Regulatory and Legislative Update - January 2024

Regulatory and legislative news for January 2024 includes FMCSA Registration Modernization Stakeholder Day, the DOL issuing its final rule on independent contractor classification, comments being sought on petitions to overturn California and Washington preemption and more.

Contents

Regulation and Enforcement

• FMCSA Registration Modernization Stakeholder Day
• DOL issues final rule on independent contractor classification
• Comments sought on petitions to overturn California and Washington preemption
• FMCSA seeks comments on additional info related to safety fitness proceeding
• CARB suspends enforcement of zero-emissions fleet rule pending EPA action
• Truck Leasing Task Force meeting held January 18
• DOT increases civil penalties by about 3.2 percent
• FMCSA proposes to raise UCR fees by 25 percent

Legislation

• House bill would increase truck insurance minimum to $5 million
• House bill would lower the minimum age of CMV drivers to 18

Courts

• Team drivers are entitled to pay for some non-driving time, federal court rules
• Supreme Court declines to hear broker negligent selection case

Regulation and Enforcement

FMCSA Registration Modernization Stakeholder Day

FMCSA has restarted an effort to "modernize" its registration procedures for motor carriers, freight brokers and surface freight forwarders. On January 17 it hosted a "stakeholder day" at USDOT headquarters in Washington, DC, which was attended by approximately 60 industry representatives. The meeting was billed as an opportunity for FMCSA licensing staff to pursue "discovery" of stakeholders' problems and concerns with the current process.

Working groups for motor carriers, freight intermediaries, insurers and other third-party service providers met for most of the day. Common themes of their subsequent reports to the full group included the need to reduce fraud in the licensing process while also making the process less complicated and confusing for the majority of users who are first-time applicants for FMCSA authority. The Agency staff agreed with these points to a degree that encouraged many observers. The staff expects to hold several more stakeholders' meetings in the next few months, and then to construct a revised IT system while opening a rulemaking docket to implement a new system within the next year.

DOL issues final rule on independent contractor classification

The U.S. Department of Labor’s Wage and Hour Division issued its final rule revising WHD’s analysis of determining worker classification under the Fair Labor Standards Act (FLSA). The notice of proposed rulemaking (NPRM) had included trucking as one of various industries with a high incidence of misclassification of employees as independent contractors.

The final rule’s principal objective was to undo the final rule issued by WHD in January 2021 during the waning days of the Trump administration. That rule’s goal generally was to make it easier for employers to classify workers as independent contractors than had been the case under prior guidance and court precedent.

Under the final rule published on January 10 WHD’s stated goal is to return to prior interpretations of the so-called economic reality test, which includes the following six factors:

• The opportunity for profit or loss depending on managerial skill;
• The investments by the worker and the employer;
• The degree of permanence of the work relationship;
• The nature and degree of employer control;
• The extent to which the work performed is an integral part of the employer’s business; and
• The worker’s use of skill and initiative.

Although the final rule is fundamentally in line with what was proposed, DOL did clarify its intent in some limited areas related to trucking in response to comments submitted. For example, the proposed rule included a sentence stating that an employer's compliance with legal obligations, safety or health standards, or requirements to meet contractual or quality control obligations may indicate control. Many commenters, including several involved in trucking, objected to the language, saying it would disincentivize companies from operating as safely as possible. DOL largely defended its approach, but it revised the regulation to state that “actions taken by the potential employer for the sole purpose of complying with a specific, applicable Federal, State, Tribal, or local law or regulation are not indicative of control.”

One notable addition in response to comments was to recognize that drivers performing work requiring commercial driver's licenses “are likely using specialized skills as compared to drivers generally.” DOL added, “As with any worker, consideration of whether a driver with a CDL uses that specialized skill in connection with business-like initiative determines whether this factor indicates employee or independent contractor status.”

DOL also addressed trucking in the context of the investment issue, acknowledging that an owner-operator need not make the same scope of investment as the larger operator. “Although the driver who wholly owns or is independently financing a single truck is making a quantitatively smaller investment (in dollars and size) than the employer that has a fleet of trucks, the driver is making a similar type of investment as the employer and a sufficient investment so that the driver can operate independently in that industry – suggesting independent contractor status.”

For the final rule, visit https://www.federalregister.gov/d/2024-00067.

Comments sought on petitions to overturn California, Washington preemption

FMCSA requests comments by February 26 on petitions requesting waivers of decisions issued during the Trump administration that preempted meal and rest break rules for certain commercial drivers in California and Washington. In August of last year, FMCSA invited petitions by November 13. Ultimately, waiver petitions were filed by the International Brotherhood of Teamsters; the Truck Safety Coalition, Citizens for Reliable and Safe Highways and Parents Against Tired Truckers; William B. Trescott; and the State of California. The State of Washington itself did not file a petition for waiver. It had initially challenged the FMCSA preemption declaration in the U.S. Court of Appeals for the Ninth Circuit, but it voluntarily dismissed the case in August 2022. For the Federal Register notice, visit https://www.federalregister.gov/d/2023-28399.

FMCSA seeks comments on additional info related to safety fitness proceeding

Although comments on the advance notice of proposed rulemaking (ANPRM) regarding safety fitness determinations ended in November, FMCSA is requesting comments by February 12 on six studies or reports that the agency said it has become aware of and that might be considered as it proceeds to the next step.

Several of the reports listed relate to use of technology in addressing safety issues. For example, one is an evaluation of an in-vehicle monitoring system to reduce risky driving behaviors. Another addresses the effectiveness of forward collision warning and autonomous emergency braking systems in reducing front-to-rear crash rates. One evaluates use of an in-vehicle data recorders to assess driving behavior and safety. One other report is not about technology but does discuss the effectiveness of a tool – federal compliance reviews of trucking companies – in reducing highway crashes.

For the Federal Register notice on the additional documents, visit https://www.federalregister.gov/d/2024-00522.

CARB suspends enforcement of zero-emissions fleet rule pending EPA action

The California Air Resources Board (CARB) in late December issued a notice stating that that it has decided not to take any enforcement action regarding its Advance Clean Fleets rule as it applies to drayage or high-priority fleets until the U.S. Environmental Protection Agency grants a preemption waiver or determines that a waiver is not necessary. A high-priority fleet is one with $50 million or more in gross annual revenue or one that operates or directs the operation of 50 or more vehicles.

CARB encouraged fleets to comply with the regulations voluntarily, and it warned fleets that if they add internal combustion engine-powered vehicles to their California fleets after December 31, 2023, they might be required to remove vehicles once EPA grants a waiver.

Truck Leasing Task Force meeting held January 18

FMCSA's Truck Leasing Task Force held a virtual meeting on January 18. The meeting addressed the degree to which inequitable leasing agreements and terms affect the frequency of maintenance performed and whether a vehicle is kept in a general state of good repair. For more information, visit www.fmcsa.dot.gov/tltf.

DOT increases civil penalties by about 3.2 percent

In keeping with a directive from the White House Office of Management and Budget, the Department of Transportation has adjusted civil penalties for agencies under its jurisdiction, including FMCSA, to account for inflation. The adjustments result in civil penalties that are 3.241% higher than they were in 2023. For the Federal Register notice, visit https://www.federalregister.gov/d/2023-28066.

FMCSA proposes to raise UCR fees by 25 percent

FMCSA is requesting comment until February 8 on a proposal to increase annual registration feels for the Unified Carrier Registration Pland and Agreement by an average of 25% for the 2025 registration year and subsequent years. The fees, which apply to carriers, brokers, freight forwarders, and leasing companies, would increase between $9 and $9,000, depending on the applicable fee bracket. For the Federal Register notice, visit https://www.federalregister.gov/d/2024-00262.

Legislation

House bill would increase truck insurance minimum to $5 million

Rep. Jesus Garcia (D-Illinois) and five co-sponsors introduced a bill (H.R. 6884) that would increase the minimum insurance requirement for interstate motor carriers to $5 million from $750,000 currently and would index the increased minimum to inflation. Similar bills have been introduced in Congress for several years but never advance beyond House passage, which has occurred only when Democrats have led the House. In the current Congress, H.R. 6884 has no chance of moving beyond the bill introduction phase. For more on H.R. 6884, visit https://www.congress.gov/bill/118th-congress/house-bill/6884.

House bill would lower the minimum age of CMV drivers to 18

Rep. Ashley Hinson (R-Iowa) introduced legislation (H.R. 6670) that would require the Department of Transportation to issue regulations within six months to reduce the minimum age for an operator of a commercial motor vehicle to 18 years of age. The bill also would repeal as moot the pilot program for 18-to-20-year-olds that was included in the 2021 Infrastructure Investment and Jobs Act. For more on H.R. 6670, visit https://www.congress.gov/bill/118th-congress/house-bill/6670.

Courts

Team drivers are entitled to pay for some non-driving time, federal court rules

In a ruling that arguably applies only to team operations, a federal appeals court in December said that CRST team drivers who were confined to the sleeper berth of the truck while the other driver worked were entitled to compensation under the Fair Labor Standards Act for time that exceeded an eight-hour sleeping period. The opinion of the U.S. Court of Appeals for the First Circuit places considerable weight on the restrictive nature of an off-duty driver in a team operation, concluding that the time spent in the sleeper berth beyond an eight-hour sleep period is for the “predominant benefit” of the motor carrier.

“As the parties acknowledge, drivers spend the vast majority of their time not spent driving in the sleeper berth of a moving truck,” a three-judge panel ruled on December 12. “They remain at their place of work, with their freedom of movement severely curtailed, throughout the sleeper berth time, regularly spending ten, twelve, and even sixteen hours in the confines of this small space.” The appeals court added that “CRST benefits enormously from the team driving model as the company makes its deliveries in approximately half the time that it would take a solo driver to complete the same trip.”

Although the appeal court’s ruling is not explicitly limited to team operations, much of the analysis revolves around the highly restrictive nature of drivers’ rest periods while in a moving vehicle.

Supreme Court declines to hear broker negligent selection case

The U.S. Supreme Court once again declined to hear an appeal of a case involving the question of whether the Federal Aviation Administration Authorization Act (FAAAA) preempts a negligent selection of claim against a freight broker. In July of last year, the U.S. Court of Appeals for the Seventh Circuit upheld a lower court ruling that the safety exception within FAAAA did not allow a claim against GlobalTranz for retaining a carrier involved in a fatal highway crash.

The Supreme Court has been asked to review the question of FAAAA preemption in the context of brokers at least once before. In June 2022, the court declined to review a U.S. Court of Appeals for the Ninth Circuit ruling that a state common law tort claim against a broker was not barred by FAAAA.

Advocacy and Comment

1. We held off sending this month’s update pending the results of the FMCSA’s day-long meeting on January 17 regarding the new registration proposal. We are glad we did. The meeting offers hope that the Agency has heard and understands the problem of supply chain fraud and the lack of new entrant accountability which encourages identity theft, double brokerage, and serial bait and switch scams. The meeting suggests that the Agency is seeking input on application reform before its well-meaning but cumbersome proposed new URS application is advanced.

Hopefully, the Agency’s open door policy will facilitate a discussion concerning use of the desktop audit as a means to deter fraud and permit a red light / green light safety fitness determination for new carriers. At the meeting, the FMCSA suggested that new application reform and other agenda items were being fast tracked during calendar year 2024 so stakeholder input cannot be delayed. Meetings by interested parties are being scheduled.

2. Several of the other hot topics discussed above seem to be concerning. Hopefully, the First Circuit decision which effectively negates the hours of service exemption from overtime applicable to drivers subject to hours of service regulations does not become precedent. The statute clearly does not support the Court’s finding. The implications for long haul trucking could be significant. Clearly the lasting effect of AB5 will not be addressed any time soon by the Supreme Court and remains unresolved. Continuing union pressure to kill the owner operator model and pass pro union legislation remains an issue.

3. As noted, the FMCSA has given short notice of a number of academic studies it wishes to include in consideration of its new SFD proposal. A quick analysis of these will be necessary. Yet at first glance, it is hard to tell how the topics could fit into making new safety fitness determinations unless brownie points are awarded to large carriers which can afford to pay for new onboard technology in the purchase of new equipment.

4. Every four years, the incumbent administration accelerates its agenda to pass new final rules before the following January transition of Administrative and Legislative power that might result from the November elections. Robin Hutcheson has already announced her departure as FMCSA Administrator. The Agency seems interested to advance both the safety fitness rulemaking and its anti-fraud policy in this election year. It will be difficult to develop a new safety fitness rule given the status of SMS and the absence of any suggested prototype. Analysis required by the administrative procedure Act simply will raise too many unanswered questions. Clearly though, serious progress can be made on facilitating better new entrant procedures and recordkeeping to identify and stop systemic fraud, particularly identity theft, bait and switch scams, and double brokerage which can be based upon existing rules and authority.

Ultimately, the industry needs to be advocating for more extensive vetting of carriers, brokers, and forwarders, and transparent and accountable remote auditing of carriers’ and brokers’ status to prevent fraud. Concerned stakeholders will be offering viable alternatives with regard to both. Interested readers should contact us at asectt@gmail.com.