Scopelitis

President Obama released his FY 2014 budget (available here), which includes a request that Congress continue funding the federal government’s intensifying efforts to combat employee “misclassification” nationwide.  This program is described as follows (from p. 126):

When employees are misclassified as independent contractors, they are deprived of benefits and protections to which they are legally entitled, such as minimum wage, overtime, unemployment insurance, and anti-discrimination protections. Misclassification, together with the underreporting of cash income for those paid as independent contractors, also costs taxpayers money in lost funds for the Treasury and in Social Security, Medicare, the Unemployment Trust Fund, and State programs. The Budget includes approximately $14 million to combat misclassification, including $10 million for grants to States to identify misclassification and recover unpaid taxes and $4 million for personnel at WHD to investigate misclassification.

These funding levels are the same as seen in the President’s FY 2013 budget.  Of particular interest is the $10 million in state grants, which are doled out by the U.S. Department of Labor as an incentive for states to reclassify independent contractors as employees.  The Department of Labor’s FY 2014 budget (summary available here) goes into more detail regarding this program (from p. 25):

The FY 2014 UI State Administration request includes $10,000,000 for states to improve worker misclassification efforts. Modeled on a successful (SNAP) Supplemental Nutrition Assistance Program, this initiative will provide a “high performance bonus” to the States most successful at detecting and prosecuting employers that fail to pay their proper share of UI taxes due to worker misclassification and other illegal tax schemes that deny the Federal and State UI Trust Funds hundreds of millions of dollars annually. States will be able to use these incentive funds to upgrade their misclassification detection and enforcement programs. As part of this initiative, States would be required to capture and report outcomes and cost/benefit information to enable the evaluation of new strategies.

While it remains to be seen what Congress will ultimately enact, the President’s budget demonstrates that the executive branch of the federal government remains focused on combating “misclassification” – and in directly funding state agencies that do so as well.  Any company retaining the services of independent contractors (including owner-operators) should be sure to adopt and adhere to contractual and operating procedures which best protect independent-contractor status.

For additional information on the federal government’s attack on so-called “misclassification” or questions regarding the protection of independent-contractor status, contact Greg Feary, or Braden Core in the Firm’s Indianapolis office at (317) 637-1777
 

On March 5th, the FMCSA issued an order finding the Alabama Metal Coil Securement Act to be preempted because the act is more stringent than federal law but is not beneficial with respect to safety and  imposes an undue burden on interstate commerce. As such, effective April 4, 2013, the state can no longer enforce the law against interstate motor carriers.

The National Transportation Safety Board (“NTSB”) recently issued recommendations to the Federal Motor Carrier Safety Administration (“FMCSA”) after investigation of a 2011 accident where a truck crashed into a train near Reno, Nevada, killing six and injuring dozens.  NTSB recommended that FMCSA require motor carriers to look back ten years into driving-related employment history prior to hiring new drivers. The recommendation came after NTSB’s investigation revealed the truck driver in the Nevada accident had traffic citations and crashes in his commercial driving history.  We will monitor the FMCSA’s response to the recommendation.  

CBP recently announced that it will only accept petitions filed outside of the 60 day time period allowed by the CBP Form 7501 Notice of Penalty in certain limited circumstances.  Moreover, if a late filing is accepted, the cost of late filing has increased significantly. In the past, CBP would typically accept a late filed petition including an offer in compromise if the petitioner added $200 to the mitigated amount.  Now, the agency will assess a pealty of .1% of the full assessed claim (as opposed to the mitigated amount) multiplied by the number of days the petition is late.  Thus, for a $50,000 assessment that is 30 days late, the additional penalty is $1,500 (.001 x 30=.03 x $50,000= $1,500). 

As such, the firm strongly recommends that motor carriers and customs brokers that receive notices of penalty from CBP ensure that petitions are filed within the initial 60 period. 

Illinois House Bill 5101 prohibits texting or using a hand-held cell phone while driving a commercial motor vehicle - making it a serious traffic violation.  Illinois previously prohibited texting while driving for all vehicles, but cell phones were permitted.  Illinois statutes have since been amended to be in compliance with the Motor Carrier Safety Regulations law that prohibits texting and cell phone use by commercial motor vehicle drivers.

Senate Bill 2488 also prohibits cell phone use in construction or maintenance speed zones regardless of the speed limit in those zones.  Drivers can only use cell phones in voice-operated mode, which includes the use of a headset or cell phones used with single button activation.

Given that segments of our industry rely on the use of consumer reporting agencies to perform background checks and prepare consumer reports, transportation employers will want to ensure that they are using a new version of the Summary of Your Rights Under the FCRA form (Summary of Rights) in order to comply with the Fair Credit Reporting Act (FCRA).

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 transferred the rulemaking and enforcement powers over the FCRA to the newly created Consumer Financial Protection Bureau (CFPB).  The CFPB recently issued a new version of the Summary of Rights form that should be used by employers beginning on January 1, 2013.  This new Summary of Rights form resembles the old form, but directs individuals to contact the CFPB for more information on their rights under the FCRA.  The new form can be downloaded here (See Appendix K).

As a reminder, the FCRA requires that employers provide individuals with a Summary of Rights in the following situations:

1. Adverse Action.  If an employer is going to take some type of adverse action against an individual based in whole or in part on the contents of a background check or “consumer report”, the employer must, prior to taking any adverse action, provide the individual with a “pre-adverse action” notice and a Summary of Rights.
 
2. Investigative Consumer Reports.  If an employer plans to obtain an “investigative consumer report” on an individual (an assessment of an individual’s character, general reputation, or personal characteristics obtained through personal interviews with the individual’s neighbors, friends, and associates), the employer must provide the individual with advance written disclosure of its intent and a Summary of Rights.

Carriers should review their FCRA compliance protocol to ensure that this new Summary of Rights form goes into use on January 1, 2013.  For additional information, please contact David Robinson at 317-637-1777.

After the Eastern District of Arkansas decertified the conditional class of bus drivers on federal claims and denied class certification with regard to state claims in Douglas v. First Student, Inc., 9-cv-652, a group of 87 of the opt-in plaintiffs and potential class members from Douglas filed an action for their individual claims on November 16, 2012  in Abbott, et. al. v. First Student, Inc., 12-cv-726 (E.D. Ark.).  The bus drivers are now each seeking individual relief for unpaid wages and unpaid overtime under both the Fair Labor Standards Act and the Arkansas Minimum Wage Act as joined plaintiffs with common counsel.  This action by the plaintiffs and their counsel represents one means by which class plaintiffs will attempt to aggressively continue pursuit of their claims even after decertification or denial of certification on a class basis.

Beginning November 1, 2012, the informed compliance period of the Canada Border Services Agency's ("CBSA") eManifest program begins.  eManifest is the third phase of the Advance Commercial Information ("ACI") program, which enhances CBSA's ability to identify potential threats to Canada while facilitating the movement of low-risk shipments across the border.  eManifest requires motor carriers, freight forwarders, and importers to electronically transmit cargo, conveyance, house bill/supplementary cargo, and importer data to the CBSA prior to arrival at the border.

Throughout the informed compliance period, which lasts from November 1, 2012 through May, 2013, the CBSA expects carriers to become eManifest-compliant.  During this six-month period, the CBSA will not deny entry to Canada or impose penalties for eManifest non-compliance; however, beginning in May, 2013, non-compliant carriers will be subject to penalties and will be denied entry.  Additional information on the implementation of eManifest can be found at http://www.cbsa.gc.ca/prog/manif/implementation-eng.html.

With the implementation of eManifest, highway carriers transporting goods into Canada are required to transmit cargo and conveyance data electronically to the CBSA prior to arrival.  The cargo and conveyance data must be received and validated by the CBSA a minimum of one hour before the shipment arrives at the border.

North Carolina has joined Arizona, Mississippi, and South Carolina in requiring employers, including motor carriers, to use the federal government's E-Verify system for evaluating employment eligibility.  The E-Verify system compares Form I-9 employment eligibility information with data from the U.S. Department of Homeland Security and the Social Security Administration to ensure a match.  E-Verify is an otherwise voluntary system, except for certain federal contractors and employers in Arizona and Mississippi.

Beginning October 1, 2012, North Carolina employers with at least 500 employees must use the E-Verify system for all new hires.  The obligation will apply to employers with 100 or more employees beginning January 1, 2013, and employers with 25 or more employees must use E-Verify as of July 1, 2013.  E-Verify requirements do not apply with respect to current employees.  

Northern District of California Judge Ronald M. Whyte denied a motion for class certification on September 7, 2012 with regard to a class of truck drivers from CEVA Freight, LLC seeking to be classified as employees instead of independent contractors.  Judge Whyte found that the circumstances for the owner-operators were too individualized to allow for them to proceed with their misclassification action as a class.  Some of the owner-operators hired their own teams to operate trucks while others operated their own trucks--these types of differences in circumstances were enough for the Judge to deny the motion.  The owner-operator plaintiffs claimed that, as a result of the misclassification, they were owed overtime, as well as meal breaks and other benefits.  With this ruling, the owner-operator plaintiffs would have to pursue their claims of misclassification individually, pending any appeal to the 9th Circuit Court of Appeals.  The case has been ongoing in federal court since 2005.

On remand from the Ninth Circuit, the United States District Court for the Southern District of California issued its decision on August 27, 2012, holding Affinity Logistics Corporation (“Affinity”), a motor carrier, carried its burden of establishing it properly classified as independent contractors a certified class of former owner-operator delivery drivers (the “contractors”) under California law.  Ruiz v. Affinity Logistics Corp., No. 05CV2125, slip op. at 21 (S.D. Cal. Aug. 27, 2012). 

The Southern District previously reached this same conclusion under Georgia law, which applies a presumption of independent contractor status, to the facts adduced at a three-day bench trial.  On appeal, the Ninth Circuit concluded California, not Georgia, law should apply to the contractors’ relationship with Affinity and remanded the case.  California law applies a presumption of employment status that a putative employer may overcome if the weight of the evidence supports a finding of independent contractor status when the court applies a multi-factor, common law right of control test.   

When it revisited the issue under California law, the Southern District applied the right of control test with “with deference for the remedial purposes of California’s protective legislation.”  Id. at 6.  This notwithstanding, the court found evidence that the contractors could “hire others to complete the deliveries Affinity hired them to do is strong evidence suggesting that Affinity did not have the requisite level of control over the manner and means of [the contractors’] work.”  Id. at 7.  The court further found the majority of the “secondary factors” considered by California courts, including, e.g., investment in equipment and opportunity for profit or loss, among others, favored independent contractor status.  Id. at 20-21. 

While the court further found Affinity exercised “some control” over the contractors, the court deemed this evidence irrelevant to the ultimate question because “this control was either unrelated to the manner and means by which [the contractors] accomplished their work, or it was a result of other factors—such as federal regulatory requirements or [customer] preferences—rather than direct control by Affinity.”  Id. at 21.

The court therefore found in favor of Affinity.  Judgment has been entered against the plaintiff and class of contractors.  Plaintiff filed a Notice of Appeal on August 29, 2012.              

A California judiciary committee struck down an "anti-Concepcion" bill, drafted in response to the US Supreme Court's decision in AT&T v. Concepcion, in which the court held that AT&T could requires its employees to arbitrate their issues individually.  Specifically, the California senate bill was drafted in February 2012 and, if enacted, would strike language from employee's contracts that waived the right to bring grievances against an employer in a class action suit. 

Supporters of the bills argued it would ensure workers the ability to form class actions and, as a result, would deter fraud.  Opponents argued that voiding such waiver language would dramatically increase litigation costs by encouraging class actions.

So as to allow small fleet owners to take advantage of the flexibility option, the California Air Resources Board ("CARB") has extended the reporting deadline to September 1, 2012.  The extension affects fleet owners of 20 or less 50-foot or longer box-type trailers that 2010 models or older.  The small fleet owners may select 1 of 2 options to bring trailers into the compliance.  Of the two options, the extension applies to the second.  The options are as follows:

1. Owners can ensure the fleet is equipped with United States Environmental Protection Agency ("EPA") SmartWay-verified aerodynamic equipment on trailers, including side skirts and trailer tails, by January 1, 2013, or

2. Owners may report by September 1, 2012, to take advantage of the optional phase-in plan, which allows small fleets up to four years to comply.

Regardless of which method owners choose, owners must also install fuel efficient, low-rolling resistance tires on their trailer fleets by January 1, 2017.

Owners will certain information available when reporting online at Tractor-Trailer GHG Reporting, including the trailer vehicle identification numbers, makes and model years, and license plate numbers. For refrigerated van trailers, the transport refrigeration unit model year and engine model year are both required.

The rule is also expected to help combat climate change by reducing carbon dioxide emissions nationwide by 33 million metric tons by 2020.  Fleet owners seeking more information on compliance assistance and funding opportunities can go to http://www.arb.ca.gov/truckstop.
 

In light of increased oil and gas drilling, the Federal Motor Carrier Safety Administration ("FMCSA") has proposed revisiting hours-of-service guidance for oilfield carriers. The FMCSA has traditionally granted two HOS exceptions to oilfield haulers.

One exception grants oilfield haulers a 24-hour restart after 70 hours of work in eight days. This applies to drivers who exclusively haul oil and gas equipment, such as pipe, as well as drivers who serve field operations. The second exception provides that specially trained drivers of vehicles specific to oil wells do not have to include waiting time in their on-duty time.

The FMCSA intends to clarify these exceptions. Specifically, the 24-hour restart would apply to carriers that provide direct support to oil and gas well sites, including hauling water used in the fracking process, and hauling waste away from the site. The waiting time exception would apply only to drivers of equipment that is specially built for well service, and who have been trained in the operation of that equipment.

Drivers who haul supplies, equipment and materials such as sand and water would not be eligible for the waiting time exception, even if their trucks have been somewhat modified or if they have extra training.

The FMCSA will release the proposed guidance one June 5, 2012 in the Federal Register and comments will be due in August.
 

A Maryland federal judge recently ruled that the Supreme Court class action ruling in Wal-Mart v. Dukes does not bear on an FLSA overtime pay class action suit. The court conditionally certified the collective action, rejecting the argument that the Dukes ruling applies to all aggregate actions. The court stated that the court's holding in Dukes only bears on Rule 23 class actions and is not applicable to FLSA actions.

In Dukes, the Supreme Court held that classes cannot be certified when each class member would be entitled to different relief against a defendant.

At issue was a collective action suit against Wells Fargo, where in the company's loan officers were classified as exempt and were not paid overtime if and when they worked more than 40 hours a week, up until April 1, 2011, when their status was changed to nonexempt, according to the judge's ruling. Prior to the switch, the officers were paid on a "draw and commission" basis ranging from $1,000 to $5,000 per month depending on their performance. After, they were paid $12 an hour, plus net commissions.

 

The California Supreme Court recently handed down a much anticipated decision in the case of Kirby v. Immoos Fire Prot., Inc., 140 Cal. Rptr. 3d 173 (Cal. 2012), where the court determined the applicability of California Labor Code § 218.5 in an overtime and rest break lawsuit.  The statute has a fee shifting provision that provides for attorney’s fees and costs to plaintiffs or defendants who prevail on claims brought for the nonpayment of wages and benefits.  The lower courts awarded attorney’s fees under the statute to the employer Immoos Fire Protection, Inc. for prevailing on a rest break claim brought under California Labor Code § 226.7. 

The California Supreme Court reversed the lower courts’ award to the employer,  finding that fees could not be awarded under 218.5 for the rest break claim because the meal and rest break statute was not “aimed at protecting” an employee’s wages.  The court deferred on other substantive questions and narrowed its own precedent with respect to what constitutes a “wage.”  Consequently, the implications of the holding are not altogether clear.  Nevertheless, the statute remains a viable avenue for employer’s to pursue attorney’s fees in an otherwise employee friendly labor code which has several fee shifting statutes that only provide fees to prevailing employees.

Recently, the Federal Motor Carrier Safety Administration ("FMCSA") released its 2012-2016 strategic plan, which lays out the agency's safety-focused initiatives over the next five years. The strategic plan is built around a three-pronged approach to truck and bus safety: raise the barrier to entry to the industry; enforce high safety standards; and eliminate high-risk carriers and drivers.

Among other things, the agency plans to development a smartphone application called the "SaferBus App" in order to assist consumers in selecting a particular carrier. Additionally, the FMCSA hopes to increase accessibility to its data management system. The FMCSA plans to complete rulemaking revisions to the Safety Fitness Procedures, in accordance with the CSA. Through this rulemaking FMCSA would establish safety fitness determinations based on safety data from crashes, inspections, and violation history rather than the old compliance review. The intention is to permit the FMCSA to assess the safety performance of a greater segment of the motor carrier industry with the hope of reducing large truck and bus crashes, injuries, and fatalities. The FMCSA will also work on rulemaking revisions to the Electronic On-Board Recorders for Hours of Service Drivers to require motor carriers to install and operate Electronic On-Board Recorders (EOBRs).

Further, the FMCSA will create a single comprehensive safety ranking system that covers all regulated carriers (ie, passenger, HAZMAT property, and HHG carriers, as well as shippers, including intermodal freight, brokers, drivers, and cargo tank manufacturers or repair facilities.)  The Agency hopes to expand CSA and the number of carriers with SMS BASIC scores.

 The FMCSA's strategic plan is available at http://www.fmcsa.dot.gov/about/what-we-do/Strategic-Plan/Strategic-Plan.aspx.

The National Highway Traffic Safety Administration ("NHTSA") proposed a federal motor vehicle safety standard to require electronic stability control ("ESC") systems on large commercial trucks and buses. The rule would affect vehicles with a gross vehicle weight rating of more than 26,000 pounds. The proposed rule would take effect between two and four years after the standard is finalized, depending on the type of vehicle. The proposal also includes standards for performance testing of the technology.

Based on NHTSA research, the technology could prevent up to 56% of rollover crashes each year and another 14% of loss-of-control crashes.

A Notice of Proposed Rulemaking has been published in the Federal Register and members of the public will have the opportunity to comment on the proposal for 90 days. NHTSA will also hold a public hearing on the proposed safety standard to solicit further public comment.

The Transportation Security Administration ("TSA") published a rule in today's Federal Register setting the fee for Security Threat Assessments ("STAs") at $41.  According to the notice, STAs are required for "employees of aircraft operators, foreign air carriers, IACs [Indirect Air Carriers ], and CCSFs [Certified Cargo Screening Facilities] who have or are applying for unescorted access to cargo to be transported on passenger aircraft, screen cargo, supervise the screening of cargo, or perform certain other security functions as provided for in [49 C.F.R.] § 1540.201(a)."  The rule takes effect June 22, 2012. 

The transportation industry has always been on the leading edge of interstate and international commerce.  Operating across multiple jurisdictions frequently entails thorny compliance issues.  A federal district court in California issued a ruling last week in a class action case that provides some welcome guidance for businesses in California whose employees work both inside and outside the state.  The issue in the case, Wright v. Adventures Rolling Cross Country, Inc., No. C-12-0982 EMC (N.D. Cal.), was whether employees of a California tour operator were covered by California’s wage and hour laws while working abroad.  Judge Chen of the Northern District of California held that while work performed inside California by a California resident is covered by the California Labor Code and its associated Wage Orders, work performed principally outside the state is not.  The Court accordingly dismissed all claims based on work performed outside California.  The decision is consistent with a prior ruling from the Central District of California in Sarviss v. General Dynamics Info Tech., Inc., 663 F.Supp.2d 883 (C.D. Cal. 2009).  While the decisions in Wright and Sarviss are helpful, we expect to see employees continue to claim that California’s wage and hour laws (and those of other states) apply extraterritorially.   We will continue to follow and report on developments here.