Wednesday, May 25, 2011

Authority to operate is what matters

Authority to operate is what matters

Settlement confirms that FMCSA – not its data – decides
By Henry E. Seaton
May 1, 2011
Reprinted from: /

Q: I have read the press release concerning alerts in the Safety Measurement System database, and I have been in conversations concerning whether satisfactory safety ratings should trump all other information, including both the Behavior Analysis and Safety Improvement Categories or the former Safety Evaluation Areas. Is there any stale date on satisfactory safety ratings? Would a satisfactory safety rating from 10 to 20 years ago still be evidence that the Federal Motor Carrier Safety Administration considers the trucker safe and fit? As we all know, truckers change employees often, and different managers look at safety either as important or not.

A: Safety ratings do not become stale. Plaintiff’s bar, in an effort to chase after deep pockets, has recognized a satisfactory rating as a bar to suing shippers but has pursued shippers using unrated carriers. In this context, one of the important things accomplished by the recent settlement with FMCSA over public release of SMS rankings and alerts was confirmation that the agency certifies carriers as safe to operate and that only carriers deemed unsatisfactory or placed out of service are not fit to operate on the nation’s roadways.

The reason the suit was brought was to disabuse shippers and brokers of the fear that the Compliance Safety Accountability (CSA) program data was intended for their use in credentialing carriers or somehow was required to escape possible vicarious liability. The case law that so troubles shippers and brokers was in some cases the result of the spurious argument that an unrated carrier was in some sense not fully licensed to operate. As a result of this misconception, many shippers and brokers thought that carriers with a satisfactory rating were in some sense approved, while unrated carriers are not. Nothing could be further from the truth.

In fact, under the current statutes in effect and cited in the agency’s settlement (49 C.F.R. 385), carriers without a safety rating have the equivalent of a satisfactory rating because under any of the agency’s monitoring or scheduling tools, they are within compliance and have not been selected for an audit. Thus, correctly seen, the issue is not whether satisfactory safety ratings should trump all other information, whether BASICs or SEAs.

What the settlement accomplished was to determine that BASICs or SEAs do not establish some standard for shipper or broker use that should trump the agency’s ultimate safety rating. An important key is the fact that the settlement confirms that an unrated carrier – like a carrier with a satisfactory safety rating, issued 20 years ago or just last month – is authorized for use.
In the settlement, FMCSA confirmed that under existing law, the agency determines who is authorized to conduct operations over the nation’s highways. As a major broker, you are charged by regulations with using authorized motor carriers – nothing more, nothing less. (49 C.F.R. 371)

My traditional advice to broker clients has been to hold out to arrange for transportation using carriers who are licensed, authorized and insured and which enjoy a safety rating of satisfactory or equivalent issued by FMCSA. That remains the federal standard. The settlement in NASTC et al. v. FMCSA makes clear that publication of SMS methodology, which has not even been approved for the agency’s own use, has not changed the law or required brokers to require contractually or hold out to provide a different carrier credentialing standard.

Finally, in an important and thorough 35-page document entitled “Carrier Selection Framework,” the Transportation Intermediaries Association released its recommendations for carrier selection on April 8. Therein, it refers to the negotiated disclaimer language and recommends best practices, which includes reliance upon the agency’s ultimate determination under Section 385, eschewing any use of SMS methodology. Taken together, the disclaimer and the TIA’s selection document should end the misconception decisively that CSA/SMS methodology is intended as fit for use in the carrier selection process by shippers and brokers.

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Thursday, May 5, 2011

FMCSA Rejects Argument that Carriers Subcontracting Loads to Other Carriers are Responsible for Subcontractors Compliance with Safety Regulations

Under the alternative service model, licensed carriers frequently hire other carriers to provide services they are contractually obligate to provide. Formerly called, convenience interlining, this practice which is similar to brokerage has created vicarious liability concerns particularly in light of state law where the dangerous enterprise exception holds that a prime contractor is liable for the acts or omissions of its sub.  Serna v. Pettey Leach Trucking, Inc., 110 Cal. App. 4th 1475 (Cal. App. 2d Dist. 2003)

The alternative model is a valuable tool for retaining additional capacity in view of the attacks upon the owner/operator model. In Missouri Basin Wells Service, Inc. FMCSA 2011-0078, the FMCSA’s Western Service Center claimed that a carrier acting as a prime contractor was liable for the safety compliance of its contracted subcarriers.  In a well written Petition for Reconsideration, the prime carrier argued that the subcontracted carrier as a licensed, authorized, and insured carrier was solely responsible under the federal regulations for compliance with federal safety duties. In an order issued April 15, 2011, the Agency agreed.

This decision has important implications for the future success of the alternative service model and may be helpful in establishing that under federal transportation law, a carrier does not become liable for the acts of its sub when it hires a separate licensed, authorized and insured carrier.