driving a CMV requiring a CDL of the same or higher class and/or the same endorsement necessary to operate the CMV for which training is provided. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-11271.

Oak Harbor Freight Lines obtains exemption on instructor qualifications

FMCSA has granted Oak Harbor Freight Lines, Inc., an exemption from the qualification requirements pertaining to entry-level driver training theory instructors. The exemption allows the company’s safety supervisor to conduct classroom training for entry-level drivers who intend to operate CMVs used in hazmat transport. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-10763.

 

Courts

Supreme Court set to decide whether to hear AB 5, broker cases

The U.S. Supreme Court likely will decide by the end of June on whether it will consider the California Trucking Association’s claim that California’s AB 5 law is preempted by federal law as it applies to motor carriers. The court last fall had invited the Justice Department to weigh in. The government’s brief, which was submitted late last month, argued that the Supreme Court should let stand the ruling of the U.S. Court of Appeals for the Ninth Circuit, which had held that AB 5’s ABC test for employment status is a labor law of general applicability that does not regulate rates, routes, or services substantially.

Justices are scheduled to discuss the case on June 23, and an order on whether to grant the petition for a writ of certiorari is likely on June 27 before the end of the current term. If the court decides to hear the case, the stay on AB 5’s enforcement on motor carriers will remain in place until the court issues an opinion. However, if the court denies cert, the state of California will be free to enforce AB 5 immediately.

In its May 24 amicus brief, the Justice Department said that the appeals court petitioners were unlikely to succeed on their claim that the Federal Aviation Administration Authorization Act (FAAAA) preempts applying the ABC test to owner-operators. Nor does the Ninth Circuit’s decision conflict with any Supreme Court decision, it said. The government’s brief further argued that while other circuits have reached different outcomes on the issue, “those case-specific decisions do not create a conflict warranting this Court’s review.” The Justice Department also contended that the case was not ripe for Supreme Court consideration anyway because of a need to resolve a threshold issue – whether motor carriers and owner-operators may fall within the business-to-business exemption under California law.

In a response filed on June 7, CTA quipped that the government’s brief “calls to mind the question famously posed by Chico Marx: ‘Who you gonna believe, me or your own eyes’?” Contrary to the claim that AB 5 might ultimately not apply to carriers and owner-operators, CTA stated that “in fact, AB 5 was designed to, and surely will, upend the operation of the trucking industry.” Moreover, CTA said that the government’s contention that the different outcomes do not represent a conflict is contradicted by the Ninth Circuit’s own opinion, which acknowledged that the Massachusetts ABC text invalidated by the First Circuit was “identical” to California’s law.

The CTA case is not the only FAAAA-related case that the Supreme Court has under consideration. The court also is set to consider on June 23 a case presenting the question of whether a state common-law tort liability claim against a freight broker for alleged negligent selection of an unsafe carrier constitutes an act of “safety regulatory authority of a State with respect to motor vehicles.” Such actions are exempted from federal preemption under FAAAA.

The U.S. government’s brief – filed the same day as the one in the AB 5 case – agreed with the Ninth Circuit’s ruling that FAAAA does not preempt a state’s authority to regulate motor carrier safety through imposition of common-law duties, including by imposing safety requirements on freight brokers in the selection of motor carriers. C.H. Robinson, which is seeking Supreme Court review, responded June 7 that the government is fixating on its view of the merits but “cannot dispute the substantiality of the legal question (as evidenced by the deep disagreement among district courts) or the importance of the issue to the industry (as evidenced by the many amicus briefs).”

 

Advocacy and Comment

At least three of the issues covered above are worthy of comment.

1) The Department of Labor’s notice of listening sessions comes as no surprise. The first two meetings appear to be of general application and signal the Agency’s intention to reboot its reclassification efforts across all industries through rulemaking. We will be reminding the Agency that the owner operator / independent contractor model deserves a carveout and should not be considered as part of a one size fits all new regulation. We have laid the groundwork for this in previous submissions to the DOL which will be resubmitted in next month’s listening sessions.

The Small Business Administration has announced that after a rule is submitted it will hold a transportation round table to discuss its impact on small businesses and owner operators in particular. Interested parties need to be assimilating data showing the number of owner operators involved in their respective segments of the industry, the economic consequences of the elimination of the model, and the adverse effect on the supply chain. Recent press articles demonizing the motor carrier industry fail to recognize the value of the model and the small business protections built into the truth in leasing regulations.

(2) Dispatch Services. The FMCSA’s request for comments mentioned above is the result of Congressionally directed action. Most of the questions are peripheral in nature and do not address the real issues. Identity fraud, “double brokerage,” cargo theft, uninsured losses, and vicarious liability issues predominate the spot market. Although the FMCSA is given policing powers to address both carrier and broker malfeasance, the problem of intermediary abuse remains systemic and major frauds have been identified but not prosecuted.

In this context, so-called dispatch services fit the broker definition. Former Acting Administrator Jim Mullen’s Opinion settles the matter. The problem with “deregulating” broker services because the “dispatch service” does not handle the billing and paying misses the point. Any party claiming to act as a sales agent for multiple carriers can easily exceed its apparent authority, utilize its agent status to credential reputable carriers and book loads which are devoted to unvetted carriers or ghost recipients.

Changing the broker regulations is not necessary. What is needed is Agency enforcement action and exercise of its broad authority to prosecute felonious breaches of the broker regulations consistent with the National Transportation Policy and the existing regulations and statutes the FMCSA is required to enforce.

(3) Pending Supreme Court Cases. The pending California Trucking and the Mueller cases are both important to the industry and are on similar appellate tracks. Both are on appeal to the Supreme Court which asked the Solicitor General to opine on whether the cases should be accepted for review. The Solicitor General has said that the existing decisions should stand. If the Supreme Court follows this decision, state law will trump the Federal Government’s use of preemption to establish uniform rules of commerce. Both cases are awaiting the Supreme Court decision to hear the appeal and the appellate grounds are limited.

With deregulation of routes, rates and services, Congress passed an Act intended to trump state law and it has been used as the basis for appeal in both California Trucking and Mueller. What’s missing is the fact legislative history shows Congress intended to wield the force of the commerce clause to create and protect the owner operator model decades before the F4A legislation. Unchanged and precedent federal safety rules and the broker regulations make clear Federal law trumps state law on both issues. It is unfortunate but these compelling arguments are not positioned for review and are not likely to be heard any time soon.

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Regulatory and Legislative Update - May 2022

By Dan Boaz

Contents

FMCSA has extended its emergency declaration regarding COVID-19 through May 31, 2022. For the latest version and other guidance related to COVID-19 is available at www.fmcsa.dot.gov/COVID-19. Note that use of the declaration now requires monthly reporting by carriers.

Regulation and Enforcement

Legislation

Advocacy and Comment

 

Regulation and Enforcement

FMCSA resurrects plan to require speed limiters on heavy trucks

As recently as December, the Federal Motor Carrier Safety Administration had labeled speed limiters for heavy commercial vehicles as a long-term priority and not imminent, but it has now indicated that it will move forward with a plan to require carriers to use such devices. In the May 4 Federal Register, the agency published an advance notice of supplemental proposed rulemaking.

Late in the Obama administration, FMCSA and the National Highway Traffic Safety Administration jointly issued a notice of proposed rulemaking (NPRM) that would have required vehicle manufacturers to program a maximum speed as determined by further rulemaking into truck engines’ electronic control units (ECUs) and would have required motor carriers to maintain the speed limiting devices for the service life of the vehicle. The proposed rule would have applied to new vehicles with gross vehicle weight ratings of more than 26,000 pounds.

Although the Trump administration withdrew several Obama-era rulemakings in 2017, it did not withdraw the proposed speed limiter rule but rather shelved it by labeling it as a “long-term action” in the unified regulatory agenda. Nearly a year into the Biden administration, the Department of Transportation still lists speed limiters as a long-term action, and NHTSA has not signaled any action.

FMCSA now plans to move forward with a supplemental notice of proposed rulemaking (SNPRM) that would require motor carriers to use available speed-limiting technology on their trucks’ ECUs, which is within its authority. The advance SNPRM seeks comments by June 3 on various technical issues involved in speed limiters, including what skills or training are needed to adjust or program ECUs to limit speed, what equipment is needed, how long it takes, etc. FMCSA also is seeking input on whether there should be a retrofit requirement for engines that were not manufactured with speed limiting capabilities built into the ECUs and whether the upcoming rule should be expanded to include Class 3 to 6 vehicles.

For the Federal Register notice, visit https://www.federalregister.gov/d/2022-09443.

FMCSA revisits state inspection programs for passenger carriers

As directed by the Infrastructure Investment and Jobs Act (IIJA), FMCSA is soliciting additional comment on an advance notice of proposed rulemaking (ANPRM) concerning potential requirements for states to establish annual inspection programs for CMVs designed or used to transport passengers. The agency had issued the ANPRM in April 2016 during the Obama administration, but it was one of several rulemakings withdrawn by FMCSA in 2017 as part of the Trump administration’s regulatory review, which determined that there was not enough data and information available to support moving forward with a rulemaking.

Comments are due June 9 on a series of questions posed in FMCSA’s May 10 Federal Register notice. For that document, visit https://www.federalregister.gov/d/2022-09657.

Final rule implements HHG working group recommendations

FMCSA has amended the federal regulations for transportation of household goods to incorporate the recommendations of the Household Goods Consumer Protection Working Group, which was established by the FAST Act in late 2015. The agency’s rule amends regulations to reflect aspects of the recommendations that require a rulemaking to implement and are within FMCSA’s authority. The rule also makes additional minor changes to the HHG and broker regulations intended to increase clarity and consistency.

The final rule is effective June 27. For the rule, visit https://www.federalregister.gov/d/2022-08808. The report of the working group is available at https://www.fmcsa.dot.gov/fastact/fast-act-hhg-working-group-report-recommendations.

Steel company receives relief for scrap metal haulers

FMCSA has granted an exemption to Cleveland-Cliffs Steel, LLC (Cliffs) that would allow its employee-drivers with CDLs who transport scrap metal on two trucks between their production and shipping locations on public roads to work up to 16 hours per day and to return to work with less than the mandatory 10 consecutive hours off duty. The exemption is similar to the hours-of-service (HOS) exemption that applies to Cliffs’ drivers transporting steel coils. However, unlike the steel coil exemption, the scrap metal trucks would comply with the heavy hauler trailer definition, height of rear side marker lights restrictions, tire loading restrictions, and the coil securement requirements in the FMCSRs. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-10129.

FMCSA denies CDL exemption for driveaway carriers transporting empty vehicles

FMCSA has rejected an exemption sought by a group of affiliated driveaway motor carriers from the requirement that drivers transporting certain empty passenger vehicles hold a CDL. The exemption would have covered drivers delivering commercial motor vehicles (CMVs) with seating capacities of 16 or more, including the driver, but with a gross vehicle weight rating (GVWR) of less than 26,001 pounds. FMCSA determined that the application provided no evidence that the exemption would ensure a level of safety equivalent to or greater than that achieved absent such exemption. For more information, visit https://www.federalregister.gov/d/2022-08936.

FMCSA rejects exemption for bus company’s Mexican-licensed drivers

FMCSA has denied an exemption from several regulations related to CDL/CLP testing that was requested by Tornado Bus Company for certain drivers who currently hold a Mexican Licencia Federal de Conductor. The exemption would have covered drivers who have been granted permanent resident status from the Department of Homeland Security (DHS) and have more than two years’ experience driving in the U.S. and Mexico. FMCSA determined that the application does not demonstrate that the exemption would likely ensure a level of safety equivalent to or greater than would be achieved absent such exemption. For more information, visit https://www.federalregister.gov/d/2022-08934.

Legislation

House bill would eliminate overtime exemption for regulated truck drivers

Rep. Andy Levin (D-Michigan) and seven co-sponsors – all but one of them Democrats – introduced legislation (H.R. 7517) that would repeal the overtime exemption in the Fair Labor Standards Act that applies to commercial drivers subject to federal hours-of-service regulations. In announcing the introduction, which is only a sentence (not including the title of the bill), Levin cited DOT’s report on potential steps to address supply chain challenges. That report, which was released in February, suggested that eliminating the exemption could help increase the number of truck drivers.

Levin also announced that H.R. 7517 is endorsed by the Owner-Operator Independent Drivers Association, Teamsters, Institute for Safer Trucking, Truck Safety Coalition, Parents Against Tired Truckers, and Citizens for Reliable and Safe Highways (CRASH). For more information on H.R. 7517, visit https://www.congress.gov/bill/117th-congress/house-bill/7517. For the February 2022 DOT report on supply chain issues related to freight and logistics, visit https://www.transportation.gov/supplychains.

Advocacy and Comment

As the above summary indicates, regulatory and legislative issues facing the trucking industry have changed from safety to economic issues. SMS methodology is still around and results in higher nuclear verdicts and insurance rates, but the FMCSA has no clear plan of action to rectify the issue.

Supply chain disruption and economic issues involving drivers and driver pay now occupy center stage. Key issues which are not the fault of carriers or drivers include supply chain disruption, escalating fuel cost, dramatic increase in both new and used trucks and trailers, and parts shortages.

The key administrative and legislative agenda of the new Administration appears to be to blame the so-called “driver shortage” on carrier abuse of both drivers and owner operators. The apparent solution is to eliminate incentive pay, whether by the mile or percentage, and endorse AB5 at the federal level to ensure that all truck drivers are treated as employees. This agenda being proposed at the Legislative and the Administrative level would eliminate independent contractor treatment of owner operators and make truck driving an hourly pay job. The argument that government protection and mandatory pay will solve the supply chain disruption and create more truck driving jobs is a government knows best answer which requires close inspection it has yet to receive.

Under the truth in leasing regulations, 49 C.F.R. 376, blue collar professional drivers have been granted small business independent contractor status for four decades. Protected by regulations that address carrier abuse, drivers and other small businesses who own or lease to own their own equipment have traditionally received independent contractor treatment and the opportunity that goes with it.

The argument is often made that owner operators are forced to accept toxic contracts when the numbers suggest otherwise. Vital segments of the trucking industry, including over-the-road truckload, intermodal dray operations and others are dependent upon independent contractors who could easily obtain regular wage and hour jobs as employees if they did not want the freedom and opportunities to accumulate wealth which the model presents. In fact, recent statistics prove that the threat of AB5 and loss of independent contractor status in California has resulted in owner operators either quitting or feeling forced to file for their own authority to keep independent contractor status otherwise intended and carved out for them in federal regulation.

The nanny state legislation which kills the model will further exacerbate the loss of skilled drivers which cannot be made up by higher taxes. What is needed is to consider how to stimulate the creation of both employees and owner operators to abate the driver shortage in light of escalating costs.

Clearly, the nature of truck driving straightjackets the use of drivers and equipment and necessitates compensation for inordinate, uncompensated delays regardless of how the driver owner operator is otherwise compensated. Action at the Federal Maritime Commission and past precedent at the ICC suggests that this is a proper area for inquiry and regulation to stem this abuse. To be sure, the day-long backups frequently photographed by the press at the California ports are not caused by the waiting truckers but by the inability of the ports and their hourly employees to address the backup.

The above summary of Administrative activity shows that interdisciplinary teams are being established to examine some of these issues including DOL and DOT. Missing, though, is any participation by SBA or the suggestion that, just maybe, stimulus in the form of SBA loans to owner operators and small carriers is obviously going to be necessary for the small business model to continue to flourish in the trucking industry with the otherwise unsustainable predicted costs.

While we are forgiving student loans to the college educated elite, maybe greater consideration should be given to encouraging the ability of small carriers and owner operators to compete in light of the tidal wave of increased costs and access to capital which otherwise will severely limit their viability contrary to the National Transportation Policy.

Clearly, the cost of trucking is going up and small carrier operators will be the most effected. Remember, over 95% of the licensed carriers have less than 10 units and there are as many as 800,000 owner operators who are endangered species if the small business opportunities resulting from independent contractor status is lost. In this context, the cost of new and used equipment is sky rocketing. Fuel now costs as much as $1.00 per mile. The threat of technology eliminating the need for drivers, higher financing charges, and balkanized state-by-state regulations effecting the independent contractor model are bipartisan issues that Congress and the current Administration should be addressing. The trucking industry brought stability to the supply chain chaos resulting from COVID and international disruptions. The new issue ahead for trucking is how to encourage and not stifle blue collar entrepreneurship in trucking.

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