transportation industry news Summer
2016 The Bedrock Rule: The Carrier Gets Paid 3 Carmack v. Arbitration: Carmack Wins 4 The Road Ahead & Making Tracks — Team Updates 6 Team Directory 7
THE DOL’S NEW OVERTIME RULES WHAT DO THEY MEAN TO TRUCKING? ALEX MAULTSBY | alex.maultsby@smithmoorelaw.com
In May, after years of build-up, the United States Department of Labor published new regulations that will affect who may be paid a salary and who must be paid by the hour. The changes, which take effect December 1, 2016, dramatically change the landscape for employers. But first, what has not changed? While many employers do not realize it, the law has always required that employees do certain types of work before the employer is allowed to pay them a flat salary without paying extra for overtime. Generally, those duties fall under the headings of administrative, executive, or professional work. Without going into a detailed analysis of what kinds of jobs fall under those categories, broadly speaking these employees are supervisors of two or more employees, managers of
operations who use their own judgment and discretion to make important decisions, or employees whose jobs require some advanced educational degree. Being an office worker or carrying a Manager title, for example, does not necessarily mean one may be paid a salary. If an employee has the right duties—say, a Safety Manager who researches, designs, and implements an overall driver safety program—then the employer may pay him or her a salary, as opposed to an hourly rate of pay that fluctuates based on hours worked. This is where the new regulations come into play. Until December 1, that salary may be as low as $455 per week, or $23,660 per year. On December 1, that amount will jump all the way to $913 per week, or $47,476 per year. So, unless a person is paid a salary at the rate of at least $47,476 per year, he must be paid by the hour and must be paid 1.5 times his hourly rate when he works over 40 hours in a workweek. There is only one slight twist: employers may use bonuses and incentive payments (including commissions) to satisfy up to 10 percent of that $47,476, if these extra payments are paid at Continued on Page 2
least quarterly. Stated otherwise, if an employer pays a bonus or commission at least quarterly, and the bonus or commission payments add up to at least $4,747 over the course of a year, then the employer need only pay a salary of $42,729. Note that this rule is not satisfied if the employee merely has the opportunity to earn that $4,474, but only if the employee is actually paid the $4,474. As a reminder, the new regulations did not do away with the requirement that employees perform what has always been considered exempt work. Therefore, to be exempt from overtime, the employee must do the administrative, executive, or professional work that has always been required AND must receive the new enhanced salary—either (1) at least $47,476, or (2) at least $42,729 plus an annual total in bonuses or commission, paid quarterly or more often, to reach the new level. The upshot of the new law is that employers need to look at every salaried individual paid less than $47,476 per year and ask whether he or she should receive a raise to that new level or should become paid on an hourly basis. As simple as the new threshold is to understand, the decisions it requires of employers are not easy. For example, consider a dispatcher whose pay is $45,000 because he is a ten-year employee and a newly hired dispatcher whose pay is $37,000. Raising the pay of the senior employee who is only $3000 away from $47,476 and converting to hourly pay the employee who is nearly $11,000 away seems financially sensible. However, that approach would mean two employees with the same job, doing the same work, would be paid under different schemes. The newer dispatcher 2
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would need to keep time records while the other would not—disadvantage for him. However, the senior employee might be asked to work all of the overtime, for no more pay— disadvantage for him. Obviously, what might look like an easy fix can carry complications for employee relations. Moving an employee to hourly status, of course, means his or her pay will fluctuate as he or she works more hours one week and fewer hours the next. If overtime is well-defined and predictable, an employer can calculate an hourly rate that will yield the same overall pay the employee now receives. However, the more that overtime changes from week to week, the more difficult it will be to make the conversion to hourly pay without affecting overall compensation. And, of course, controlling the hours of employees who work remotely requires careful management. There is some good news for employers: examining the impact of the new salary threshold can create an opportunity for employers to address what might be existing problems. In looking at whose pay needs to change, employers might find that employees are presently misclassified. That is, some current employees might be receiving a salary without doing exempt work. Where those mistakes exist, they can now be corrected—with an explanation that the change is triggered by the new regulations’ enhanced salary threshold. Overall, these DOL-mandated changes will require good communication with employees to explain the reasons for the changes and, for some workers, the impact of moving from salaried to hourly status. In the end, employers and employees both will need to accept some degree of uncertainty and be flexible as a new pay scheme takes root.
THE BEDROCK RULE: THE CARRIER GETS PAID KEVIN MCCARRELL | kevin.mccarrell@smithmoorelaw.com
Motor carriers often have help when collecting freight charges from defaulting freight brokers, freight forwarders, shippers, and consignees, as case law often dictates the oft-cited “bedrock rule” that the “carrier gets paid.” Nonetheless, complicated facts with multiple parties can often result in litigation quagmires that can still leave motor carriers holding the bag. The most frequent situation encountered by carriers results when an undercapitalized, fly-by-night freight broker goes belly up without paying the motor carriers’ invoices for hauling freight. In these instances, a carrier, and its freight collections counsel, must carefully analyze its options in attempting to collect from the remaining parties: namely, the shipper and/or the consignee. One older opinion that was recently reported, Minsa Corp. v. Almac Sys. Transp., Inc., No. 5:09-CV-275-C, 2011 WL 12907655 (N.D. Tex. June 10, 2011), highlights the favored status of carriers in collecting freight charges. In Minsa, unlike the traditional lawsuit where the carrier sues the shipper for unpaid freight charges, the shipper filed an “interpleader” lawsuit in which
it admitted that it owed certain funds (and paid those funds into the court), but sought a court directive as to whom the funds should be paid. The shipper’s strategy was an attempt to avoid a “double payment.”. Each of the unpaid motor carriers laid claim to the funds pursuant to federal case law and regulations promulgated pursuant to the Carmack Amendment, and to complicate matters further, the bank that had “factored” the defunct broker’s accounts receivable also asserted a security interest in the funds. Without ruling on the issue of whether the shipper might have to fork over a
“double payment” to both the carriers and the factoring bank, the court ruled in favor of the carriers stating that their argument was “of course” correct. Although much of the case law favoring carriers relies on the rule that a bill of lading constitutes a contract between the carrier and the shipper, the Minsa court did not rely on a “privity of contract theory,” but instead on federal billing and credit regulations. However, the court did take note that the shipper had not executed “Section 7,” a portion of the bill of lading that, if signed by the shipper, releases the shipper from liability for freight charges.
To read more go to smithmoorelaw.com/TNLSummer16Broker
Members of Transportation Team Participate in Hands On Greenville Volunteer Day Kurt Rozelsky, Rob Green, Joseph Rohe, Kristen Nowacki and others from the firm’s Greenville office participated in the United Way of Greenville County’s annual Hands On Greenville volunteer day on April 30. They were responsible for spreading mulch (which they affectionately called “Mulch Madness”) across 3 acres at Pendleton Place, a local non-profit organization serving abused, neglected, and abandoned children. Smith Moore Leatherwood
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CARMACK V. ARBITRATION: CARMACK WINS FREDRIC MARCINAK | fredric.marcinak@smithmoorelaw.com
The growing popularity of arbitration as a form of alternative dispute resolution has started to make its way into freight claims law. Recently, the National Motor Freight Traffic Association (“NMFTA”) has amended the National Motor Freight Classification to provide for arbitration of freight claims.
Although many carriers have opted out of this provision, arbitration continues to be raised in other settings. In the recent case of Federated Mutual Ins. Co. vs. Con-way Freight, Inc., the United States District Court for the District of Minnesota examined
whether an arbitration award could be enforced against a motor carrier for cargo damage. In that case, the motor carrier transported freight from Laredo, Texas to Wanamingo, Minnesota. The shipper purchased first party cargo insurance through Federated Mutual. Sometime during transit, the cargo was damaged. As a result of the damage, Federated paid the shipper $32,405.28 for the damaged cargo. Con-way and Federated were members of Arbitration Forums, Inc. Arbitration Forums, Inc., is a venue that requires members to submit claims for property damage to arbitration in place of litigation. Accordingly, Federated filed a proceeding against Con-way in the Arbitration Forums seeking recovery of the amounts it had paid to its insured. Con-way did not participate in the proceeding. After the arbitrator awarded Federated the full amount it sought, Federated sought to enforce the arbitration award in Court. To read more go to smithmoorelaw.com/ TNLSummer16Carmack
UPDATE: OBESITY AND THE AMERICANS WITH DISABILITIES ACT MARC TUCKER | marc.tucker@smithmoorelaw.com
In a much anticipated ruling, the 8th Circuit Court of Appeals (encompassing Arkansas, Iowa, Missouri, Nebraska, North Dakota, and South Dakota) recently issued an opinion addressing whether obesity constitutes a disability under the Americans with Disabilities Act of 1990 (“ADA”). The case, Morriss v. BNSF Railway Co., 817 F.3d 1104 (8th Cir. 2016), arises from BNSF Railway Company’s (“BNSF”) decision to revoke a conditional offer of employment after an applicant, Melvin Morriss (“Morriss”), failed to meet BNSF’s job-specific qualification standards. Id. at 1106. Morriss applied for a position as a machinist and received a conditional
offer of employment from BNSF. Id. The machinist position was considered a safety-sensitive position; as such, Morriss was required to pass a medical review. Id. As part of this process, Morriss reported that he was 5’10” tall, weighed 270 pounds, was previously diagnosed as “pre-diabetic” but not currently diabetic, considered his overall health “good,” denied suffering from any medical condition or impairment, and disclosed no limitations on his ability to perform daily activities. Id. In addition, during litigation, Morriss affirmatively stated that he did not believe that he had a disability and that there was no underlying condition that contributed to his obesity.
To read more go to smithmoorelaw.com/TNLSummer16ADA 4
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DOT DRUG TESTING: TO TEST OR NOT TO TEST? BENNETT CRITES | bennett.crites@smithmoorelaw.com
involving a commercial motor vehicle results in a fatality. A driver does not need to be cited for a moving violation, nor does the driver need to be deemed at-fault. If a fatality occurs, the driver is tested regardless;
Apologies to Shakespeare, Hamlet.
2. A test must be conducted if the driver receives a citation for a moving traffic violation and one or more of the vehicles involved in the accident is towed from the scene of the accident; and
Pursuant to §382.303 (a) and (b) of the FMCSR there are only three instances where a post-accident drug and alcohol test is mandatory: 1. A test must always be conducted on a surviving driver when an accident
ROB GREEN rob.green@smithmoorelaw.com
Transportation companies can often feel powerless when dealing with federal agencies that overstep their bounds. However, the recently decided case of CRST Van Expedited, Inc. v. EEOC reminds us that that companies who push back can prevail and make an overreaching agency pay up for its actions. The United States Supreme Court in that case held that the Equal Employment Opportunity Commission (“EEOC”) may be responsible for paying more than $4 million in legal fees that CRST Van Expedited (“CRST”) incurred in defending frivolous claims advanced by the EEOC.
To test, or not to test, that is the question: Whether ‘tis nobler in the mind to suffer The slings and arrows of outrageous plaintiff’s attorney, Or to take arms against a sea of labor troubles...
When is a driver required to report for a post-accident Department of Transportation (“DOT”) alcohol and drug test? This seems like a simple enough question. However, it is not rare for a driver to report for a DOT test when none is required or to fail to report when one is required. Sloppy safety management can make the defense of a truck accident case more difficult. Mistakes in the process can also be an aggravating factor that increases the value of the case. Even law enforcement has been known to tell drivers incorrect testing instruction.
HITTING BACK AGAINST THE EEOC
3. A test must be conducted if the driver received a citation for a moving traffic violation and one or more persons involved in the accident immediately receives medical treatment away from the scene of the accident. The alcohol test must be conducted within 2 hours of the accident, and the drug test should be conducted within 32 hours of the accident. If the alcohol test is not conducted within 2 hours, the employer should continue to make an effort to have the driver tested for up to 8 hours. If the alcohol or drug test is not conducted within the time limit, then the safety manager should document why the test was not administered.
To read more go to smithmoorelaw.com/TNLSummer16Testing
In CRST Van Expedited, the EEOC took a female driver’s complaint of sexual harassment during training and attempted to expand it into a huge “pattern and practice” lawsuit that may have required CRST to pay millions to settle. CSRT, instead, decided to stand up and fight the claims rather than settling. The ensuing litigation showed that, among other things, the EEOC had failed to conduct the statutorily required investigation and conciliation of more than 67 of the claims it asserted. As such, those claims were dismissed by the district court. CSRT sought to recover attorneys’ fees for defending those claims under Title VII of the Civil Rights Act of 1964 (“Title VII”) and the standard of Christiansburg Garment, which permits a defendant to recover fees when it prevails on an employment discrimination claim that is “frivolous, unreasonable, or groundless.” The federal district judge granted CSRT’s claim and awarded CSRT more than $4 million in attorneys’ fees. To read more go to smithmoorelaw.com/ TNLSummer16EEOC
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THE ROAD AHEAD Rob Moseley will discuss insurance programs at The Expedite Association of North America conference on July 8–10 in Nashville, TN. The wailing you hear may not be country twang. Kurt Rozelsky and Fredric Marcinak will present at the next edition of the SML webinar on July 12. The topic will be “When the Accident isn’t Your Fault: Appealing Your Safety Rating and Diffusing it at Trial.” Register to participate at www.smithmoorelaw.com/ TNLWebinarJuly2016. Marc Tucker will attend the North Carolina Trucking Association Annual Conference in Hilton Head, SC, July 24–27.
Kurt Rozelsky will preside over his last FDCC Trucking Law Section meeting in La Malbaie, Quebec, July 25–30. The meeting will also be the last of the Presidency of Steve Farrar, a.k.a the Grand Poobah. Rob Moseley will preside over the annual meeting of the American College of Transportation Attorneys in Atlanta, GA, August 18–19. Matt Stone will teach two transportation segments at the CLM Claims College in Baltimore, MD, from September 7–9. On September 29, Rob Moseley will take his post as presenter at the Motor Carrier Insurance Educational Foundation in Orlando, FL.
Making Tracks April 5: Rob Moseley appeared at the GMTA HR Seminar in Atlanta, GA. April 6–8: Matt Stone attended the CLM conference in Orlando, FL. April 13–15: Despite security protocols, Marc Tucker, Shawn Kalfus, Kurt Rozelsky, and Bennett Crites managed to attend the DRI Trucking Law Conference in Chicago, IL. April 17–19: Rob Moseley was spotted in Athens, GA, at the UGA Trucking Profitability Conference. He enjoyed a spot on a labor relations panel. April 21: Rob Moseley presented to the Iowa Motor Truck Association Safety Professionals Conference in Des Moines, IA. April 22: Rob Moseley participated in a webinar for Vertical Alliance.
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April 27–30: Fredric Marcinak went to Destin, FL, for the TLA Annual Conference. Amid his time on the beach, he managed to preside over the Freight Claims Committee meeting. May 10: Rob Moseley presented the latest SML Webinar on the Food Safety Modernization Act regulations. June 4–5: Fredric Marcinak went north of the border for the Conference of Freight Counsel in Toronto, CAN. Illustrating weak homeland security, he was allowed back into the US afterward. June 9–11: Rob Moseley went to Hilton Head, SC, for the SCTA Annual Conference and Board Meeting. June 19–22: Matt Stone attended the GMTA Annual Conference on Amelia Island, FL. June 27–28: Rob Moseley taught another edition of transportation contracts in Chicago, IL, at the SMC3 Connections meeting.
TEAM DIRECTORY ERIK ALBRIGHT
ROB MOSELEY
MIKE BOWERS
K R I S T E N N O WA C K I
MANNING CONNORS
BOB PERSONS
RICK COUGHLIN
M A R Y R A M S AY
BENNETT CRITES
JOHN REIS
Greensboro, NC | 336.378.5368 erik.albright@smithmoorelaw.com
Charleston, SC | 843.300.6633 mike.bowers@smithmoorelaw.com
Greensboro, NC | 336.378.5236 manning.connors@smithmoorelaw.com
Greensboro, NC | 336.378.5471 rick.coughlin@smithmoorelaw.com
Charleston, SC | 843.300.6653 bennett.crites@smithmoorelaw.com
*TEAM LEADER* Greenville, SC | 864.751.7643 rob.moseley@smithmoorelaw.com
Greenville, SC | 864.751.7753 kristen.nowacki@smithmoorelaw.com
Atlanta, GA | 404.962.1075 bob.persons@smithmoorelaw.com
Charleston, SC | 843.300.6659 mary.ramsay@smithmoorelaw.com
Charlotte, NC | 704.384.2693 john.reis@smithmoorelaw.com
JULIE EARP
JACK RIORDAN
Greenville, SC | 864.751.7638 jack.riordan@smithmoorelaw.com
Marc Tucker Featured in Heavy Duty Trucking
ROB GREEN
JOSEPH ROHE
The May 2016 cover
Greensboro, NC | 336.378.5256 julie.earp@smithmoorelaw.com
Greenville, SC | 864.751.7617 robert.green@smithmoorelaw.com
Greenville, SC | 864.751.7668 joseph.rohe@smithmoorelaw.com
story of Heavy Duty focused
Trucking J AY H O L L A N D
Wilmington, NC | 910.815.7165 jay.holland@smithmoorelaw.com
MARVIS JENKINS
Atlanta, GA | 404.962.1018 marvis.jenkins@smithmoorelaw.com
S H AW N K A L F U S
Atlanta, GA | 404.962.1042 shawn.kalfus@smithmoorelaw.com
J E N N I F E R R AT H M A N
Atlanta, GA | 404.962.1074 jennifer.rathman@smithmoorelaw.com
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KURT ROZELSKY
Greenville, SC | 864.751.7624 kurt.rozelsky@smithmoorelaw.com
PETER RUTLEDGE
Greenville, SC | 864.751.7610 peter.rutledge@smithmoorelaw.com
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FREDRIC MARCINAK
Greenville, SC | 864.751.7691 fredric.marcinak@smithmoorelaw.com
M AT T S T O N E
Atlanta, GA | 404.962.1057 matt.stone@smithmoorelaw.com
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Greensboro, NC | 336.378.5331 alex.maultsby@smithmoorelaw.com
KEVIN MCCARRELL
Greenville, SC | 864.751.7652 kevin.mccarrell@smithmoorelaw.com
MARC TUCKER
Raleigh, NC | 919.755.8713 marc.tucker@smithmoorelaw.com
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Smith Moore Leatherwood LLP Attorneys at Law 2 West Washington Street Suite 1100 Greenville, SC 29601 T 864.751.7600 F 864.751.7800 www.smithmoorelaw.com
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Emergency Response Team As part of the array of transportation services provided to firm clients, our 24/7 emergency response team is standing by to serve clients with urgent needs following a catastrophic accident. The team has handled numerous night time and weekend emergencies for our clients. Members of the emergency response team take responsibility for preserving physical and electronic evidence, taking driver and witness statements, making arrangements for cargo salvage, and managing relations with law enforcement. Additionally, firm clients benefit from the team’s knowledge of substantive experts and criminal defense counsel. smithmoorelaw.com/emergencyresponseteam