From everyday interactions to company-level strategy, government regulations have major ramifications on the trucking industry.
To help you gain a better understanding of pending policy changes as you prepare for the 2020 truckload market, we asked Tom Jensen, UPS VP of Public Affairs, to lend his expertise.
As the lead federal advocate for one of the largest and most comprehensive transportation providers in the world, he is uniquely positioned to offer insight into these three major upcoming transportation regulations. Below is his perspective.
3 Regulations That Could Impact Your Business in 2020
According to a recent study, both shippers and carriers expressed a strong desire for greater visibility into government policy.
When asked where they most wanted expert analysis, 56% of carriers and 47% of shippers ranked “impact assessments for regulatory changes” as a top choice, making it the second overall choice in both audiences.
Carriers in particular noted difficulty with policy changes. When asked to choose their biggest challenges, they ranked “keeping up with government regulations” second overall — it was number one for mid-sized carriers.
With the Federal Motor Carrier Safety Administration (FMCSA) Clearinghouse, proposed changes to driver Hours of Service and the California AB 5 bill on the horizon, 2020 is shaping up to be an interesting year on the regulatory front.
Let’s take a look at these three policy changes and how they could impact your business.
Drug & Alcohol Clearinghouse
Registration for the US Department of Transportation’s Drug and Alcohol Clearinghouse is now officially open, and as of January 6, 2020, prospective or current employers can conduct queries on drivers’ histories.
What is the FMCSA Drug & Alcohol Clearinghouse?
The long-awaited Drug & Alcohol Clearinghouse will serve as a secure, online database that will allow relevant parties to identify — in real-time — whether or not a Commercial Driver’s License (CDL) holder has violated any federal drug and alcohol testing program requirements within the past five years.
Relevant parties include: United States Department of Transportation (US DOT) or more specifically the Federal Motor Carrier Safety Administration (FMCSA, which is part of the DOT), current and potential employers, state driver licensing agencies, and law enforcement officials.
The FMCSA Clearinghouse will serve as a secure database that will allow relevant parties to identify — in real-time — whether or not a CDL holder has violated any testing program requirements.
The regulation does not change the existing DOT workplace drug and alcohol testing requirements — it is just bringing existing procedures into a centralized database.
Many motor carriers and transportation officials concerned with driver safety have long advocated for the Clearinghouse.
It was designed to bring more transparency to the industry by helping carriers to better vet new drivers and make sure currently employed drivers do not present a risk.
Simply put, the objective of the Clearinghouse is to improve safety on our nation’s roads by creating greater visibility into CDL drivers’ drug and alcohol testing behavior.
When will the FMCSA Clearinghouse take effect?
On January 6th, 2020, the FMCSA officially implemented the program, meaning:
- Employers are required to conduct electronic queries in the Clearinghouse, checking CDL driver violation histories (as well as traditional manual inquiries with previous employers in accordance with existing procedures).
- Medical review officers and substance abuse professionals are required to submit verified positive test results (as well as refusals) to the Clearinghouse.
- Drivers are able to view their own records (which will only contain information recorded on or after January 6, 2020).
- States and licensing agencies have the option to request information from the Clearinghouse before completing certain CDL transactions.
Though currently employed drivers are not required to register immediately, on January 6th, 2023, this will become a requirement for new CDL applications and renewals.
FMCSA Clearinghouse Registration
The FMCSA encourages all CDL holders (drivers) to register for a free account as soon as possible to review information and confirm the database is accurate.
Employers of drivers are now required to look up drivers in the Clearinghouse during the hiring process, as well as conduct an annual audit for currently employed drivers. This will be in addition to any other drug and alcohol testing that a carrier conducts.
Though registration is free for drivers, carrier queries to the database to look at driver history are not — the FMCSA will charge $1.25 per query.
Carriers can purchase search bundles for discounted fees to reduce the cost. The FMCSA recommends that carriers buy bundles based on their fleet size and anticipated annual hiring needs. Large fleets can even pay a flat rate for unlimited queries.
How Will the FMCSA Clearinghouse Impact the Industry?
Only infractions that occur on or after January 6, 2020 will be recorded, so it will take some time for this information to build up in the database — meaning there will not be any immediate impact to the industry.
That said, many shippers and carriers are concerned about the operational growing pains and potential cost of the new program.
There is also fear that the Clearinghouse will weed out more drivers with substance abuse violations, resulting in less carrier capacity and exacerbating an existing driver shortage issue.
Ironically, weeding out drivers that violate federal drug and alcohol testing standards has always been a core goal of FMCSA.
It will take some time for this information to build up in the database — meaning there will not be any immediate impact to the industry.
These rate and capacity fears are natural in a tighter labor pool.
While the establishment of a federal repository for testing violations will undoubtedly remove some drivers from service — putting pressure on the owner-operator sector of the industry in particular — this is not likely to have a material impact on shipping rates and capacity.
In all likelihood, the trucking industry will adapt to this regulatory scheme after a relatively short adjustment period, similar to previously implemented compliance obligations (i.e. ELDs).
In short, there is no real change in the underlying DOT drug and alcohol testing program. The Clearinghouse is just making the existing procedures more efficient for employers and licensing agencies.
It will have a marginal, not material, impact on rates and capacity in the truckload sector, and even less impact to the LTL sector.
For more information on the Clearinghouse regulation, the DOT has compiled a helpful FAQs resource that you can view here.
Proposed Changes to Driver Hours of Service
The ELD mandate, which was initially implemented in December of 2017, requires all drivers to electronically track their Hours of Service (HOS) in a digital recording device, synced up to their truck’s engine.
Though it drove greater compliance to hours of service regulations, it also decreased driver flexibility, making it more difficult to operate in certain scenarios.
To help offset some of these compliance challenges, the FMCSA is considering changes to the hours of service regulations for all drivers operating in interstate commerce.
You can review the full existing hours of service regulations here.
When will the proposed changes to hours of service changes take effect?
The FMCSA originally proposed changes to Hours of Service in the summer of 2019, and the changes are currently mired in the federal rulemaking process, which is a methodical, slow journey.
In the meantime, the Presidential Election in November 2020 will come into play.
- If President Trump is re-elected, the Hours of Service rule-making process will proceed on its normal schedule.
- If President Trump is not re-elected, the Trump administration DOT will likely push to get the rule enacted before they leave office in January 2021.
- If President Trump is not re-elected, and the administration cannot get the rule enacted before January of 2021, the incoming President’s DOT administration will almost assuredly not enact the Trump-era DOT proposal.
An important side note: these HOS changes are not a legislative exercise and there is no current legislation related to HOS. Rather, this is a regulatory process. We are not anticipating any HOS legislation next year.
Though Congress could introduce legislation related to Hours of Service at some point, that scenario is much less likely as the stakeholders will await the outcome of the rule-making procedure (currently in motion).
How Will the Proposed Hours of Service Changes Impact the Industry?
In short, the proposed changes would provide some additional operational flexibility to multiple sectors of the trucking industry by giving drivers and dispatchers more discretion on how to use on and off-duty hours.
Carriers could effectively expand their driving window by strategically taking optional breaks at times that allow them to avoid heavy traffic. This would add the net effect of increasing driver efficiency while increasing HOS compliance.
If implemented, it could mitigate some scheduling friction between shippers and carriers, as drivers would have more leeway to plan their breaks and rests around appointment times.
Reclassification of Independent Contractors
From the environment to compensation for college athletes, California has been taking the lead on several legislative fronts. Due to their relative population size and economic influence, where California goes, other states will often follow.
California Assembly Bill 5 (AB 5) is no exception. Now that California’s new independent contractor law has begun the charge, other states like New York and New Jersey have signaled their consideration of passing similar laws.
What is the California AB 5?
Originating from a California Supreme Court decision about employee classification, Assembly Bill 5 (AB 5) is a new California state law that redefines and limits the way businesses classify workers as independent contractors (as opposed to employees).
The legislature passed the law — which had significant support from labor groups and unions — in response to worker classifications practices from many technology companies in the gig economy.
AB 5 is a new California state law that redefines and limits the way businesses classify workers as independent contractors.
Generally speaking, this law changes the landscape of worker classification, making it more difficult for companies to classify workers as independent contractors, instead pushing them to classify workers as employees.
Employees are often entitled to greater labor protections that independent contractors are not eligible for, including minimum wage laws, sick leave, unemployment and workers’ compensation benefits.
The new California worker classification law provides a new test to determine proper worker classification.
The three-pronged test determines that workers can be classified as independent contractors if:
- They are free from the control and direction of the hiring entity when performing their work.
- The work performed is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation or business.
As it relates to trucking, this law will make it more difficult for California-based motor carriers to utilize independent contractors (i.e. owner-operators). Instead, they will likely be required to treat these workers as employees (i.e. company drivers).
When will the new California worker classification law go into effect?
As of January 1, 2020, the law went into effect. Gig-economy companies like Uber and Lyft have pledged to orchestrate a well-financed 2020 California ballot initiative in an attempt to invalidate the law.
In the meantime, New York and New Jersey (and potentially numerous other states) are considering similar state-level legislation in 2020.
Exactly how and where California will enforce the new law across all industries, and whether or not it will spread to other states, remains to be seen.
Will Congress get involved in the new California worker classification law?
Congress will not get involved in this issue in the short term. Pro-labor forces — which generally favor making everyone an employee vs. an independent contractors — see more opportunity in “blue” states than at the federal level.
Meanwhile, there are already major legal challenges from various business sectors, including trucking, in an attempt to invalidate the California law.
How will the California worker classification law impact shippers and carriers?
In an attempt to minimize disruption and maintain flexibility in the trucking industry, the California Trucking Association filed a lawsuit in the U.S. District Court for Southern California in November 2019, stating that the law should not apply to independent owner-operators.
On December 31, 2019, U.S. District Court Judge Roger Benitez signed a temporary restraining order, exempting affected truck drivers for the time being. This short-term legal challenge only applies to the trucking industry (commercial motor carriers) and only provides a temporary reprieve from the new law.
This short-term legal challenge only provides a temporary reprieve from the new law.
This legal issue is far from resolved and a permanent solution as to how, or if, this law will apply to truckers may not happen for quite a while. In short, this is a fluid situation.
The long-term fallout from the California AB 5 could be significant. It is the first state-level statutory initiative to significantly rewrite the relationship between employee vs. independent contractor.
Many industries will feel the effects of AB 5, including trucking and transportation. In response, many sectors of the business community are planning legislative efforts to broaden their ability to use independent contractors for their industries.
Many industries will feel the effects of AB 5, including trucking and transportation.
The expansion of these types of legislative statutes (pro-employee/anti-independent contractor) could indeed have a material impact on trucking rates and capacity in the long term.
By limiting how and when independent contractors can be used, carriers — particularly smaller ones — will face increased operating costs from wages, benefits, insurance and more.
If these laws gain momentum in several states, they will also impact larger carriers that hire drivers for short durations or during peak shipping periods. Any increased costs to carriers big and small would undoubtedly be passed along to shippers in the long term.
The Coyote team will continue to monitor regulatory changes that impact the trucking industry and our valued network carriers.