Regulatory and Legislative Update - June 2022

Contents

FMCSA has extended its emergency declaration regarding COVID-19 through August 31, 2022. For the latest version and other guidance related to COVID-19 is available at www.fmcsa.dot.gov/COVID-19. Note that use of the declaration now requires monthly reporting by carriers.

Regulation and Enforcement

• Labor Department sets forums to explore misclassification issue
• FMCSA seeks comments on broker, bona fide agent definitions
• Comment period on speed limiters extended until July 18
• Senate panel holds nomination hearing for Hutcheson
• CVSA sets August 21-27 for Brake Safety Week
• FMCSA issues emergency declaration for baby formula, extends COVID declaration
• Owner-operator seeks exemption from various HOS provisions
• FMCSA renews CDL exemption for transporting certain RVs
• Truck driving school seeks exemption from instructor qualification requirements
• Oak Harbor Freight Lines obtains exemption on instructor qualifications

Courts

• Supreme Court set to decide whether to hear AB 5, broker cases

Advocacy and Comment

Regulation and Enforcement

Labor Department sets forums to explore misclassification issue

Having recently suffered a loss in the courts over its undoing of a Trump administration rule, the U.S. Department of Labor (DOL) plans a rulemaking on determining employee or independent contractor status under the Fair Labor Standards Act (FLSA). To start that process, the department is scheduling separate public forums this month for employers and workers.

Late in the Trump administration, DOL published a rule adopting an economic reality test that considers whether a worker operates his or her own business or is economically dependent on an employer for work. The Biden administration’s DOL first delayed that rule and then withdrew it in May 2021. However, in March, a federal district court vacated those actions, so the rule stands as of today and is retroactively effective to the original March 8, 2021, effective date.

The employer forum will be held 2:30 p.m. to 4:30 p.m. Eastern on June 24. To register, visit https://www.eventbrite.com/e/employer-open-forum-registration-349987621397. The worker forum will be held 5 p.m. to 7 p.m. Eastern on June 29. To register, visit https://www.eventbrite.com/e/worker-open-forum-registration-356311426067.

FMCSA seeks comments on broker, bona fide agent definitions

The Infrastructure Investment and Jobs Act (IIJA) requires FMCSA to issue guidance by November 15 clarifying the distinctions between brokers and bona fide agents, so the agency is seeking responses to various questions to inform that guidance. FMCSA noted that over the past decade it had received numerous inquiries and several petitions related to the definition of a broker.

Under the IIJA provision, FMCSA’s guidance must consider the extent to which technology has changed the nature of freight brokerage, the role of bona fide agents, and other aspects of the freight transportation industry. At a minimum, FMCSA also must (1) examine the role of a dispatch service in the transportation industry; (2) examine the extent to which dispatch services could be considered brokers or bona fide agents; and (3) clarify the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916, applicable to a dispatch service.

Comments are due July 11. For the Federal Register notice, which includes 13 specific questions for which FMCSA seeks answers, visit https://www.federalregister.gov/d/2022-12574.

Comment period on speed limiters extended until July 18

FMCSA has extended through July 18 the comment period on its advance notice of supplemental proposed rulemaking concerning the potential mandate that motor carriers use speed limiters installed on their trucks. Comments originally had been due June 3, but the agency had received requests for extensions from the American Trucking Associations and the Owner-Operator Independent Drivers Association. (For more on FMCSA’s advance notice, see the May 2022 Regulatory Update.) For the Federal Register notice extending the comment period, visit https://www.federalregister.gov/d/2022-11490. To view the advance notice, file comments, or view comments, visit https://www.regulations.gov/document/FMCSA-2022-0004-0001.

Senate panel holds nomination hearing for Hutcheson

The Senate Commerce Committee on June 8 heard testimony from and questioned Robin Hutcheson, President Biden’s nominee to be FMCSA administrator. Hutcheson currently is deputy administrator and acting administrator, having replaced Meera Joshi in that role in January. Joshi had been nominated for the post and had completed a hearing, but the Senate never confirmed her, and her nomination was returned according to standard procedures at the end of the congressional session.

Hutcheson faced few challenging questions. A majority were related in some way to the supply of drivers, and several related specifically to the younger driver initiative. Sen. Roger Wicker (R-Mississippi) questioned the Biden administration’s decision to limit participation in the congressionally mandated younger driver pilot program specifically to apprenticeship programs registered with the Labor Department. Wicker suggested that the Senate might not have agreed to the compromise apprenticeship program had that limitation been included in the provision. Sen. Todd Young (R-Indiana) also pushed Hutcheson to take faster action on allowing younger drivers to operate in interstate commerce.

Sen. Deb Fischer (R-Nebraska) pushed Hutcheson for faster progress in completing work to implement the recommendations of the National Academies of Sciences in addressing issues with safety measurement data. Fischer also said she plans to reintroduce her bill from the last Congress that would establish a standard of care for the selection of motor carriers by shippers, brokers, and others.

Hutcheson received several questions related to regulation and enforcement for livestock haulers and to hair testing as an alternative to urine testing. To view the June 8 hearing, visit https://www.commerce.senate.gov/2022/6/nomination-hearing. Hutcheson’s responses to written questions are available at https://www.commerce.senate.gov/services/files/421B6F1E-12C8-4A4D-BAE5-36DF4C22C42A.

CVSA sets August 21-27 for Brake Safety Week

The Commercial Vehicle Safety Alliance has announced Aug. 21-27 as the dates for this year’s Brake Safety Week. During week, inspectors will conduct their usual North American Standard Level I and V Inspections and capture and report brake-related data to CVSA. The results will be released in the fall.

FMCSA issues emergency declaration for baby formula, extends COVID declaration

FMCSA has issued an emergency declaration relieving carriers of certain regulatory requirements in order to expedite the delivery of baby formula and the ingredients needed for its production, including whey, casein, corn syrup, and hydrolyzed protein, as well as necessary containers and packaging. The declaration is in effect through June 30 unless revoked earlier or extended. For more information, visit https://www.fmcsa.dot.gov/emergency/emergency-declaration-under-49-cfr-ss-39023-no-2022-005.

Owner-operator seeks exemption from various HOS provisions

FMCSA is requesting comments by July 11 on an application by a leased owner-operator for an exemption from five provisions of the federal hours-of-service (HOS) regulations. The application was submitted by Leland Schmitt, Jr., who currently is leased to Clearwater, Minn.-based D&E Transport and has 30 years’ experience. Schmitt requested a five-year exemption from (1) the 10 consecutive hour off-duty time requirement; (2) the 14-hour “driving window”; (3) the 30-minute break requirement; (4) the 60 hours-in-7-days limit; and (5) the 70 hours-in 8-days limit. Schmitt told FMCSA that the mandatory 10-hour off-duty break goes against his natural sleep patterns and that his normal nighttime sleep while in the CMV is between five to seven hours. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-12467.

FMCSA renews CDL exemption for transporting certain RVs

FMCSA is provisionally renewing a 2017 exemption from the federal CDL for drivers who deliver certain newly manufactured motorhomes and recreational vehicles (RVs) to dealers or trade shows before retail sale (driveaway operations). The exemption applies when transporting RVs with gross vehicle weight ratings of 26,001 pounds or more provided that they do not have actual gross vehicle weights or gross combination weights that equal or exceed 26,001 pounds. It also applies when transporting RV trailers that weigh 10,000 pounds or less at the time of transportation. For the Federal Register visit, visit https://www.federalregister.gov/d/2022-10762.

Truck driving school seeks exemption from instructor qualification requirements

FMCSA requests comments by June 24 on an application from SBL Truck Driving Academy, Inc. to exempt two of its current employees from the theory and behind-the-wheel instructor qualification requirements contained in the entry-level driver training regulations. Specifically, SBL seeks an exemption from the requirement that instructors have at least two years of experience driving a CMV requiring a CDL of the same or higher class and/or the same endorsement necessary to operate the CMV for which training is provided. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-11271.

Oak Harbor Freight Lines obtains exemption on instructor qualifications

FMCSA has granted Oak Harbor Freight Lines, Inc., an exemption from the qualification requirements pertaining to entry-level driver training theory instructors. The exemption allows the company’s safety supervisor to conduct classroom training for entry-level drivers who intend to operate CMVs used in hazmat transport. For the Federal Register notice, visit https://www.federalregister.gov/d/2022-10763.

Courts

Supreme Court set to decide whether to hear AB 5, broker cases

The U.S. Supreme Court likely will decide by the end of June on whether it will consider the California Trucking Association’s claim that California’s AB 5 law is preempted by federal law as it applies to motor carriers. The court last fall had invited the Justice Department to weigh in. The government’s brief, which was submitted late last month, argued that the Supreme Court should let stand the ruling of the U.S. Court of Appeals for the Ninth Circuit, which had held that AB 5’s ABC test for employment status is a labor law of general applicability that does not regulate rates, routes, or services substantially.

Justices are scheduled to discuss the case on June 23, and an order on whether to grant the petition for a writ of certiorari is likely on June 27 before the end of the current term. If the court decides to hear the case, the stay on AB 5’s enforcement on motor carriers will remain in place until the court issues an opinion. However, if the court denies cert, the state of California will be free to enforce AB 5 immediately.

In its May 24 amicus brief, the Justice Department said that the appeals court petitioners were unlikely to succeed on their claim that the Federal Aviation Administration Authorization Act (FAAAA) preempts applying the ABC test to owner-operators. Nor does the Ninth Circuit’s decision conflict with any Supreme Court decision, it said. The government’s brief further argued that while other circuits have reached different outcomes on the issue, “those case-specific decisions do not create a conflict warranting this Court’s review.” The Justice Department also contended that the case was not ripe for Supreme Court consideration anyway because of a need to resolve a threshold issue – whether motor carriers and owner-operators may fall within the business-to-business exemption under California law.

In a response filed on June 7, CTA quipped that the government’s brief “calls to mind the question famously posed by Chico Marx: ‘Who you gonna believe, me or your own eyes’?” Contrary to the claim that AB 5 might ultimately not apply to carriers and owner-operators, CTA stated that “in fact, AB 5 was designed to, and surely will, upend the operation of the trucking industry.” Moreover, CTA said that the government’s contention that the different outcomes do not represent a conflict is contradicted by the Ninth Circuit’s own opinion, which acknowledged that the Massachusetts ABC text invalidated by the First Circuit was “identical” to California’s law.

The CTA case is not the only FAAAA-related case that the Supreme Court has under consideration. The court also is set to consider on June 23 a case presenting the question of whether a state common-law tort liability claim against a freight broker for alleged negligent selection of an unsafe carrier constitutes an act of “safety regulatory authority of a State with respect to motor vehicles.” Such actions are exempted from federal preemption under FAAAA.

The U.S. government’s brief – filed the same day as the one in the AB 5 case – agreed with the Ninth Circuit’s ruling that FAAAA does not preempt a state’s authority to regulate motor carrier safety through imposition of common-law duties, including by imposing safety requirements on freight brokers in the selection of motor carriers. C.H. Robinson, which is seeking Supreme Court review, responded June 7 that the government is fixating on its view of the merits but “cannot dispute the substantiality of the legal question (as evidenced by the deep disagreement among district courts) or the importance of the issue to the industry (as evidenced by the many amicus briefs).”

Advocacy and Comment

At least three of the issues covered above are worthy of comment.

1) The Department of Labor’s notice of listening sessions comes as no surprise. The first two meetings appear to be of general application and signal the Agency’s intention to reboot its reclassification efforts across all industries through rulemaking. We will be reminding the Agency that the owner operator / independent contractor model deserves a carveout and should not be considered as part of a one size fits all new regulation. We have laid the groundwork for this in previous submissions to the DOL which will be resubmitted in next month’s listening sessions.

The Small Business Administration has announced that after a rule is submitted it will hold a transportation round table to discuss its impact on small businesses and owner operators in particular. Interested parties need to be assimilating data showing the number of owner operators involved in their respective segments of the industry, the economic consequences of the elimination of the model, and the adverse effect on the supply chain. Recent press articles demonizing the motor carrier industry fail to recognize the value of the model and the small business protections built into the truth in leasing regulations.

(2) Dispatch Services. The FMCSA’s request for comments mentioned above is the result of Congressionally directed action. Most of the questions are peripheral in nature and do not address the real issues. Identity fraud, “double brokerage,” cargo theft, uninsured losses, and vicarious liability issues predominate the spot market. Although the FMCSA is given policing powers to address both carrier and broker malfeasance, the problem of intermediary abuse remains systemic and major frauds have been identified but not prosecuted.

In this context, so-called dispatch services fit the broker definition. Former Acting Administrator Jim Mullen’s Opinion settles the matter. The problem with “deregulating” broker services because the “dispatch service” does not handle the billing and paying misses the point. Any party claiming to act as a sales agent for multiple carriers can easily exceed its apparent authority, utilize its agent status to credential reputable carriers and book loads which are devoted to unvetted carriers or ghost recipients.

Changing the broker regulations is not necessary. What is needed is Agency enforcement action and exercise of its broad authority to prosecute felonious breaches of the broker regulations consistent with the National Transportation Policy and the existing regulations and statutes the FMCSA is required to enforce.

(3) Pending Supreme Court Cases. The pending California Trucking and the Mueller cases are both important to the industry and are on similar appellate tracks. Both are on appeal to the Supreme Court which asked the Solicitor General to opine on whether the cases should be accepted for review. The Solicitor General has said that the existing decisions should stand. If the Supreme Court follows this decision, state law will trump the Federal Government’s use of preemption to establish uniform rules of commerce. Both cases are awaiting the Supreme Court decision to hear the appeal and the appellate grounds are limited.

With deregulation of routes, rates and services, Congress passed an Act intended to trump state law and it has been used as the basis for appeal in both California Trucking and Mueller. What’s missing is the fact legislative history shows Congress intended to wield the force of the commerce clause to create and protect the owner operator model decades before the F4A legislation. Unchanged and precedent federal safety rules and the broker regulations make clear Federal law trumps state law on both issues. It is unfortunate but these compelling arguments are not positioned for review and are not likely to be heard any time soon.