Labor Meets Transportation in Surface Transportation Reauthorization Bills

After a one-year extension last fall, Congress is making progress, albeit in fits and starts, towards passing a multiyear surface transportation reauthorization bill. Both versions of these massive bills not only authorize highway spending, but also contain numerous policy-related provisions aimed at trucking.

At the time of this writing, the full House has passed its version of policy-related provisions (H.R. 3684) and the Senate has passed its version, known as the bipartisan infrastructure bill. The Senate provisions will now have to go to the House to reconcile the differences between the two versions. While the future of the legislation and the final provisions are uncertain, now is a good time to look at what may be coming down the road.

Carriers utilizing lease-purchase agreements may be wary of provisions in both bills that direct the Secretary of Transportation, in conjunction with the Secretary of Labor, to establish a Truck Leasing Task Force to examine truck leasing agreements, including lease-purchase agreements, and whether their terms are “predatory” (House) or “inequitable” (Senate). The House version specifically directs an examination of the classification of drivers under lease-purchase agreements, while the Senate version places more emphasis on how the terms affect maintenance and safe operation of vehicles. Ultimately, the Task Force is to issue a report with its findings and include recommendations on best practices and changes to laws at the federal, state, or local levels to promote “fair leasing agreements” that allow drivers to “earn a living wage.” Because provisions are in both bills – although not identical – some form is likely to become law.

Perpetuating the novel intersection of labor and transportation, the House version requires consideration of an applicant’s compliance with “applicable labor and employment laws and regulations, including wage and hour and workplace safety laws and regulations, relevant to the safe operation of a motor carrier” when granting or denying motor carrier authority. Another House provision would direct a rulemaking to establish limits on the amount of time a driver can be detained without the driver being compensated for such detention.

In a measure supported by some in the industry but opposed by many, the House version would increase the minimum liability insurance amounts from $750,000 to $2 million and provides for automatic inflation adjustments every five years thereafter. On the positive side, there is a Senate provision that directs the establishment of a pilot apprenticeship program under which drivers aged between 18 and 21 could engage in interstate operations.

The highway bill is critical to the trucking industry. Congressional deliberations throughout the remainder of the summer and fall hope to produce a necessary bill – whichever policy provisions make the final cut.

Spotlight on Investigations and Audits

While the transportation industry is largely deregulated, a surprising number of federal, state, and local government agencies write and administer a long—and growing—list of rules affecting transportation providers. These agencies regularly inspect for noncompliance, and they have the power to assess civil penalties for violations, place assets “out of service,” or worse.

When the inspectors come calling, it is important to be prepared.

The Firm’s multi-disciplinary Investigations and Audits practice combines a deep knowledge of the regulations impacting transportation providers with experience helping clients navigate the complex web of agencies and enforcement regimes.

Scopelitis can defend your business in a wide range of investigations: Federal Motor Carrier Safety Administration compliance reviews and safety audits; Transportation Security Administration and Federal Aviation Administration inspections concerning air-cargo security and dangerous-goods compliance; Environmental Protection Agency investigations involving violations of California’s Truck and Bus Regulation and Drayage Truck Regulation; Department of Labor wage-and-hour audits; Occupational Safety and Health Administration inspections; Equal Employment Opportunity Commission investigations; and state unemployment audits.

In addition, the Firm regularly defends clients facing investigations beyond those conducted by government agencies, including “premium audits” conducted by insurers, “pension fund” audits for unionized workforces, and “contract audits” conducted by shippers (e.g., for compliance and most-favored-nation clauses).

The Firm’s multi-disciplinary Investigations and Audit practice assists Mergers and Acquisitions partners for due diligence projects. While we primarily employ these skill sets on buyer-side projects, our experience in these areas aids sellers in understanding their strengths and weaknesses as they prepare for sale.

The Firm’s Investigations and Audits team – Greg Feary, Braden Core, Nathaniel Saylor, Chris McNatt, Kelli Block, Jim Hanson, David Robinson, Jack Finklea, Steve Pletcher, and Becky Trenner – can guide you through the regulatory inspection and enforcement process.

New Texas Law Paving the Way to Curbing Nuclear Verdicts

With “runaway” jury verdicts in trucking accident cases on the rise in recent years, a new law may give trucking companies some relief in one major venue. Effective September 1st, Texas law will provide defendants in these cases the right to a bifurcated trial. The first trial phase will be limited to a determination of liability for compensatory damages. Next, any liability for punitive damages will be determined in the second phase of the trial. Evidence of a defendant’s failure to comply with a regulation (like the Federal Motor Carrier Safety Regulations) may only be presented during the second phase with some exceptions. Several Texas jury verdicts have exceeded $100 million in recent years. The industry is hopeful and optimistic that this new law will combat the reptile theory, curb nuclear verdicts, and set an example for other jurisdictions.

Questions Remain After Change in Export Air Cargo Rules

In the Spring 2021 edition of The Transportation Brief, we advised on an upcoming change to the rules governing cargo offered for international air transportation. The new rule, effective June 30, 2021, requires all cargo to be screened or handled pursuant to an “alternative framework.” Due to delays by the Transportation Security Administration (TSA) in updating affected security programs, we have seen significant disruption in the supply chain as shippers, air forwarders, and all-cargo aircraft operators attempt to navigate new compliance obligations. Difficulties encountered by air forwarders include limits on screening capacity, unclear packaging guidance, late-arriving amendments to their security programs, and murky rules for single-entity charters and cargo that is not capable of being screened using methods currently approved by the TSA. Despite recent indications of imminent relief on these issues, we continue to advise Indirect Air Carrier and Certified Cargo Screening Facility clients to work closely with screening vendors and air carriers to stay ahead of the curve.

Collections During COVID and Beyond – Protecting Your Warehouse

During the height of the pandemic, businesses, including warehouses, were presented with a new world of challenges. One such challenge present before and during the pandemic is collections. The good news is that warehouses can take certain actions to be better positioned to handle this age-old problem. One way to counter this assertion to offset money owed to the warehouse company is to eliminate it from the warehouse contract language and include a provision requiring payment in full regardless of any outstanding or unresolved claims. By including more favorable provisions in a warehouse’s storage agreement or terms and conditions, warehouse companies may decrease assertions from customers requesting a right to offset money owed, thus allowing business to thrive.

Ninth Circuit Addresses Piece-rate Pay Plans

Plaintiffs’ lawyers have long argued that under California law, drivers paid with a mileage-based compensation formula are not compensated for their non-driving activities, such as time spent conducting pre-trip and post-trip inspections, fueling, waiting at company terminals, waiting at customer locations, and completing paper work associated with a load. As a result, plaintiffs’ lawyers contend that employers must compensate drivers for performing those tasks separately from the pay they receive from their mileage-based compensation formula.

Notwithstanding such arguments, in Ayala v. U.S. Xpress, Inc., the Ninth Circuit recently ruled that a properly drafted piece-rate compensation pay plan that pays for delivered loads can cover both the time spent driving as well as the time spent performing non-driving activities associated with delivering the loads.

It is important to have a written compensation pay plan to address how drivers earn their activity-based pay.