If you own or manage a transportation company, the URS, or Unified Registration System, is about to become reality for you.

It’s the FMCSA’s new, “streamlined” registration system that will improve our collective looks, smooth wrinkles, and do away with paperwork.

It requires regulated transport businesses to register online. It eliminates the MC number, FF or MX number.

As of September 30th new registrants will use this system to obtain a DOT number and register operating authority. Established companies will thereafter edit or update registrations online.

The URS is a single, online federal information system that transport businesses use to register and update their information with the Federal Motor Carrier Safety Administration.

Don’t confuse it with that other registration system, UCR. The Unified Carrier Registration system is not part of the FMCSA; instead, it’s a federally mandated, annual state-administered registration program that exists to collect funds from trucking companies and give funds back to the states to support DOT officers’ ability to write violations and give drivers costly citations that often have nothing to do with safety.

The URS applies to all interstate motor carriers, including private and for-hire passenger and property motor carriers, freight forwarders, brokers, intermodal equipment providers (IEPs), hazardous materials safety permit (HMSP) applicants/holders, and cargo tank manufacturing and repair facilities under FMCSA’s jurisdiction. Mexican-domiciled carriers conducting long-haul, non-cabotage operations into the U.S. are exempt.

Again, the URS will require online registration for all filers, will use only your DOT number as identifier, will have a new fee schedule, and will maintain your records of financial responsibility and statutory process agency…umm, just like it does now, only…umm…better.

Applicants will begin using URS for registrations and changes starting Sept. 30. If you’re already registered with the FMCSA “the old way,” you will have until December 31st to start using the new system – but only as you update biennially or edit your registration.

There will undoubtedly be some changes, so read the FAQs and website updates. I wouldn’t work up a sweat over all of this just yet, though.


Oh, by the way, the Governor of Arizona did sign the independent contractor bill, so, as said previously, it’s effective August 6th.  Arizona-based carriers should review, negotiate, and rewrite their ICOAs with their OOs. And those interstate entities domiciled elsewhere, but who now wish to be Arizona-based carriers – should consider re-domiciling and changing operations a bit to take advantage of  the new law.

 

Anticipating the Governor’s signature on HB2114 this week, Arizona should have a very strong law defining independent contractors. To paraphrase:

ANY EMPLOYING UNIT CONTRACTING WITH AN INDEPENDENT CONTRACTOR MAY PROVE THE EXISTENCE OF AN INDEPENDENT CONTRACTOR RELATIONSHIP FOR THE PURPOSES OF THIS TITLE BY THE INDEPENDENT CONTRACTOR EXECUTING A DECLARATION OF INDEPENDENT BUSINESS STATUS, and by the contractor declaring the following:

… THE CONTRACTOR is operating an independent business and providing services as an independent contractor; the contractor acknowledges the absence of an employment relationship without any claim to UI benefits or other rights arising from an employment relationships; that the contracting party is not responsible to withhold any tax; the contractor is responsible for his or her tax obligations, for obtaining licensing, registrations, or other authorizations that would be necessary for rendering the contracted services.

There will be six of ten categories that the contractor acknowledges as existing in the relationship, most of which can  – or already are – in practice with our transport partners.

Perhaps the best benefit for those of us in the trenches who spend time educating courts and state agencies to the distinction between independent contractors and company employees is the explanation in the new law that “any supervision or control exercised by the employing unit to comply with any statute, rule, or code adopted by the federal government, this state …may not be considered for the purposes of determining the independent contractor or employment status of any relationship…”

This will eliminate the hang-up that judges and agencies see as indicia of employment control. Since all motor carriers and freight brokers – to some degree – are obligated to enforce drivers to adhere to FMCSR regulations for hours of service, safe operations on the road, off-duty, and in pre-trip operations, as well as in communications with dispatch personnel, customers and general safe and efficient routing, this phrase eliminates that argument.

I would recommend that each of us review and amend – slightly, but quite importantly – our ICOAs with our owner-operators so as to comply with this law. Thereafter I expect a slight learning curve in educating state agencies, Work Comp insurance underwriters, courts and, not the least, negotiating with our contractors.

But this new law – expected to be signed by Governor Ducey this week, and effective August 6th – will unburden Arizona businesses from the vestige of impossible compliance with conflicting federal and state laws, and some costly litigation efforts.

Perhaps another benefit, which was envisioned bringing this Bill to fruition, is making Arizona more attractive to businesses across the West, particularly California companies escaping burdensome – and conflicting – regulations and insurance rates.

Re-domestication efforts can be considered. There are a few boxes to check off as companies consider this, and the benefits and detriments should be considered individually.

 

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.

 

 

The European Union has long had a type of worker with both the characteristics of employees blended with characteristics of what we in the U.S. call independent contractors. In the latest Uber settlement, the company seems to have played that Euro-card and compromised with lead plaintiffs in two class action suits, one in Northern California and the other in Massachusetts.

This outcome may suggest to us in the transport industry a renewed interest in happy mediums, that is, blended workers. The European model I studied and wrote about last summer is a bit more – okay, a lot more – closely defined and evolved than what Uber and the class members’ lead counsel proposes. If you’ll recall, the EU model of ICs in trucking grants some additional rights of employment despite having contracts and the real freedom to drive for other entities. We needn’t get into all that detail right now because we sure don’t want to sound socialistic again, but the time is probably ripe for us to re-write our ICOAs with a view towards mirroring both the EU model and the EU-lite model that Uber has smartly proposed in its settlement.

We should remember the main reason – or one of them anyway – that there’s opposition to independent contractor work: the fear of losing tax revenue. Real or not, the perception is that Owner-Operators in the transport industry are not self-reporting income or paying mandatory taxes. The EU model takes care of that, but we’re not ready for that just yet. Think of all the ALJs, State, and Federal Court judges whose heads would spin trying to grasp our industry’s regulatory quirks combined with the EU model.

That said, however, the time seems right to continue our efforts to adjust laws of contracting (see Arizona’s business’ efforts now circulating the State House) and also to gingerly approach our OO contracts with revisions that reflect these nascent terms from the EU and Uber’s proposed settlement.

 

A knowledgeable Lloyd’s broker once told me that the U.S. property and casualty market was but a boil on the rump of the worldwide insurance industry, meaning that while we in the U.S. transportation industry continually postulate on why and how to attract underwriters, our laser-like focus on insurance rates is a bit misguided; our rates are more dependent on the world reinsurance market and its focus on disasters, natural and man-made.

Reinsurance prices will continue to fall this year as competition for customers from hedge funds and other sources of alternative capital send premiums to their lowest in four years, according to Swiss Re AG.

“Price reductions have slowed down but there’s still pressure,” Edouard Schmid, the head of the property & specialty unit at the world’s biggest reinsurer, said in an interview in Zurich. “Having many years without large losses and an oversupply of traditional and alternative capital it’s more difficult for us to charge the prices we used to see for this protection.”

Swiss Re’s Property & Casualty unit posted a 22.2 percent return on equity for 2015, according to its earnings statement. That compares with a 4.7 percent ROE from the Stoxx 600 banking index in the same period, according to data compiled by Bloomberg.

           Hedge funds, sovereign wealth funds and other providers of alternative capital set aside $72 billion for reinsurance last year, a 12 percent increase from 2014, even as allocations from traditional capital fell 4 percent to $493 billion, according to research by Aon Plc. That led to price cuts when policies were renewed on April 1, according to reinsurance broker Willis Re Inc.

Lower than normal claims will indeed draw competitors. So you certainly benefit by watching your CSA scores and fixing your Safety Management Plan, especially in light of the FMCSA plan to expand their ability to monitor poor safety performers. Consider altering the term of your policy, if you see indicators of premium moving south.

Global insured losses from natural catastrophes and man-made disasters in 2015 fell to $37 billion, compared with an average of $62 billion over the previous 10 years, so there should be more capacity entering the U.S. transportation market, with underwriters backed by serious capital taking a flyer at our business.

Nonetheless, a few opportunities do exist despite the overall reinsurance market’s predominance on rates: be safe (have a Safety Management Plan and follow it); correct CSA errors via DataQ (not surprisingly, many DOT violations on DVERs are incorrect – e.g., DOT officers often do not understand the 100 air mile exemption to HOS regulations and violate and criminally charge drivers without legal basis); intervene very early in liability, Comp, and cargo incidents: many can be kept small and out of your loss runs.

 

This is not a fake story…

In its never-ending efforts at driving its employers to distraction, the California Supreme Court, in a case entitled, Kilby v CVS Pharmacy, clarified for the 9th Circuit the nature of employee seating that had previously been made a requirement in some California wage orders.

California law,  Cal. Code Regs., tit. 8, §§ 11040, subd. 14(A), states that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”  This strongly suggests that employees are entitled to a seat when their tasks can be accomplished while so seated.

There has been no interpretation as to what seats are “suitable,” who determines the “nature of the work,” or under what circumstances the “nature of the work” “reasonably permits” suitable seats.

According to the California Supreme Court, whether an employee is entitled to a seat depends on an objective assessment of all relevant factors – the totality of the circumstances. But the analysis should begin with the examination by you, the employer, of whether tasks at a particular location may be performed while seated.

Heck, what else do you have to do anyway to run your business?

The requirement applies to individual tasks performed throughout the workday, rather than the entire range of duties performed during a complete shift or contained within a job description. I’d suggest you follow each of your employees for a typical work day and ask (constantly), “Can I get you a comfortable chair?”

Failure to comply with the seating requirement exposes employers to potential class action litigation (seriously), in which the employers will bear the burden to prove the unsuitability of seating (you may want to bring a video camera with you for later use in evidence as you follow your employees around). Oh, but don’t forget the privacy issues you may be raising, so ask permission to film their day.

The lack of funding provided to California’s Department of Labor gave purpose to the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.), which “authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees.”  (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360).

I don’t know if you pay attention to TV broadcasts of war correspondents reporting from conflict zones, but there’s obvious ubiquity of the very familiar molded plastic chairs we all know and love.

Presumably these plastic chairs provide accommodative seating arrangements that pass muster with all sorts of rebels in war torn countries, so they should be just fine in your California work settings as well. Buy a set before the price skyrockets – or before a new international conflict puts a strain on their production.


More states are showing disfavor with employer-drafted conditions and restrictive covenants in the employment setting.

Oregon, Utah and Alabama are reflecting that trend.

A good example is Utah.

Its “Post-Employment Restrictions Act,” HB 251 voids any “post-employment restrictive covenant” entered on or after May 10, 2016, that extends beyond one year from the date of separation of employment, unless a non-compete clause is included in a severance agreement; or it’s related to the sale of a business.

That said, the law does not affect non-solicitation, non-disclosure, or confidentiality agreements, which are specifically excluded from the definition of a post-employment restrictive covenant.

The law also does not affect agreements currently in place. But it will limit any agreements entered into on or after May 10, 2016, including any renewals of currently existing agreements.

If you use non-compete agreements – in any state – you may want to limit to one year the term of the post-employment obligation. It’s tough enough to enforce the year in many states because courts see the limitation as an infringement on the ex-employee’s right to make a living.

While you’re at it, take a look at your severance policy in general and form  agreements. Don’t forget to include the fact that the agreement is mutually agreed upon, necessary to protect the goodwill of your business, supported by adequate consideration, and entered in good faith.

Okay, so just what amount is adequate consideration. A “pat on the back and a 15 cent subway token” once was sufficient (if there was a subway around), but I don’t know what Hillary paid recently when she got stuck in that turnstile, but it didn’t seem to be sufficient.

There is no absolute definition of adequate compensation. It depends on the nature of the position, the person’s compensation, but 5% has been bandied about as adequate in some cases.

And that being said, you must be cautious because penalties for employers seeking to enforce non-compete agreements are painful if it is eventually determined in court or via arbitration that the agreement is void. Damages can include lost wages, attorney fees, court costs.

If you must “separate” employees check on the best course of offering severance agreements to include non-compete provisions that don’t run afoul of the existing law or general feeling of judges and /or arbitrators.

When your employee needlessly damages company property or cargo belonging to another, can you dock his/her pay?

In Arizona, the law says you can. ARS 23-352. Withholding of Wages

No employer may withhold or divert any portion of an employee’s wages unless one of the following applies:

  1. The employer is required or empowered to do so by state or federal law.
  2. The employer has prior written authorization from the employee. An employer shall not withhold wages under a written authorization from the employee past the date specified by the employee in a written revocation of the authorization, unless the withholding is to resolve a debt or obligation to the employer or a court orders otherwise.
  3. There is a reasonable good faith dispute as to the amount of wages due, including the amount of any counterclaim or any claim of debt, reimbursement, recoupment or set-off asserted by the employer against the employee.

Accordingly, under Arizona law, an employer who has a written agreement with an employee may withhold wages that represent an amount of any claim of debt, reimbursement, and recoupment or set-off.  The altered wage paid must, however, never fall below the minimum wage in Arizona. Of course, if the employer is otherwise compensated by insurance, suit or subrogation, the employee must be reimbursed the lost wage, even if he’s no longer in your employ.

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Los Angeles and Long Beach turn times are causing shippers to look elsewhere to land cargo – what does this mean to you?

The average turn time for southern California terminals is now more than 90 minutes. And you ask, “How does this affect my costs – how much will shippers pay for the ‘convenience of California?'” and “Who would ever want to be a contract dray driver now?” considering these slow turns deliver meager pay on leased or owned trucks that cost so much to comply with California and Port clean air rules. It’s no wonder the Teamsters are having so much success in the short term… That’s short term.

Who will pay? Shippers, cargo owners, motor carriers.

Shipper alternatives?

The Mexican port of Lázaro Cárdenas is home to a deep-water port handling containers, dry bulk and liquids. APM’s new Terminal 2 project has direct access to US and Mexican corridors handling a million TEU’s. The US is the destination of 78% of Mexican exports, and also provides 49% of Mexico’s imports.  The U.S. and Mexican railroads pass freight from one jurisdiction to the other at six major border crossings. The U.S. sides of these crossings are in San Ysidro and Calexico, Calif.; Nogales, Ariz.; and El Paso, Eagle Pass, and Laredo, Texas.

We saw Kansas City Southern play this port more than ten years ago, gearing up their Mexican sub to bring direct rail access to Texas and all up into the Midwest. But why should you not think about more western crossings?

There’s also the small Port of Ensenada in Baja that’s siphoning cargo bound for the maquila manufacturing operations further inland in Mexico and the US.

Each offers transportation corridors to California, Arizona, and Nevada, bypassing the Los Angeles Basin and its problematic labor, over-the-top regulations, and expensive breakbulk warehouses.

How May This Affect Your Transportation Business?

Your customers will be looking for transport cost reductions. They may already be using Mexican ports. You may want to consider an alliance with a Mexican motor carrier. I can help with that.

If global trade is not currently part of your business, 2016 may be the year to think and act beyond U.S. borders. If you are already doing business internationally, that’s good, because approximately 95 percent of the world’s consumers live outside the United States, and the IMF estimates 87 percent of all economic growth will occur in the next five years.

The rise of e-commerce, combined with advances in shipping and logistics, allows even small organizations to reach customers abroad. If you can help the transportation needs of the nearly 300,000 American businesses that presently engage in global trade, you’re on the right track.

 

 

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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.