Above the Fold: Supply Chain Logistics News (January 3, 2020)

Happy New Year! I hope everyone had a fun and relaxing holiday.

We’re just three days into the new year and we already face a growing risk to supply chains around the world: an escalating conflict between the U.S. and Iran. Let’s hope it doesn’t get worse.

It was a relatively quiet week for supply chain and logistics news, but here are the items that caught my attention:

Truck Drivers Exempt from California’s AB5 Law (For Now)

California’s Assembly Bill 5 (AB5) law, which makes it harder for “gig economy” companies like Uber and DoorDash to qualify their workers as independent contractors rather than employees, was set to go into effect on January 1. But a number of lawsuits, including one from the California Trucking Association, have put it on hold. As reported by Reuters, “U.S. District Judge Roger Benitez in San Diego granted on Tuesday [December 31, 2019] a five-page order sought by trade group California Trucking Association [CTA] while he considers imposing a permanent injunction, the hearing for which is set for Jan. 13.”

What is AB5? Here’s a brief summary from CTA’s website:

AB 5 places into law an independent contractor test known as the “ABC” test. In order to be considered an independent contractor, a worker must satisfy all 3 parts of the test:

A. The person is free from the control and direction of the hiring entity, both in contract and in fact.

B. The person performs work that is outside the usual course of the hiring entity’s business.

C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Certain independent contractors, such as insurance agents, physicians, attorneys, accountants, engineers, and direct sellers were placed under a different test. With few exceptions, the relationship between independent truckers and their carriers, brokers and shippers will be governed by the “ABC” test.

If AB5 is upheld and independent truckers are no longer considered contractors but employees of carriers, brokers, and shippers, this would significantly impact trucking operations in California and beyond. The same applies to Uber, Lyft, and other gig economy companies if they don’t prevail in their lawsuits. Stay tuned.

More Drug Testing for Truck Drivers

Speaking of trucking-related laws and regulations, the Federal Motor Carrier Safety Administration (beginning January 1, 2020) is increasing the minimum annual percentage rate for random drug testing from 25% of the average number of driver positions to 50% of the average number of driver positions. As reported by Transport Topics

For reference, FMCSA estimates there are 3.2 million commercial driver license holders participating in interstate commerce and 1 million CDL holders participating in intrastate commerce. Under the annual random testing rate of 25% of all driving positions, this meant at least 1.05 million random controlled substances tests were to be conducted. With a new annual random testing rate of 50%, approximately 2.1 million random tests will need to be conducted in 2020.

“This change reflects the increased positive test rate and will result in an estimated $50 million to $70 million increase in costs to the industry by requiring that more drivers be tested,” the Federal Register document states.

The testing rate had been reduced from 50% to 25% in 2016. The decision to raise it back up to 50% was triggered by an increase in the positive rate for controlled substances in random testing (it increased to 1%). 

In related news, FMCSA’s Commercial Driver’s License (CDL) Drug and Alcohol Clearinghouse (Clearinghouse) goes into effect on January 6. Here’s an overview from FMCSA’s website

The Clearinghouse will provide FMCSA and employers the necessary tools to identify drivers who are prohibited from operating a CMV based on DOT drug and alcohol program violations and ensure that such drivers receive the required evaluation and treatment before operating a CMV on public roads. Specifically, information maintained in the Clearinghouse will enable employers to identify drivers who commit a drug or alcohol program violation while working for one employer, but who fail to subsequently inform another employer (as required by current regulations). Records of drug and alcohol program violations will remain in the Clearinghouse for five years, or until the driver has completed the return-to-duty process, whichever is later.

Simply put, between AB5 and new drug testing and reporting requirements, trucking companies are starting 2020 with a lot on their plate.

And with that, have a happy weekend!

Song of the Week: “Wars” by Of Monsters and Men