With the New Year comes new regulations, many of which will undoubtedly affect the nation’s 3.5 million truck drivers and niche sectors that make up this dominant $700 billion industry. Some claim that trucking is a “deregulated” industry, and perhaps financially it is, but in terms of environment, labor, and safety, trucking remains highly regulated on all levels- federal, state, and local. Some leading industry executives believe that a few of these changes are welcome- but certainly not all of them. Here are the 5 changes that you should be aware of going into 2020.
1. AOBRD to ELD Switchover
Electronic Logging Devices (ELD) regulation took effect on December 17th, 2017 and was signed into law under the Obama Administration. The ELD devices were originally introduced to keep track of a driver’s hours of service (HOS) and trucks using the older model (AOBRDs) had 2 years to comply with the new mandates. Well, the time has come and many carriers have procrastinated when making the switch which could tighten capacity and decrease productivity. Although the effect won’t be as rippling as the 2017 introduction, rates are expected to spike due to non-compliant larger carriers that are still utilizing AOBRDs.
2. New Overtime Laws
On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. These new rules will take effect starting in January 2020 and will allow the increase in the salary threshold for employers to be exempt from overtime, rising from the current $23,660 to $35,568. This will not affect truck drivers who are paid per mile but will affect both carriers and brokerages with office staff. As we all know, forcing companies to pay their employees more will iron out in other deductions as businesses try and balance the higher labor costs. These overtime laws are the only new regulations passed under the current Trump administration but will have a lasting effect on every working sector.
3. IMO 2020 Sulfur Regulations
Starting at the beginning of 2020, the International Maritime Organization (IMO) is calling for the reduction of allowable sulfur content in marine fuel. This regulatory hurdle will have obvious effects on transportation fuel spending for both the maritime and trucking industries. The final costs of the transition will most likely be passed off to shippers which is why transport managers across the industry should pay attention. In addition to labor costs, the second-largest expense for a carrier is fuel and a sudden spike in diesel prices could contribute to some going out of business. While many are expecting oil prices to substantially increase, U.S. producers are very capable of quickly ramping up production when incentivized by higher prices. Considering America’s newly independent energy state, the oil reserves at home are expected to absorb some of the market waves.
4. Drug and Alcohol Clearinghouse
This new regulation will take effect on January 6th, 2020 and will require all trucking companies to use the FMCSA’s new database. This software provides employers access to the drug and alcohol offenses of individuals with a commercial driver’s license (CDL) and prevents CDL violators from obtaining a new job with another carrier in a different state. The Trucking Alliance testified to Congress that they estimate more than 300,000 CDL holders would either fail or refuse to take a hair analysis test. By utilizing the Drug and Alcohol Clearinghouse database, an Obama Administration mandate, and requiring a hair follicle drug testing standard, FMCSA is expected to lose many current CDL drivers due to failed drug tests and an inability to be rehired which would result in driver shortages all over the nation.
5. New California Law- Assembly Bill 5
This new law, which will be enforced on January 1st, 2020, will dismantle the use of independent contractors in the trucking industry. AB5 states that workers must meet three criteria to be classified as independent contractors, commonly referred to as the “ABC test.”
A. The worker must be free from control and direction of the hiring entity.
B. The work performed must be outside the usual course of the hiring entity’s business.
C. The worker must be engaged in an independently established trade, occupation or business.
This decision, made by the California Supreme Court, will have a dramatic effect on the owner-operator model in the state and more specifically, the trucking industry, which utilizes this business relationship in excess. In an effort to reduce liability and continue to do business as usual, some carriers are finding loopholes by encouraging their leased-on owner-operators to receive their own DOT authority. As a result of this ruling, California-based leased-on drivers have a few choices- becoming a company driver, getting their own operating authority, or moving out of California.
Now you’re all up to date on the new regulation changes and can plan your next year’s strategy effectively in 2020. And as always, please reach out to our consulting team to help you and your business absorb these new industry policies.