Vaccination Mandates Take Shape

The federal contractor mandate, the private employer mandate, and rules for land and ferry border crossings have started to clarify how the Biden Administration’s vaccination initiative might impact the transportation industry – although the final force and effect of these rules remains unclear.

The federal contractor rule (the Contractor Mandate) currently requires workers subject to qualifying federal contracts to be vaccinated by January 4. The requirements for vaccination are being rolled out by multiple agencies and apply differently to various contracts. A clear understanding of which requirement applies to workers providing direct or indirect services pursuant to a government contract is needed to navigate the Contractor Mandate. Although several parties have filed suit seeking an injunction against enforcement, no court has yet issued a nationwide injunction that would prevent the Contractor Mandate from taking effect. A federal court in Kentucky, however, recently issued a limited preliminary injunction temporarily halting enforcement in Kentucky, Tennessee, and Ohio.

The Occupational Health and Safety Administration published its Emergency Temporary Standard (ETS) containing the private employer mandate on November 5. While it lays out detailed procedures for vaccination or testing of unvaccinated employees working for an employer with 100 or more employees, the ETS was temporarily stayed on November 6. There are multiple challenges to the ETS, so the duration of the stay and whether the ETS survives will be determined in the courts. As of the date of publication, the Sixth Circuit was chosen via lottery to hear consolidated cases related to the ETS. The Sixth Circuit is viewed as generally business-friendly, although much will depend on the make-up of the three-judge panel randomly assigned to hear the case. That panel will likely first consider whether the temporary stay entered by the Fifth Circuit should be lifted or remain in place while the courts consider the validity of the ETS. Even if the ETS does go into effect, the Secretary of Labor has suggested that many drivers who work alone or provide services outdoors may be outside the scope of the rule and not subject to vaccination or testing. Despite this, employers should begin to prepare now to ensure that they can meet any deadline for workers subject to the ETS if the stay is lifted.

Finally, the Department of Homeland Security plans to require foreign nationals crossing the border at land and ferry crossings to provide evidence of vaccination starting in January 2022. While essential travelers have been able to cross the border without evidence of vaccination during the non-essential travel closure, this policy has changed following the opening of land and ferry ports to non-essential travelers. Details regarding this change are forthcoming.

These rules are quickly changing, so it is imperative that employers and contractors keep a close eye on developments to ensure that they are complying with the latest guidance.

Spotlight Cargo Claim & Freight Charge Practice

The global supply chain crisis, paired with the continuing challenges of the pandemic, means motor carriers, cargo brokers, freight forwarders, and shippers are experiencing a significant increase in claims related to delay and cargo damage as well as a slowdown in the payment of freight charges, yet the demands for payment have generally increased.

In the current environment, force majeure clauses have taken on increased importance because they can help transportation providers protect themselves from claims when circumstances beyond their control preclude performance or delay performance. The traditional force majeure defenses of an “act of God” and “act of government” may not be enough to mitigate the unforeseen consequences of the supply chain logjam or COVID-related delivery rejections and losses, so tailored contract provisions may be needed to provide the appropriate protections. Transportation providers should be aware that market shifts and increased operating costs generally do not protect against non-performance. Likewise, the proper documentation is a prerequisite to asserting certain defenses to cargo claims, such as time limitations and limitations of liability, and for recouping the cost of collecting freight charges.

With COVID-related financial difficulties on the rise, transportation providers should endeavor to quickly identify those shippers or intermediaries that may be prone to a bankruptcy or company shutdown. Further, providers should be careful to minimize their losses when customers are unable to pay and reduce their (and their customers’) potential exposure to collection claims for charges not paid by the responsible intermediaries by promptly pursing payment and recovery.

The Firm’s Cargo Claim & Freight Charge group, led by Kathleen Jeffries, Thomas Gonzalez, Christopher McNatt, Andrew Marquis, Nathaniel Saylor, and Michael Tauscher, regularly assists clients with addressing cargo claim and freight charge issues. Equally important, the team can help mitigate exposure before issues arise.

FAAAA/AB 5 US Supreme Court Developments

The U.S. Supreme Court is currently considering whether to review two major Ninth Circuit preemption cases with significant implications for the transportation industry. In California Trucking Ass’n v. Bonta, a federal district court in California issued an injunction barring enforcement of AB5, California’s statutory ABC employment classification test that effectively extends coverage of California’s wage and hour laws to owner-operators working in the state. The district court concluded that AB5 was likely preempted by the Federal Aviation Administration Authorization Act (FAAAA), which bars states from enforcing laws that “relate to” a motor carrier’s prices, routes, or services. The Ninth Circuit reversed but kept the injunction in place while the California Trucking Association seeks review in the Supreme Court. On November 15, 2021, the Supreme Court invited the Solicitor General, the federal government’s Supreme Court representative, to weigh in with the government’s view of the case. The Court similarly invited the Solicitor General to file a brief in Virgin America v. Bernstein, another Ninth Circuit preemption case challenging that court’s restrictive approach to preemption.

The Supreme Court is also considering whether to review the Ninth Circuit’s decision in C.H. Robinson v. Miller. In that case, a federal district court held that the FAAAA preempted a plaintiff’s claim that a freight broker negligently selected an unsafe motor carrier. The Ninth Circuit agreed with the district court that the negligent selection claim “related to” the broker’s services, but held that common law negligence claims against brokers are not preempted because they fall within the FAAAA’s “safety exception.” Like it did in Bonta and Bernstein, the Supreme Court asked the Solicitor General to file a brief expressing the government’s opinion on whether to accept review of the case. It is unlikely the Solicitor General will file briefs in any of these cases until early next year.

Massachusetts Considers ABC Test for Joint Employment

One rarely looks to Massachusetts for a glimmer of hope on labor and employment issues, but if oral argument in a case before the Massachusetts Supreme Judicial Court is an indicator of outcome (there is no such guarantee), the Court may reject using Massachusetts’ ABC test in the joint employer context. In Jinks v. Credico, plaintiffs allege the trial court erred when it applied a “right to control” test to determine whether Credico was a joint employer along with a business it contracted with. Plaintiffs further argue that Massachusetts’ Independent Contractor Law – a restrictive ABC test – should determine whether Credico is an employer. During oral argument in early October, several justices were skeptical, suggesting it would be unworkable to apply the ABC test to determine whether any entity farther up the contracting chain is an employer of a worker who is one or multiple steps removed.

Since the California Supreme Court’s decision in Dynamex, California courts have grappled with application of a similar ABC test in joint employment cases. While there have been several state court appellate decisions rejecting the ABC test in California, a favorable decision from the Massachusetts high court would be a welcome development.

Freight Broker Class Action Attacks Continue

The transportation industry continues to battle class action lawsuits focused on the classification of freight brokers as exempt from the payment of overtime under the Fair Labor Standards Act (FLSA). These cases focus on the role performed by employees variously referred to as freight brokers/sales agents/account executives – whose primary duty is to connect shipping customers with transportation providers. Historically, it has been common for freight brokerage companies to pay these employees a salary plus commission and to classify them as exempt employees under the FLSA. Recent court decisions (and a host of settlements) have served to highlight the vulnerability of an exempt classification for these workers.

The cases ordinarily focus on the FLSA’s Administrative Exemption, and an analysis of whether freight brokers are serving in a production role or a management role. Definitive judicial guidance on the subject is limited because many of these cases have settled out of court. The courts that have addressed this issue in judicial opinions have denied the employers’ motion for summary judgment while focusing on the core sales function of the broker (not an administratively exempt function). In this environment, freight brokerage companies are urged to fully examine their classification of these workers as exempt versus non-exempt.

Enforcing Choice-of-law Provision, Federal Court Dismisses Illinois Wage Claim

Continuing a trend of federal court decisions enforcing choice-of-law provisions in lawsuits asserting violations under the Illinois Wage Payment Collection Act (IWPCA), the Northern District of Illinois recently dismissed IWPCA claims raised by the owners of several motor carriers based on a Virginia choice-of-law clause. The decision is notable given that a broker and several motor carriers were parties to the contracts at issue. The owners sought recovery for allegedly illegal settlement payment deductions under the IWPCA. The contracts, however, identified Virginia law—not Illinois—as controlling the payment terms between the parties. As such, the court determined the owners were precluded from pursuing the IWPCA claims.