Food Safety in Transportation

Who’s Exempt From Overtime – the Motor Carrier Exemption

The Fair Labor Standards Act (FLSA) provides that employers must pay non-exempt employees at “one and one-half times the regular rate” for time worked in excess of forty hours per week. 29 U.S.C. § 207(a)(1). The FLSA exempts “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service” under the Motor Carrier Act (MCA). 29 U.S.C. § 213(b)(1) (“the MCA Exemption”). Mr. Williams brought this action alleging that Central Transport LLC violated the FLSA’s overtime requirements when it employed him as a “switcher” at its St. Louis terminal. He tried to make the claim into a class action suit.

The question of how Williams spent his time working for Central Transport is a question of fact; the ultimate issue of whether his work activities exempted Central Transport from paying FLSA overtime is one of law.

In United States v. American Trucking Ass’ns, 310 U.S. 534, 553 (1940), the Supreme Court rejected the contention of that all employees of interstate motor carriers were exempt, concluding that the jurisdiction to regulate maximum hours “is limited to those employees whose activities affect the safety of [motor carrier] operation.” Later, the rule was expanded that motor carrier drivers, mechanics, loaders, and drivers helpers who “perform duties which affect the safety of operation… are therefore subject to the authority conferred [by the MCA] to prescribe qualifications and maximum hours of service.” MC-2, 28 M.C.C. 125, 126 (1941).

Mr. Williams was a “city loader” by title with Central Transport. However, he also did some minimal loading of trailers that affected the motor carrier’s safe interstate operation, including balancing loads and stacking cargo “high and tight.” The 8th Circuit Court of Appeals in a decision published July 28 2016 seems to have expanded a ruling from 1947 that even randomly assigned drivers, loaders, mechanics whose operations are quite minimally in interstate commerce (“3 or 4%”) are under the MCA exemption for overtime.

FMCSA Delays Unified Registration System

The Federal Motor Carrier Safety Administration has delayed the final implementation of its Unified Registration System until Jan. 14, 2017.

Dr. Kelly Regal, FMCSA associate administrator of research and information technology, said the agency is updating its IT systems and migrating existing data to new servers, which is causing the delay from the previous implementation date of Sept. 30.

Since December, new applicants for registration have been required to use the new streamlined online form. Existing carriers were supposed to begin using the system to do their biannual updates, name changes and transfers of authority on Sept. 30, but now won’t be able to use the system until the January 2017 implementation.

California Workers’ Comp – What Ails You?

In California, where reforms were implemented in 2013, medical trends are seen as stabilizing with fewer spine surgeries and a reduction in the use of opioids. According to the State this shows that many elements of the reform effort are working. Hmmm…not so sure. When compared with other states California has the highest rate and frequency of permanent and partial disability claims and has the highest Workers’ Comp premium rates in the country. Nothing to brag about there.

I used to think that injured workers got high quality care in the Comp system. I don’t know why I thought that. Maybe because some care was better than crawling home to a bandaid. However, the focus on quality of care  – with as much oversight as we see in the health care industry – could be a way to improve patient outcomes and limit rising premiums. But insurers often see Work Comp and its mandatory coverage as a loss leader in selling other, more profitable lines. It doesn’t appear that any insurer – despite their sales puffery to their customers – really look at clinical quality at all to determine provider quality and performance.

Literally, on the Work Comp side of healthcare, there are no standards. Just overburdened claims adjusters.

Tough to Make a Buck in Trucking 

Truckload linehaul rates in June were nearly the same as the month before, but they are still below levels from a year ago, while there seems to be no end to the recent drop in rates for intermodal shipments. I expect to see a big dropoff in capacity in fresh produce reefer business as the Food Safety regs come along. Current spot reefer rates of $2.00 a mile will go up no doubt, but it’s still not going to be an easy line to make a buck.

 

Temperature controlled Food Transportation

The rule pertaining to transportation under the Food Safety Modernization Act – FSMA – is called the Sanitary Food Transportation Act – SFTA. Effective date is April 6 2017.

  • The final rule applies to shippers, receivers, loaders, and carriers who transport food in the United States by motor or rail vehicle, whether or not the food is offered for or enters interstate commerce. An entity is subject to the regulations in several ways – a shipper can also be a loader; a freight broker can be a shipper. Contractual shifting of responsibilities is allowed – be aware of what you’re signing.
    • Transportation regulations apply to:
      • Foods transported in bulk, e.g., juice, animal feed
      • Packaged foods not fully enclosed by a container, fresh produce
      • Foods that require temperature control for safety

      Key requirements:

      • Transportation operations must be conducted to prevent food from becoming unsafe during transport, including: assuring proper temperature controls; preventing contamination by contact with non-food items or raw food, or allergens. If a shipper, loader, broker, receiver, or carrier becomes aware of a possible material failure of temperature control or other condition that may render the food unsafe during transportation, the food shall not be sold or otherwise distributed. A shipper must develop and implement written procedures – which will then, of course, be contractually transferred to brokers and motor carriers – to assure vehicles and equipment are in appropriate sanitary condition; that previous cargo does not make food unsafe; that food requiring temperature control is transported under adequate temperature control (designation of required temps on the Load Sheet and proof of temperature control at delivery).While the enforcement and effective dates are still a year out, most if not all requirements will start to be enforced by shippers. I see a number of companies gearing up and using compliance as a selling point. You can expect to see language in contracts almost immediately.
      • Small reefer carriers are most likely the first affected. One or two losses in this new environment (of very conscious receivers) will hurt too much. Cargo insurance for reefer loads has too many unscrupulous exceptions to coverage. Freight brokers will see more claims for which they will be responsible – either by contract or contingent to the absence of underlying carrier coverage.
      • The burden will fall onto the motor carrier (and by extension, the broker) to prove – via USDA inspection – that the temperature deviation or other condition did not render the food unsafe.
      • Brokers will look more often to contingent cargo insurance
      • Carriers should buy better cargo coverage; brokers must monitor those policies.

Maybe at the top of annoyances coming out of the FMCSA is “Beyond Compliance,” the Agency’s false logic attempt to make trucking “safer” by rewarding motor carriers that buy equipment purportedly leading to better CSA scores. It would be nice to see the empirical data of enhanced safety stemming from the latest doodads, rather than just regulatory guessing.

Using the input received and the Congressional direction in the FAST Act, the notice published in the Federal Register provides details on FMCSA’s proposal and processes to allow “recognition” ( I’m thinking this doesn’t mean a gold star; instead probably some kind of bonus chit to help the carrier bypass inspections or audits) for a motor carrier that:

  1. installs advanced safety equipment; (gee, at a implementation price when shippers are balking at 2% rate increases?)
  2. uses enhanced driver fitness measures; (are we talking sleep apnea testing? If so, another waste of carrier resources and time. Measure neck size, much more reliable; or hire skinny drivers).
  3. adopts fleet safety management tools, technologies, and programs; (robots and algorithms replacing fleet Safety Management?) or
  4. satisfies other standards determined appropriate by the FMCSA. (maybe a realistic new driver training program with a real backing test?)

See more at: https://www.fmcsa.dot.gov/newsroom/fmcsa-seeks-input-%E2%80%9Cbeyond-compliance%E2%80%9D-program#sthash.626nkom0.dpuf

For another prime example of regulatory annoyance, look at the mandate for ELDs. Not one of us would dispute the fact that drivers can shave miles on ELDs just as they could with paper logs.  Even I could do it (not that I would ever).

Then there’s URS. As of September 30th, the Agency will use the singular URS registration number to make our world simpler. But it will cost hours in learning and complying with the new system. The old system and paper filings will no longer be allowed because the Agency believes the Unified Registration System will cut down on phantom registrations by unsafe carriers – all six of them. Gee, no one could ever figure a way to register around the URS if one were so inclined.

Lest we forget the new Food Safety Modernization Act, a safeguard work-in-progress for a non-existent problem, in a year from now shippers, consignees, warehouses, and freight brokers will be looking to one another for assurances and pointing fingers that their part in the logistics system was not the cause of unsanitary or spoiled food conditions.

In the words of the FDA, “In keeping with the overarching food safety goal of FSMA, this rule now solely focuses on practices that create safety risks, rather than on those that affect its quality but don’t necessarily make it dangerous to consume.” Hmm, a fix for a problem that doesn’t necessarily exist.

“Loaders” have been added as covered parties under the FSMA. According to the Act, a loader is a person who physically loads food onto a motor or rail vehicle (rail carriers are exempted from the rule entirely; motor carriers are not. Certainly, that has nothing to do with the strength of the rail lobby).

  • Before loading a food not completely enclosed by a container (oh, you mean those sea-tossed containers of produce that were sitting next to containers leaking toxic battery acid?) , the loader must determine that the transportation equipment is in appropriate sanitary condition.
  • Before loading a food requiring temperature control, the loader must determine that each mechanically refrigerated cold storage compartment is adequately prepared for refrigerated transportation, including precooling, if necessary.

Seriously, who is a loader? A Beneficial Cargo Owner, a Shipper, an Expeditor, a Broker, Warehouse, a Lumper? Who checks the trailer – and who’s qualified to check the trailer – to determine adequate preparation?

Oddly, carriers and brokers are supposed to look to the shippers for guidance in compliance. But the onus will undoubtedly still fall on carriers and brokers.

And the learned outsiders pondering the new law provide a worthless solution: Carriers are going to have to be given notice of what the transport protocols are in order to make “decisions” about whether they want to move the loads or not.

Sure.

A broker and/or carrier is going to turn down loads because shippers don’t have protocols. It’s presently tough enough for reefer carriers to make a buck,  to be turned away at delivery, and without USDA inspection, or because the carrier didn’t show up at the convenience of the consignee, and the truck is left wandering around while shippers, brokers and carriers fight about responsibility. And it’s most often the carrier that is blamed – wrongly – and then the carrier’s insurer declines the claim for little or no reason. The FSMA is going to fix that?

Equipment must be clean and suitable for safe temperatures. No one has said what “clean” is or how often a trailer needs a washout, but records of prior loads must be kept. For criminal prosecution. As with the ELD mandate and Beyond Compliance, maybe only the better-capitalized brokers and carriers will have an easier time convincing shippers to follow protocols and force them to load those carriers with real cargo coverage that actually covers reefer loads. Ok, on second thought, no they won’t.

Then there’s the proposed Safety Fitness Determination program, a kind of pass / fail system that is to review tens of thousands of carriers based on the methodology of CSA scoring. I can attest that roadside stops are generating non-existent CSA violations because of: 1) DOT officers don’t really understand the regs (“Gee, what’s the 100 air mile exemption again? Don’t drivers have to keep logs with them?” – Ah, no. Or, this one: 2)  “You’ve crossed state lines. The 100 air mile exemption no longer applies.” Ah, yes it does). Or, this one’s popular 3) “Hmmm, your truck looks dirty, so these air lines must be chafing.”

And maybe the grandest incursions are by states into interstate commerce. It’s a tie:

  1. “Owner-operators are cheated by motor carriers. They are paid so little it’s like indentured servitude.” Actually, a recent study showed OOs had almost 30% greater net income than company drivers. Presumably these small business owners pay their share of taxes. But even with proof of their State and Federal returns evidencing that, judges decide they’re really just employees.
  2. FLSA wage and hour claims under the incorrect assumption that intra-state movements of cargo is not interstate commerce and thus not subject to the exemption in the Motor Carrier Act. Distilled down, the applicability of this MCA exemption depends centrally on whether the employee was engaged in interstate commerce. A driver-employee engages in interstate commerce if his delivery “forms a part of a “practical continuity of movement” across state lines from the point of origin to the point of destination, an understanding of the law that harkens back to a 1943 Supreme Court case, Walling v. Jacksonville Paper Co., 317 U.S. 564, 568 (1943).

I suppose ranting isn’t productive.

But instead of fixing non-existent problems, or developing a program of brownie points to skip real safety problems, or weeding out the very few phantom carriers, or owning up to the realization that neck size is a better indicator of fatigue, or that 24 hour sleep apnea tests are driven by the “sleep apnea industry,” why not spend money on fixing the traffic choke points and infrastructure problems that cause drivers to run over hours or become fatigued or use discretion to avoid the California break time rules, which truly affect safety and also delay loads? Wouldn’t that improve our transport system, decrease costs, and increase productivity?

The saving grace of all this is that it’s put my kids through college and I’m still off the streets.

 

 

As soon as March 31st the Food and Drug Administration will issue its final rules on sanitary transportation of food. Implementation of the rules will take another year, but shippers will have motor carriers adhering to the rules very soon.

Naturally our clients who transact in the fresh food reefer world are bound to get a set of rules from their shipper customers. Things to watch for and be ready to enact include:

  • requirements to pre-cool equipment
  • train anyone  involved in the move (lumpers, drivers, dock workers)
  • record-keeping on every load for at least a year
  • a method of transferring shipment records to shippers and consignees

While the risk of contamination of foodstuffs during transportation is – and has been – low, the FDA is going to monitor the process of proper temperature control, driver training, and trailer cleanliness. I see very few food loads mixed with non-food items at all, but load manifests must be kept assuring no mixed loads. Trailer interiors must be cleaned out. Shippers are going to be dictating the process, so it’s advisable to talk to your key customers now.

So, what’s the effect on rate? Higher, maybe. We’ll probably see insurance premium for cargo liability increase; perhaps increased business for carriers who have sophisticated telematics systems, like those made by ThermoKing. But, bottom line, higher per mile costs, greater control by produce marketers, and more record-keeping headaches and interaction ahead for shippers- brokers – carriers  – and consignees.

Freight Brokers – get your motor carriers to prove their compliance, and revise your load sheets so they indemnify you if they fail. Make carriers provide prior load records for trailers and to provide information on their reefer equipment; carriers with older reefer units are going to be trouble.

Reefer Carriers – develop and implement a program that complies with the new regs; get ahead of the game, shippers and brokers are going to demand it anyway, so why not be ready to solicit business based on compliance?

Shippers – more likely to demand that brokers will be stuck holding the bill for refused shipments.

Anyone want to develop a captive to cover shippers’ interest and contingent cargo insurance? Call me. We’ll talk.

….Anecdotal news as it develops.