Opinion: Hiring Standard’s Unintended Consequences
This Opinion piece appears in the Aug. 17 print edition of Transport Topics. Click here to subscribe today.
Compliance Coordinator
AFN
According to the law of unintended consequences, the actions of people always have effects that are not anticipated. This idea manifests itself in all sorts of areas but has a significant impact in the realm of legislation and regulation.
These unintended consequences are often economic in nature, and their costs can be so high as to make some legislative and regulatory acts unwise, even when they achieve their stated purpose. Those in over-the-road freight transportation should consider this phenomenon when thinking about the proposed National Standard for Hiring Motor Carriers.
Proposed legislation in the House and Senate would require shippers, brokers and forwarders to verify that a motor carrier has valid operating authority, meets the U.S. Department of Transportation minimum insurance level and does not have an unsatisfactory safety rating before they hire the carrier.
More importantly, it would prohibit the introduction of any other data in lawsuits alleging the negligent hiring of a motor carrier. It also would require the Federal Motor Carrier Safety Administration to complete its Safety Fitness Determination rulemaking within 18 months. (Editor’s note: As this issue of Transport Topics went to press, the legislation had not advanced through either chamber.)
What the trucking and logistics world would look like if the national hiring standard were adopted is an interesting and open question. It would save some companies litigation costs as well as liabilities. It also would save brokers, forwarders and shippers the costs of examining the safety records of the carriers they consider hiring. It should clarify a confusing environment where those who make their living by engaging trucking companies to haul freight currently don’t know what their legal obligations are. However, there will be unintended consequences.
In trying to determine what they might be, it is useful to think about the motivations of all involved, including the federal agency that regulates trucking safety. If there were no duty on a broker, forwarder or shipper beyond verifying that a motor carrier is authorized with the required liability insurance and without an “Unsatisfactory” safety rating, might FMCSA view its obligations differently?
When an entity applies for interstate trucking authority, FMCSA takes measures to ensure that the entity is not operationally related to another trucking company with an unsatisfactory safety rating and/or outstanding safety-related fines. No other efforts toward certification of safety competence are normally made before the granting of trucking authority. In other words, nearly anyone can become an authorized interstate motor carrier in the current environment.
This is partly because FMCSA presumably sees itself as one component of an effort to promote trucking safety and those companies that hire the truckers as another important and necessary piece. Under this view, the shippers and intermediaries aren’t necessarily voluntary partners with the agency but are compelled to account for carrier safety by the fear of negligent hiring lawsuits.
If the environment changed so that those lawsuits were practically eliminated, FMCSA may perceive that it must change its practices and its outlook to maintain the current level of trucking safety. The agency may regard that it must certify the safety fitness of motor carriers before granting trucking authority because there would be no one with any incentive to help monitor the carriers once authorized. An environment where only certified-safe carriers are allowed on the roads would result in a situation with far fewer authorized motor carriers than there are now.
As trucking capacity decreases, transportation rates increase; the national hiring standard that shippers and intermediaries wished for could facilitate the creation of an environment where increased transportation rates outweigh the benefits of the legislation. It would stand to reason that a smaller number of carriers and decreased competition would have other costs as well, and none of them would be good for freight shippers.
Another of these unimagined consequences might be the effect the hiring standard could have on the character of the Safety Fitness Determination rulemaking. If FMCSA discerns that there are no serious penalties for any carriers that are not deemed unfit to operate, it is conceivable that it will make a rule that establishes a relatively low threshold for unfitness as well as get rid of the “Marginal” determination. If the hiring standard passes, the agency may be compelled to adopt an attitude that causes many carriers to be designated “Unfit” as opposed to “Marginal,” which would force more carriers off the roads.
In other words, if motor carriers have no incentive to be better than marginally competent, FMCSA may arrive at the view that the new scheme created by the legislation produces a more unsafe environment and necessitates the elimination or near-elimination of a Marginal determination. The “red light, green light” scenario that many wish for may result in many more red lights than are good for the industry.
It is not known what FMCSA will do if the national hiring standard becomes law. The point is to recognize it is likely that the agency will do something. If the motivations of those who hire truckers are made different, FMCSA will consider whether those different motivations have implications for its mission. It is important to recognize that the agency’s decision regarding a proper response to the congressional action and the resulting effects of this decision would be consequences of the passage of the hiring standard — no less important than those that were intended.
AFN, based in Niles, Illinois, is a third-party logistics provider that focuses on supply chain solutions and transportation services throughout North America.
