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Top 10 legal issues for 2016: Devine

Posted: June 20, 2016 by John G. Smith

KING CITY, ON – Evolving technology and changing regulations alike are contributing to legal challenges for Canadian carriers. And Heather Devine of Isaacs and Co. Barristers and Solicitors has even identified a Top 10 list that will make its presence known in the coming year.

1. Mandated Electronic Logging Devices (ELDs)

Canada was leading the charge for Electronic Logging Devices (ELDs) a decade ago, but the U.S. ultimately surged ahead with plans to require the logbook-replacing tools by late 2017. Transport Minister Marc Garneau has since indicated that Canada will establish similar requirements.

“Sometimes being behind is not a bad thing,” Devine told delegates at the Private Motor Truck Council of Canada’s annual meeting, referring to legal implications around the devices.

The underlying data will generate “harmful evidence” for those operators who don’t comply with Hours of Service rules, she said. There are also driver privacy issues and file storage to consider. Plaintiffs in lawsuits will be looking for so-called meta data, recording factors such as who entered the information, she added. Any conflicts between engine records and the ELDs will also be a source for trouble.

“Make sure that you have someone in operations that’s assigned to be watching the developments in technology,” she said. Driver policies will also need to be updated to ensure that everyone is educated.

2. Food safety regulations

The U.S. Food and Drug Administration introduced new food safety regulations this April, covering the processing, storage, shipping and transportation of food products within North America. And even motor carriers with less than US $25.5 million in annual receipts will need to comply by April 6, 2018.

“They’re going to cause some contractual changes with your customers,” Devine said. “You can be talking to the shipper, trying to push some of the cost of these changes back.” Specifically, she stresses the need to set maximum liability at $2 per pound if at all possible.

A new “loader” category presents opportunities in negotiations, too. For the first time, the regulations are defining those people who load food onto a vehicle. The party that pays this loader’s cost should be included in contracts, she said.

The new rules are not limited to personnel. Equipment has to be designed and maintained to prevent food from becoming unsafe, and that gives people a chance to re-evaluate the way food is transported. Temperature controls offer a perfect example.

 “It’s the carriers that must develop the temperatures,” she told fleet managers in the crowd. “I always try to put it on the shipper and tell the shipper [that] you have to tell me the temperature you want it to be … Contract with your shippers so they assume as much of the responsibilities as possible.”

Still, there are exceptions to the rules, such as goods enclosed in containers. Businesses with less than $500,000 in average annual revenue are also exempt.

3. Mandatory Entry-Level Driver Training

Ontario is expected to unveil its Mandatory Entry-Level Training (MELT) standard this July, to be enforced by 2017. And some of her clients who run trucking schools admit behind the scenes that they would like the plan to fail.

“Every time there’s a change in our business, it can cost money. And this one, I don’t see how it can save you money,” she said, adding that fleets should also update policies around driver training to reflect the new rules.

4. Employees vs. dependent contractors vs. independent contractors

Deciding whether personnel are employees or self-employed can be a costly decision. When it comes to employees, those who write the paycheques need to account for Canada Pension Plan, Employment Insurance, and income tax deductions.

But the Ministry of Labor and Canada Revenue Agency (CRA) can define them differently. Those who wear company uniforms and move only one fleet’s loads are considered by CRA to be an employee. As for the Ministry of Labor? Maybe. If someone was treated like an independent contractor, but was in fact an employee, employers can be on the hook for both the employee and employer shares of contributions and premiums, plus penalties and interest, Devine said.

“Take a look at your business model. Take a look at what your drivers are actually doing for you,” she added. “Do a cost-benefit analysis. Are you really saving money by having them dedicated as independent contractors?”

So too are there issues with international brokers coming into Canada, where they don’t face tightly defined roles established under the Moving Ahead for Progress in the 21st Century Act (MAP-21). Brokers, for example, are the ones who touch freight. “The Americans are looking at coming in and taking more and more work with carriers, and taking carriers and making them part broker.”

That opens questions about who can sub-contract work. An independent contractor who subs out a load, for example, is now considered to be brokering – and that can be limited in contracts established by large shippers such as WalMart, she said.

5. A cross-border database

The Canada Border Services Agency (CBSA) allows fleets to self-declare mistakes in documents such as e-Manifests, as long as the paperwork exists in the first place. No penalties are applied.

But the CBSA is also creating a database of companies that run afoul of various border-related rules. “When they have enough data they’re going to release that data,” Devine said, comparing the reports to CSA safety ratings that had been made public.

The border officials “seem to act first and deal with things later,” she said. “I actually think that’s sinister.”

6. Cargo crime

In 2014, groceries, food, personal hygiene products, automotive and construction materials were the goods most targeted by cargo thieves, according to Northbridge Insurance. The question is, are you covered for such losses?

“You would be surprised at the people who think they have insurance and then they don’t have it,” Devine said, stressing the need to check contracts for exclusions. “Make sure the loads that you’re transporting – that might be stolen from your yard – are covered.” And ensure salespeople know, so they can work with customers ahead of time to see what assurances are required.

They are questions to be worked out ahead of time. If $350,000 in goods are stolen, and the load broker says they will cover $7,000, “that’s bad,” she said. “Where’s that extra money?” For lawyers, the question is whose insurance company will pay. “The broker doesn’t want to have liability, the carrier now has all the liability, and the shipper says, ‘I don’t care.'”

“Brokers, from my experience, they never want to take liability for anything. They just want to take the profit,” she added.

7. Broker-carrier liability

Ontario’s Highway Traffic Act sets cargo liability at $2 per pound, except where excess value has been declared. But if there is no contract for carriage, everyone turns to Bills of Lading, which have been known to be altered by drivers, Devine said.

A contract can be as short as two pages, but still include a provision that the document trumps the Bill of Lading, and requires excess values to be declared in writing.

 “You can do it by a text. You can do it by email. Just do it in writing,” she said of the latter point. “Insure those loads and then you can sleep at night … if it’s falling on you and you’re being forced to accept it, then insure it.”

8. Carrier-shipper liability

Fines can be applied if goods are not delivered on time, and those costs can be passed down to carriers. This makes the case for inserting a contract clause that says no fines will be accepted or applicable unless the potential for the fine has been explained in writing, Devine said.

Shippers often expect carriers to assume full liability in litigation, too.

“Protect yourself in your contract of carriage, or in your business model if the contract of carriage is shipper-friendly.”

9. Legalization of marijuana

Looking at the experience in Colorado, Devine says there will be a price to be paid for legalizing marijuana in Canada. There was a spike in failed drug tests in the state, and drivers lost jobs because of the results. So, too, does she expect a greater demand for U.S.-style drug tests.

Fleets with such policies in place will want to look at how broadly the rules will be applied, and ask themselves whether they will accept some recreational marijuana use among drivers, she said.

But with every threat there can be an opportunity. She knows of one company that is setting up cold storage in Hamilton, and already has three secure warehouses with heated floors ready to serve the market for marijuana.

10. New technology

Target, the massive retailer that failed to establish a presence in Canada, is still setting trends among shippers. And on May 30, it began penalizing transportation professionals for supply delays and inaccuracy. Grace periods for deliveries have been eliminated. Fines on late shipments with incomplete or inaccurate information have been increased to 5% the cost of an order.

Pressures like these are leading large brokers to rely on telematics to squeeze prices.

It isn’t the only way technology can affect legal issues – especially when it comes to avoiding collision-related lawsuits. Safety technology such as Electronic Stability Controls, Lane Departure Warnings, Collision Avoidance Systems, blindspot warning devices and sensors all help to keep trucks safe.

Are they worth the price? In the U.S., property damage payouts typically run from $100,000 to $200,000, she said. Accidents with injuries see the costs rise to $135,000 to $455,000. Introduce a fatality, and the payouts are running $855,000 to $1.3 million.

Compare that to the cost of something like a Lane Departure System, Devine said.

 

NOTE — This story has been updated to remove a reference to Canadian Food Inspection Agency regulations. There will be no new requirements for transporters under the Safe Food for Canadians Act, once in force.

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