Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: December, 2016

When Should You Contact a Transportation Attorney?

by G. Spencer Mynko, Esq.

I find it far more satisfying when I help clients avoid trouble as opposed to getting them out of trouble. The laws governing transportation are very complex and transportation companies require competent advice when it comes to compliance and implementation of legal business practices.  The bottom line is that every trucking company needs to know when they are doing things right, when they are doing things wrong, and what they need to do to correct and improve their business practices. Furthermore, as problems arise, those problems need to be addressed and dealt with expeditiously. This article explores several extremely important areas where trucking companies should consult with transportation attorneys. 

Corporate Governance

I regularly advise companies on the importance of properly running their companies. Too often, trucking companies do not follow proper corporate formalities when in comes to running their corporations and LLCs. If a company follows proper corporate protocol, the owners, shareholders, and officers should be able avoid personal liability for the company’s debts and liabilities. However, courts will sometimes hold a corporation’s owners and shareholders personally liable for business debts. This is called “piercing the corporate veil”. Corporations enjoy a “veil” of limited liability, but this can be lifted if a court decides the owner/shareholders are not entitled to corporate protection. This is why it is so important to make sure your corporate practices are State of the Art and determine whether your Trucking Company can withstand attack and protect its owners from from being liable for its debts. Contact Transportation Attorneys to make sure your company is being run properly.

Utilizing Independent Contractors

Protecting IC status requires more than a good Contract. While you may have a state-of-the-art independent contractor lease agreement, the real issue is whether you are properly classifying your independent contractors. Transportation providers know the importance of having best-in-class contracts to document their independent contractor relationships. Companies often think that such contracts are a silver bullet to ward off potential driver reclassification claims, but that is not the case. The next step in the independent contractor model due diligence process is ensuring that your operations actually reflect the practices outlined in the contract. That means training everyone involved in your independent contractor program to handle real-world issues and situations in a manner that is consistent with the contract and the nature of the independent contractor relationship. Supplementing your agreement with practical training on how to manage contractor relationships goes a long way toward reducing the likelihood you are later faced with reclassification claims.

Regulatory Compliance

Trucking in the U.S. was deregulated, in economic terms, in the 1980s and 1990s. When it comes to safety, however, trucking is more regulated now than it has ever been. Truck safety rules are reshaping how trucking companies operate and serve shippers, and carriers, drivers and shippers alike will face more regulation soon. From 2009 through 2014, former Federal Motor Carrier Safety Administrator Anne S. Ferro rewrote her agency’s regulatory playbook, focusing the FMCSA on three key initiatives: implementing the Compliance, Safety, Accountability, or CSA, program; changing driver hours-of-service rules; and replacing paper driver log books with electronic logging devices. The CSA and revised HOS rules are still with us, and ELDs are soon to become a reality.

The December 18, 2017 compliance deadline for the FMCSA’s electronic logging device (ELD) mandate looms large in the transportation industry, particularly now that the 7th Circuit Court of Appeals has upheld the rule. With only a few exceptions, the mandate requires all drivers of commercial motor vehicles who are currently required to complete daily records of duty status to begin tracking their duty status with a compliant ELD by the end of next year. For their part, carriers must ensure the devices are installed and operational in their owned and leased equipment and must retain all hours-of-service-related data, including supporting documentation, for at least six months.

Other “hot” regulatory topics include: Prohibition of Coercion, Safety Fitness Determination, and FAST Act and Regulatory Reform.

Contracts

Transportation contracts are a reality of life for carriers, shippers, freight brokers, intermediaries, third-party logistics companies, freight forwarders and anyone else I can’t think of. I often see contracts at the center of a dispute which make me think to myself: “Why did you sign this?”   Which reminds me: it’s better to ask me to review a contract before you sign it. Remember: your leverage, well-being, and future performance are all best served by having a lawyer involved before you enter into a contract.

Trucking Companies really must consult with a lawyer before entering into any contract. If this is not the case, have all of your current contracts reviewed. Too much is at stake to run your company without fully understanding your contractual obligations.

Dispute Resolution

 Whenever a client comes to me with an actual dispute, whether it be a cargo claim, employment dispute, work injury, major accident, or any other matter, the initial steps a trucking company takes are critical to favorable resolution of the dispute. And while I always hope that trucking companies can resolve disputes informally and avoid litigation, lawsuits are an unfortunate reality for trucking companies.

Transportation litigation presents unique legal and social scenarios beyond the more simplistic “car wreck” case. When legal counsel is presented with a trucking case, it is imperative that such counsel immediately adjust any “common” litigation strategy to take into account specialized regulations and social risks. All assumptions must be set aside; regardless of the scope of counsel’s experience, a trucking case simply cannot be properly handled in a cookie-cutter fashion. From the outset of the case, a detailed litigation strategy must be considered that takes into account federal and state laws and motor carrier regulations that apply bumper to bumper, tractor to trailer, and owner to driver, and all in the context of potential social bias against large transportation vehicles.

When a dispute arises, a transportation company should immediately contact a transportation lawyer to get proper advice on the initial steps that have to be taken to protect itself from negative consequences. Even in situations where your insurance company is providing you with lawyers, it is always a good idea to get a second opinion and have another set of eyes take a look at a problem – many of my clients have benefited from this.

BIG Changes in California Work Comp Law coming January 1, 2017

by gspencermynko

There has been a significant change in California workers’ compensation law that will take effect January 1, 2017and may alter your workers’ compensation insurance coverage and premiums on your current and renewal policies. Unfortunately, AB 2883 – the new California Workers’ Comp Law on Excluded Employees – is sure to cause big Headaches.

What is Assembly Bill 2883 (AB 2883)?

AB 2883 was signed into law August 26, 2016 and amends Labor Code sections 3351 and 3352 changing the definition of “employee” and the eligibility criteria to elect exclusion from workers’ compensation coverage. Beginning January 1, 2017 all workers’ compensation insurance policies will be required to cover certain officers and directors of private and quasipublic corporations and working members of partnerships and limited liability companies who may have been previously excluded from coverage. So come January 1, Corporate Officers and Directors of Incorporated Trucking Companies, Members of LLC Trucking Companies, and Partners in Partnership Trucking Companies may be required to be covered under a Work Comp policy.
How does AB 2883 change the law?
Under Labor Code section 3351(c), the term “employee” does NOT include the officers and directors of a private corporation where those officers and directors are the sole shareholders of the corporation, unless they elect to be.  The same goes for “all working members of a partnership or limited liability company” under subsection (f). AB 2883 changes the law by requiring an officer/shareholder to be exempt from workers’ compensation coverage only if he or she owns at least 15% of the outstanding stock. AB 2883 changes the definitions of excluded employees.
Prior to the passage of the law, officers, directors and working partners were not required to be covered under the business’s workers’ comp policy unless they opted to be covered and were not listed on a limiting and restricting endorsement. Going forward officers, directors and partners are required to be covered under the employer’s workers’ comp policy unless they meet a narrower definition of excluded employee. Under this narrower definition, officers, directors, and partners can only opt out of coverage by signing a waiver under penalty of perjury and filing the waiver with their employer’s insurer. All California workers’ compensation carriers must comply with this new legislation beginning January 1, 2017 on all in-force policies (regardless of the inception date of the policy).
Here are important details all Corporate, LLC, and Partnership Trucking Companies should know:
A Corporate Officer/Director must own 15% or more of the corporation’s issued and outstanding stock to be eligible to elect exclusion from WC coverage.
A General Partner of a Partnership, or a Managing-Member of a LLC, is eligible to elect exclusion from the WC policy (Note – the 15% ownership requirement does not apply to General Partners and Managing Members. All working members of a partnership or LLC receiving wages come under the workers’ compensation provisions. An individual who is a general partner of a partnership or a managing member of an LLC must execute a written waiver to be excluded).
Each eligible Corporate Officer/Corporate Director/General Partner/Managing-Member must sign a new waiver attesting to his/her qualification to be excluded, under penalty of perjury. The new waiver(s) will replace any current Exclusion Letter.
AB 2883 has eliminated the requirement that 100% of the stock must be held by titled Officers/Directors in order for a Corporate Officer/Director to be eligible for exclusion.
But wait, I am the Vice-President of Motor Oil and Lubricants!

The bill’s new language was added because some insureds were allegedly abusing the exemption process under current law by listing everyone in their organization as an officer or director to avoid purchasing workers’ comp. AB 2883 revises the exemption language to permit only officers and directors that that own at least 15 percent of the issued and outstanding stock of the company or an individual who is a general partner or a partnership or a managing member of a limited liability company to be exempt if they execute a waiver under penalty of perjury that they meet one of these qualifications. So your mechanic with a fancy title who only owns 5% of the companies stock is clearly not exempt from work comp. I understand that small, privately held trucking companies often reward long-time employees with a small percentage of the company and give them a corporate title in exchange for their loyalty. Until January 1, 2017, such employees can exclude themselves from work comp coverage: After AB 2883 takes effect, minor shareholders will not be able to opt out.
 
Note to trucking companies: corporations, partnerships and LLCs that do not purchase workers’ comp (because they consist of the owners of the organization and have no employees under current law) will be illegally uninsured on the first of the year unless the owners sign and file the appropriate waiver. If an officer or director with 15% or more ownership, a general partner of a partnership, or a managing member of a limited liability company does not provide a signed waiver, they will be considered an employee, and a premium charge will result based on the payroll rules of California
One Small, Silver Lining.
This new law removes the condition that in order for owners to have the option to exclude themselves from workers’ compensation coverage, 100% of the ownership must be active in the business and receiving remuneration.  Starting January 1, 2017, silent partners/owners have no effect on the owner exclusion option.
So what should trucking companies do?

Workers’ compensation carriers have begun sending policyholders a letter containing the details of the new rules and required waiver. In order to maintain existing exclusions, it is imperative your carrier receives the completed and signed waiver for each eligible individual electing exclusion as soon as possible, but no later than December 31, 2016. Remember, if any previously excluded individuals lose their eligibility to elect exclusion, Work Comp Carriers must include those individuals for coverage effective January 1, 2017 and add their payroll/premium on the policy. And don’t forget: the change in the law applies to in-force policies!
AB 2883 directly impacts policies with any of the following exclusion endorsements as these endorsements will no longer be compliant as of January 1, 2017:
1600 Exclusion Endorsement(s) for Corporate Officer(s)/Director(s)
1700 Exclusion Endorsement(s) for General Partner(s)
1901 Exclusion Endorsement(s) for Managing Members
 
In regard to new business quotes, AB 2883 requires that the waiver shall be effective upon the date of receipt and acceptance by the carrier. This requirement impacts procedures on new business quotes and carriers can no longer allow a 90-day grace period for receipt of the signed waiver forms post-bind. Effective immediately, all signed waivers must be received with the bind order for each quote, and not after policy inception.
AB 2883 is a big deal. Considering how aggressive Workers’ Compensation Insurance carriers have become in targeting and auditing trucking companies, all trucking and transportation companies need to take affirmative steps to protect themselves against violations of the new law and their potential consequences.   
 
Contact Transportationattorneys.net today to discuss AB 2883!