New Regs for Transport Companies

The American Transportation Research Institute just released findings of its 2017 update to the operational cost of Trucking, aptly called, An Analysis of the Operational Costs of Trucking. Some interesting excerpts:

The analysis found that the average CPM was $1.592 for 2016, up one percent from the costs of $1.575 found in 2015. The total marginal costs for TL was $1.42; for LTL, it was $1.74; and Specialized was $1.83.

As we know, the trucking industry hauls most of freight in the United States, accounting for 66 percent of the nation’s freight tonnage and 73 percent of freight value. A typical truck-tractor in the ATRI sample was reported to have driven 103,945 miles per year, compared to just 25,511 miles for straight trucks.

Respondents reported holding equipment for more miles, but slightly fewer years compared to the previous year’s analysis. This indicates that trucks are being used more intensively each year and are likely wearing out in less time than before

Though new truck models are becoming more fuel efficient, indications of an increase in fuel economy have lagged. For example, the overall fuel economy of the respondent sample held steady at an average of 6.3 MPG

Fuel costs have consistently been the biggest MC line-item expense across most of the years ATRI has conducted this research, and generally account for approximately 30 to 40 percent of a motor carrier’s CPM.24 However, due to the continual steady decline of fuel prices in 2015 and early 2016, fuel’s share of a carrier’s MC was lower than historically experienced and was in fact surpassed by driver wages for the second consecutive year.

Many industry shifts have continued to exert upward pressure on driver pay. In fact, in 2016 both driver wages and benefits grew for the fourth consecutive year, and are now ranked as the biggest cost center for motor carriers in ATRI’s sample for the second consecutive year. Chief among these shifts has been the much-discussed shortage of qualified drivers, a shortage that continued to plague the industry in 2016. Truck insurance costs increased to 7.5 cents per mile.

Most truckload drivers are paid on a per-mile basis while LTL P&D drivers are generally paid by the hour. Survey respondents indicated that average truck driver pay per mile was 52.3 cents in 2016, marking four years of continuous increases. In terms of hourly wages, the 2016 CPM figure translated to $20.91.

 

Regards,

Jim.mahoney@jfm-lawfirm.com

 

ELD Mandate and Compliance 

The ELD compliance requirement will present several operational speedbumps, which will slow velocity and economics of motor carriers, large and small.

How to record yard moves, and is moving a trailer to a dock, dropping it and going bobtail back against the wall count as “on duty, driving,” or “off duty.” It matters because savvy drivers will figure out how not to record “on duty, driving,” because the DOT penalty for driving over hours is 10 hours out-of-service.

ELDs record time in 1 minute increments, incorporate cameras, record hard braking, speeding, and hard cornering.

Who’s to say detention time is on duty, not driving, or personal conveyance usage. Certainly detention time plays a huge role in efficiencies and drivers can be caught using long/lat placements.

Will the FMCSA address the issues of detention or the inability to find parking in a reasonable amount of time? Detention affects driver fatigue, but there’s not much done about it by the Agency. The FMCSA was authorized to do something under MAP 21.

Don’t forget, if you’ve leased a rental truck for less than 30 days, you don’t need an ELD; paper logs will suffice.

Regards,

Jim.Mahoney@jfm-lawfirm.com

Effective July 1, 2017, the Fair Wages and Healthy Families Act, also known as Proposition 206, requires most private and municipal employers to provide paid sick time (PST) to employees (A.R.S. Sec. 5-23-371 et seq.).

Covered employers. Nearly all private employers are covered by the law. A limited exemption is provided for “small businesses,” which are those with annual gross revenues below $500,000 that are not engaged in interstate commerce or the production of goods for interstate commerce.

Covered employees. Employees include “any person who was or is employed by an employer.” Part-time and temporary workers are also covered by the law and are entitled to accrue and use PST. In calculating the number of employees performing work for a covered employer, all employees performing work during a given week should be counted (including part-time and temporary workers).

The law does not apply to employees covered by a collective bargaining agreement (CBA) in effect before July 1, 2017. For CBAs entered into or expiring after July 1, 2017, the law’s requirements may be expressly waived by clear and unambiguous language within the agreement.

Accrual of leave. Arizona employees are entitled to a minimum of 1 hour of PST per 30 hours worked.

PST will begin to accrue on July 1, 2017, or the beginning of employment, whichever is later. New hires may be required to wait until 90 days after hire before using accrued PST.

Employers with fewer than 15 employees must permit accrual and use of up to 24 hours of PST per year.

Employers with 15 or more employees must permit accrual and use of up to 40 hours of PST per year.

The Motor Carrier Exemption under the Fair Labor Standards Act (FLSA) section 13(b)(1) is an exemption from overtime for employees over whom the Secretary of Transportation claims authority whose duties affect the safe operation of motor vehicles in interstate transportation. It does not affect minimum wage obligations of the employing motor carrier. Under the Fair Wages and Healthy Families Act these workers are assumed to work 40 hours each work week. Earned but unused PST may be paid or carried over to the following year subject to the 24 or 40 hour limitations noted above.

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.

 

MEDICAL MARIJUANA AND THE TRANSPORTATION WORKPLACE

 

Colorado – crystal clear

Employers are allowed to regulate or prohibit the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the workplace. Employers may also enact policies restricting the use of marijuana by employees. Simple. No need to drag in DOT issues. Clear-headed.

 

Nevada – oddly sensible, but it’s complicated by reasonable accommodation.

Nevada Revised Statutes 453A.800. Costs of medical use of marijuana is not required to be paid or reimbursed; medical use of marijuana not required to be allowed in workplace; medical needs of employee who engages in medical use of marijuana to be accommodated by employer in certain circumstances.  The provisions of this law do not: 1. Require an insurer, organization for managed care or any person or entity who provides coverage for a medical or health care service to pay for or reimburse a person for costs associated with the medical use of marijuana. 2. Require any employer to allow the medical use of marijuana in the workplace. 3. Except as otherwise provided in subsection 4, require an employer to modify the job or working conditions of a person who engages in the medical use of marijuana that are based upon the reasonable business purposes of the employer but the employer must attempt to make reasonable accommodations for the medical needs of an employee who engages in the medical use of marijuana if the employee holds a valid registry identification card, provided that such reasonable accommodation would not: (a) Pose a threat of harm or danger to persons or property or impose an undue hardship on the employer; or (b) Prohibit the employee from fulfilling any and all of his or her job responsibilities.

 

California – typical psychosis.

A tortured, psychotic path in California now suggests a concern when the employee explains positive test results by mentioning a medical condition that led to the marijuana use.

The employer can still choose not to hire the applicant, or to fire the employee.

But the decision would be the least risky when the employer applies a zero tolerance policy for marijuana use across the board, and when the position is safety-sensitive (like operating machinery or DOT safety related).  The decision is to be made only on the drug test results, and not on the underlying medical condition.

But, if an applicant for an office job fails a drug test due to off-duty medical marijuana treatment for cancer, the employer may decide to hire anyway.

Arizona – hazy – with a chance of general legalization.

The Arizona Medical Marijuana Act (“AMMA”) already prohibits employers from discriminating against individuals who are authorized to use medical marijuana. The principal exception to this prohibition applies if the hiring or retention of a medical marijuana user would cause the employer to lose a monetary or license-related federal benefit, e.g., hampering your FMCSA authority via workers in safety-related functions.

Employers may certainly test employees and applicants for marijuana and other controlled substances, but the AMMA protects authorized medical marijuana users testing positive for marijuana from adverse employment action based solely on the test results.

Arizona employers can discipline an employee with a positive test even if the employee is authorized to use medical marijuana, but only if there is additional objective evidence of possession or impairment during working hours. Where it gets even hazier is the evidence of workplace impairment: a workplace incident reflecting negligence, obvious signs of intoxication: decreased coordination, slurred speech, blood shot eyes, and/or empty bags of Cheetos (jk).

As some of us may know from Cheech and Chong movies, off-duty usage effects can linger into the workday. The fact that an employee’s off-duty use of medical marijuana may be protected by Arizona state law does not alter the fact that such use may have adverse results and occasionally may cause an injury. This clouds the challenge for employers: Hmmm…does evidence of workplace intoxication, despite the employee having a medical marijuana card mean the employee goes home until the fog clears? No clear answer. Legislature was too busy lining up to sue Feds for clarification of who gets to use which bathroom.

http://jfm-lawfirm.com

 

 

 

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.