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Regulatory and Legislative Update - December 2022



Regulation and Enforcement


Advocacy and Comment


Regulation and Enforcement

FMCSA issues interim guidance on definitions of broker and bona fide agents

In response to a mandate in last year’s infrastructure law, FMCSA has issued interim guidance regarding the agency’s definitions of “broker” and “bona fide agents” in the context of transportation by motor vehicle. Although the interim guidance was effective immediately, FMCSA requested comments on it by January 17 and said it might issue updated guidance if comments demonstrate a need. The agency in June had requested comments on various issues related to the topic.

Regarding brokers, FMCSA said that the prevailing view among commenters is that the current definition of “broker” is adequate, it clarified that definition in one area: The relevance of an entity's handling of funds in a transaction between shippers and motor carrier. FMCSA said that handling money exchanged between shippers and motor carriers is a factor that strongly suggests the need for broker authority, but it is not an absolute requirement for a person or entity to be considered a broker.

Regarding bona fide agents, FMCSA said an area of debate was whether representing more than one motor carrier required broker authority. FMCSA said that representing more than one motor carrier does not necessarily mean one is a broker rather than a bona fide agent. Determinations will be highly fact specific and will involve determining whether the person or company is engaged in the allocation of traffic between motor carriers, FMCSA said.

The more complicated area in the guidance was the role of “dispatch services,” when they are brokers or bona fide agents, and even how they are defined. FMCSA said that while there is no commonly accepted definition of a dispatch service, such services appear to have certain common features: (1) they work exclusively for motor carriers, not for shippers; (2) they source loads for motor carriers; and (3) they perform additional services for motor carriers that are unrelated to sourcing shipments.

FMCSA’s interim guidance states that when a dispatch service does not participate in the arrangement of freight, or when it represents only one motor carrier, it is not a broker. If a dispatch service arranges transportation on behalf of multiple motor carriers and engages in the allocation of traffic, however, then it is not a bona fide agent and must obtain broker operating authority registration. The agency noted, however, that this analysis is often highly fact specific and must be made on a case-by-case basis.

The analysis of whether a dispatch service is a bona fide agent is based on whether the service falls within the definition in 49 CFR 371.2(b), FMCSA said. However, if the dispatch service allocates traffic between two motor carriers, by definition it cannot be a bona fide agent, it added. The interim guidance further lists the situations in which a dispatch service would or would not require broker authority.

For the interim guidance in the Federal Register, visit https://www.federalregister.gov/d/2022-24923. To view comments in response to FMCSA’s June request for information along with other documents, visit https://www.regulations.gov/docket/FMCSA-2022-0134.

FMCSA plans to narrow scope of emergency declaration relief

FMCSA is requesting comments by February 6 on a notice of proposed rulemaking (NPRM) to narrow the scope of regulations from which relief is provided automatically for motor carriers providing direct assistance when an emergency has been declared. The agency also proposed revisions to the process for extending an automatic emergency exemption where circumstances warrant.

Federal regulations (Part 390.23) automatically create a 30-day exemption from 49 CFR parts 390 through 399 when a president, governor, or FMCSA issue a declaration of an emergency and a motor carrier or driver provides direct assistance to state and local emergency relief efforts. In the Federal Register notice, FMCSA said it believed that most emergencies justify relief from the normal hours-of-service (HOS) limits but that other safety regulations “often have no direct bearing on the motor carrier's ability to provide assistance to the emergency relief efforts.”

Under the NPRM, a presidential declaration of an emergency would continue to trigger a 30-day exemption from all Federal Motor Carrier Safety Regulations (FMCSRs) in parts 390 through 399, but the duration and scope of existing automatic relief would be limited in the case of regional declarations by FMCSA or governors. The automatic relief would apply for only five days and would exempt commercial motor vehicle drivers only from the HOS regulations in Parts 395.3 and 395.5. FMCSA said five days was appropriate in most actual emergencies. “Any emergency relief efforts extending beyond that time are typically geared to rebuilding and not to the emergency response scenarios envisioned when this rule was first issued.”

FMCSA also proposes to modify the definition of an emergency in the regulations to clarify that automatic relief does not apply to economic conditions that are caused by market forces, including shortages of raw materials or supplies, labor strikes, driver shortages, inflation, or fluctuations in freight shipment or brokerage rates, “unless such conditions or events cause an immediate threat to human life and result in a declaration of an emergency.” One exception would be states of emergency declared by governors due to a shortage of residential heating fuel. That relief is statutory under the Reliable Home Heating Act.

For the Federal Register notice, visit https://www.federalregister.gov/d/2022-26506.

'Interpretive rule' clarifies applicability of regulations to passenger carriers

FMCSA issued an “interpretive rule” that adds appendices to the FMCSRs to explain existing statutes and regulations FMCSA administers related to the applicability to passenger carriers of the regulations related to safety, financial responsibility, and registration. Under certain conditions, motor carriers performing intrastate movements of passengers may still be operating in interstate commerce and – unless otherwise exempt – are subject to applicable FMCSA statutory and regulatory requirements, FMCSA noted.

Although the rule was effective November 15, FMCSA is requesting comments by January 15. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-24089. To comment or view comments, visit https://www.regulations.gov/docket/FMCSA-2021-0188. (Note: The original Federal Register notice contained an error regarding the docket number. The correct docket number is FMCSA-2021-0188.)

Withdrawal of passenger inspection rulemaking confirmed by FMCSA

FMCSA has confirmed its May 2017, decision to withdraw an April 2016 advance notice of proposed rulemaking (ANPRM) concerning the establishment of requirements for states to implement annual inspection programs for commercial motor vehicles (CMVs) designed or used to transport passengers. Last year’s infrastructure law had directed the agency to solicit further comment on the ANPRM. After doing so in June, FMCSA said that it had determined that there is not enough data and information available to support moving forward with a rulemaking action. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-24708.

Livestock stakeholders are denied broad HOS exemption

Nearly four years after publishing the application for comment, FMCSA has rejected an HOS exemption requested by several associations with members involved in the production and distribution of livestock and insects. The requested exemption would have allowed drivers to drive through the 16th consecutive hour after coming on duty and to drive for a total of 15 hours during that 16-hour period. Although the groups did not receive the exemption, they have received some of the requested relief through federal legislation.

FMCSA noted that livestock haulers are entirely exempt from all HOS regulations under the agricultural commodities exemption, which covers a 150 air-mile radius from the source of the commodity. Moreover, last year’s infrastructure law – enacted several years after the groups filed their application – exempted drivers transporting livestock from HOS regulations within a 150 air-mile radius from the final destination of the livestock. The agency also noted that livestock haulers are exempt from the requirement to use electronic logging devices. The exemption would allow drivers six or more hours driving time within the 150 air-mile exempt zones in addition to 15 hours of driving time outside the zone, FMCSA noted. “The Agency finds that allowing 21 or more hours of driving during a work shift would not likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent the exemption.” For the Federal Register notice, visit https://www.federalregister.gov/d/2022-25999.

FMCSA rejects owner-operator’s exemption from various HOS provisions

FMCSA has denied an application from 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 was leased to Clearwater, Minnesota-based D&E Transport and had 30 years’ experience. Schmitt had 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 had 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.

The agency said Schmitt had failed to establish that he would maintain a level of safety equivalent to, or greater than, the level achieved without the exemption. “The Agency concurs with commenters that if it exempts one individual from the HOS regulations, it could open the door for a huge number of similar exemption requests,” FMCSA said. “Such a result would be inconsistent with a primary goal of the HOS regulations.” For the Federal Register notice, visit https://www.federalregister.gov/d/2022-24383.

Driver seeks broad exemption from HOS regulations

Several days before FMCSA denied a similar request from owner-operator Leland Schmitt, Jr., the agency requested comments by January 3 on an application from Wayne Moore, Jr. of Shelbyville, Indiana, for an exemption from four provisions in the HOS regulations: (1) the 10 consecutive hour off-duty time requirement; (2) the 14-hour “driving window”; (3) the 30-minute break requirement; and (4) the 70 hours-in 8-days limit. FMCSA summarized the request as wanting the ability to split off-duty time into periods that are more conducive to proper rest and sleep without having to comply with the HOS regulations. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-26127.

New Hampshire Inmate seeks exemption from two driver training provisions

FMCSA requested comments by January 3 on Robert Towle’s application for an exemption from two requirements in the entry-level driver training regulations related to use of instructors who meet the definition of theory instructors and to the requirement for use of a provider listed on the Training Provider Registry. Towle, an inmate of the New Hampshire State Prison, wants to use a CDL training class provided by a special school district operated by the New Hampshire Department of Corrections. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-26129.

Rosco Vision receives exemption for camera system to replace mirrors

FMCSA has granted a limited five-year exemption to grant a limited 5-year exemption to Rosco Vision, Inc. (Rosco) to allow motor carriers to operate CMVs with the company’s CV Digital Camera Monitor System installed as an alternative to the two rear-vision mirrors required by the FMCSRs. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-25983.



Senate bill would fund truck parking expansion

Sens. Cynthia Lummis (R-Wyoming) and Mark Kelly (D-Arizona) introduced a bill (S. 5169) that would authorize $755 million over five years to build additional commercial truck parking facilities. The bill not only would cover construction of commercial truck parking spaces at rest areas and weigh stations along highways but also would cover expansion of parking adjacent to truck stops and travel plazas, at publicly owned freight facilities such as port terminals. S. 5169 is a companion bill to H.R. 2187, which was approved in July by the House Transportation & Infrastructure Committee. For more on the Senate bill, visit https://www.congress.gov/bill/117th-congress/senate-bill/5169.


Advocacy and Comment

Three end of the year issues forecast an interesting new year on the regulatory scene.

(1) Dispatch Services Interim Rules. The FMCSA, in initiating these interim rules, failed to address the significant issue of fraudulent double brokerage and identity theft which affects carriers, shippers and brokers and which ultimately allows the perpetrators of the fraud to steal millions and go unpunished.

In this interim rule, the Agency tries to reinterpret the broker regulations to create a carve-out for third parties which arrange for transportation but do not handle the funds or act as third party sales agents working for a single carrier only. This finding would exacerbate the problem, setting no reliable registry for determining the third parties’ bona fides or bringing the “dispatch service” within the MAP-21 and Section 14704 self-help provisions for enforcement purposes.

If third parties can claim to be a dispatch service operating for a sole carrier to book freight, simply bypassing its alleged principal in a bait and switch scheme, this ruling makes it simpler for identity theft to occur. Clearly, the Agency has no budget or appetite for enforcing rules of commerce, yet verification of licensed intermediaries and bonding information via its website is essential in the spot market.

Actually, the OIG, a division of U.S. DOT, has jurisdiction to police and prosecute fraud in interstate commerce. The time has come to seek funding for enforcement of the rules by the OIG using the full breadth of MAP-21 which extends liability for broker abuse automatically to any party who aids and abets a fraud.

(2) NLRB Joint Employer Rule. As presented, the rule could have far reaching effects across industries, particularly undercutting the use of contracted labor. With respect to trucking it can be viewed as an attempt to facilitate the unionization of truck drivers and owner operators serving customers, particularly in closed shop states. Our coalition of stakeholders filed comments in support of SBA’s opposition and explained that trucking has unique attributes which have not been examined. See https://www.regulations.gov/comment/NLRB-2022-0001-11601

(3) DOL Employee Misclassification NPRM. Finally, The Department of Labor’s Wage and Hour Board has re- tabled its employee misclassification initiative as proposed guidance for the courts in evaluating misclassification. The standard it proposes acknowledges that the decision is ultimately up to the courts where there is an existing “economic realities” test that the owner operator independent contractor meets.

Yet once again, the DOL fails to recognize the need for a carve-out for the owner operator model based on the unique economic realities of trucking and of Federal Laws which provide a blueprint for owner operator compliance under the truth in leasing regulations. Other than to suggest that independent contractors across industries need and deserve employee wage and hour treatment, DOL offered no analysis of the effect of possible reclassification of owner operators. Its unweighted multi-factor guidance offered less clarity.

While acknowledging that adoption of the AB5 structure was beyond its authority and the courts ultimately had the last word based on precedent, no analysis on the reclassification’s possible effect or cost of the proposal on small businesses or the trucking industry in particular were presented.

In filings made on the December 13th, 11 stakeholders pointed out that the owner operator / independent contractor model is a unique creation of federal transportation law designed (1) to provide contract protection against abuse and (2) to encourage blue collar entrepreneurship with flexible wage and hour compensation designed to facilitate productivity and use of the federal hours of service rule to trump overtime. See https://www.regulations.gov/document/WHD-2022-0003-0001/comment

The Stakeholders’ position which is shared by others as well, is that the owner operator / independent contractor model and the federal transportation statutes and regulations which support it cannot be ignored and deserve a carve-out from any new guidance or rule. Our point with the DOL, which it has yet to address is that a “one size fits all” approach applicable to shift workers does not fit the economic realities of the owner operator model.

In a Release dated December 14, a number of Republicans have urged DOL to not move forward with any proposed rule due to its negative impact on workers and businesses across industries, its lack of clarity and the devastating consequences on the U.S. economy.

DOL’s proposal is an attack on the independent contractor model and affects more than just trucking. This is clearly a ripe issue for Congress and political action.

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