Summer 2015
TRANSPORTATIONNEWSLETTER
Cover ing legal and other developments affecting those in the transpor tation industry
Broker: Are You a Statutory Employer of Your Contractor’s Driver?
INSIDE THIS ISSUE Discipline Policies that Overreach: Does Your Employee Handbook Violate Labor Laws?. . . . . . . . . . . . . . . .
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Team Updates. . . . . . . . . . . . . . . . . . . 03
SC Expands FTZ Alternative Sites Framework . . . . . . . . . . . . . . . . 06
Transportation Contracts in the Age of Big Data . . . . . . . . . . . . . . . . . 07
Act of God Prevails!. . . . . . . . . . . . . 07
Recently, the South Carolina Supreme Court addressed a workers’ compensation claim The Transportation Newsletter is available online!
To view the full articles in this edition of the Transportation Newsletter online, visit www.smithmoorelaw.com/TNL
by an expedited delivery service driver against a broker who was fatally injured while returning from a brokered load. Collins v. Seko Charlotte (Op. No. 27519, Apr. 29, 2015). “Driver”, a direct employee of the carrier, was dispatched by the carrier to take an “express hot delivery” from South Carolina and deliver it on an expedited basis to Wisconsin. The delivery was under an unwritten contract between the carrier and the broker, even though the broker also had its own operating authority and employed drivers for local loads. The broker paid the carrier for mileage one way; however, the carrier included the cost of the return trip in the mileage rate it charged broker. After the load was delivered in Wisconsin, Driver was returning to South Carolina when he was involved in an accident and killed. Driver’s estate made a claim under the South Carolina Worker’s Compensation Act (“Act”) against both the motor carrier and the broker. The motor carrier did not carry workers’ compensation insurance, causing Driver’s estate to make a “statutory employee” argument as to the liability of the broker. continued on page 2 >>
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Noting that the concept of statutory employment provides an exception to the general rule that coverage under the Act requires the existence of an employeremployee relationship, the parties admitted that Driver was not a direct employee of the broker. The statutory employee argument is made mostly in the construction industry where an employee of an uninsured subcontractor makes a statutory employee claim against the general contractor. The
Court applied the South Carolina test for statutory employees: 1. The activity of the subcontractor is an important part of the owner’s trade or business; 2. The activity performed by the subcontractor is a necessary, essential, and integral part of the owner’s business; or 3. The identical activity performed by the subcontractor has been performed by employees of the owner.
Voss v. Ramco, Inc., 325 S.C. 560, 482 S.E.2d 582 (Ct. App. 1997)(emphasis supplied). Only one part of the test needs to be satisfied to find statutory employment and the courts have rather liberally applied the test in order to broadly find inclusion under the Act. To read more about the issues this case raises for motor carriers visit: www. smithmoorelaw.com/TNLCollins.
Discipline Policies That Overreach: Does Your Employee Handbook Violate Labor Laws? As companies continue to relocate to the southeast United States and other areas, the region’s historically union-free workforce stands to enjoy significant gains in job opportunities and the income and benefits that come with them—gains at the expense of the labor market organized under unions in other regions. Unions obviously have taken note, but so too has the National Labor Relations Board (“NLRB”). For non-union companies unfamiliar with the NLRB, it is the federal agency “vested with the power to safeguard employees’ rights to organize and to determine whether to have unions as their
bargaining representative. The agency also acts to prevent and remedy unfair labor practices committed by private sector employers and unions.” See www. nlrb.gov/what-we-do (emphasis added). The NLRB’s heightened scrutiny of nonunion employers is unquestionably the catalyst for the “Report of the General Counsel Concerning Employer Rules,” dated March 18, 2015. Griffin, Richard F. Jr., Memorandum GC 15-04. As discussed below, Memorandum GC 15-04 surveys a selection of common discipline and conduct policies found in employee handbooks
and explains how and why some of them violate the National Labor Relations Act (“NLRA”). For those unfamiliar with the Act, particularly non-union employers, the Memorandum is disquieting to say the least. Aside from the problem that its conclusions are suspect and not grounded in any facts or evidence, understanding the Memorandum requires a basic knowledge of certain aspects of the NLRA. The NLRA was enacted in 1935, and its purpose is established as follows: It is hereby declared to be the policy of the United States to … encourage the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection. To read more about these labor laws and the impact on employee handbooks, visit www.smithmoorelaw.com/TNLLaborLaws.
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| Transportation Newsletter | Summer 2015
SMITH MOORE LEATHERWOOD SUMMER 2015
TRANSPORTATION TEAM Erik Albright
Mike Bowers
Stephen Cohen*
Manning Connors
Rick Coughlin
Greensboro, NC | 336.378.5368
Charleston, SC | 843.300.6633
Atlanta, GA | 404.962.1023
Greensboro, NC | 336.378.5236
Greensboro, NC | 336.378.5471
erik.albright@smithmoorelaw.com
mike.bowers@smithmoorelaw.com
stephen.cohen@smithmoorelaw.com
manning.connors@smithmoorelaw.com
rick.coughlin@smithmoorelaw.com
Fredric Marcinak
Bennett Crites
Julie Earp
Jay Holland
Shawn Kalfus
Charleston, SC | 843.300.6653
Greensboro, NC | 336.378.5256
Wilmington, NC | 910.815.7165
Atlanta, GA | 404.962.1042
Greenville, SC | 864.751.7691
bennett.crites@smithmoorelaw.com
julie.earp@smithmoorelaw.com
jay.holland@smithmoorelaw.com
shawn.kalfus@smithmoorelaw.com
fredric.marcinak@smithmoorelaw.com
Kevin McCarrell
Rob Moseley
Greenville, SC | 864.751.7652
*TEAM LEADER* Greenville, SC | 864.751.7643
kevin.mccarrell@smithmoorelaw.com
Bob Persons
Mary Ramsay
Greenville, SC | 864.751.7753
Atlanta, Ga | 404.962.1075
Charleston, SC | 843.300.6659
kristen.nowacki@smithmoorelaw.com
bob.persons@smithmoorelaw.com
mary.ramsay@smithmoorelaw.com
Joseph Rohe
Jennifer Rathman
KristEn Nowacki
rob.moseley@smithmoorelaw.com
Jack Riordan
John Reis* Charlotte, NC | 704.384.2693 john.reis@smithmoorelaw.com
Greenville, SC | 864.751.7638 jack.riordan@smithmoorelaw.com
Kurt Rozelsky
Greenville, SC | 864.751.7668
Atlanta, GA | 404.962.1074
Greenville, SC | 864.751.7624
joseph.rohe@smithmoorelaw.com
jennifer.rathman@smithmoorelaw.com
kurt.rozelsky@smithmoorelaw.com
Peter Rutledge
Matt Stone
Marc Tucker
Heather White
Greenville, SC | 864.751.7610
Atlanta, GA | 404.962.1057
Raleigh, NC | 919.755.8713
Charlotte, NC | 704.384.2635
peter.rutledge@smithmoorelaw.com
matt.stone@smithmoorelaw.com
marc.tucker@smithmoorelaw.com
heather.white@smithmoorelaw.com
* New Transportation Team Member
Smith Moore Leatherwood LLP | Attorneys at Law |
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Making Tracks •
On April 7, the NCTA sponsored a Regulation and Accident Seminar featuring Rob Moseley and Marc Tucker. This was held in Raleigh at the North Carolina Trucking Association headquarters.
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Kurt Rozelsky went to Omaha as well for the College World Series to watch his Virginia Cavaliers march towards to the championship. ESPN quality control managed to keep Kurt off the camera this year.
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Rob Moseley was back in the Tar Heel State for the Truckload Carrier Association’s 2015 Safety & Security Annual Meeting in Charlotte on May 4-5. Rob spoke on trucking technology – interesting topic for Rob, who was the last SML attorney to give up his Blackberry. If you would like more info on Rob’s presentation, see the article written by Todd Dills at CCJ: www.ccjdigital.com/managing-your-trucks-ecm-and-otherdata-properly-can-aid-in-post-crash-litigation-attorney-says.
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Rob Moseley presented at the one-day contract and freight claims seminar at the San Diego edition of SMC3’s Connections on June 21.
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Matt Stone and Rob Moseley attended the Georgia Motor Trucking Association Annual Meeting at Amelia Island on June 21-24. Rob spoke on Ways to Mess Up a Perfectly Good Trucking Company.
Marc Tucker delivered the transportation team’s latest webinar on May 12. The webinar covered cybersecurity issues found within the transportation industry. To hear the archived version, see www.smithmoorelaw.com/marctucker-and-rob-moseley-hosted-transportation-webinarmay-12.
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Rob Moseley led a webinar for Vertical Alliance on June 24. Rob discussed upcoming regulation in the trucking industry.
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SML was well represented at the summer meeting of the Conference of Freight Counsel in Charleston in June. Kristen Nowacki tagged along as Rob Moseley and Fredric Marcinak made a pilgrimage to The Citadel.
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Jack Riordan hosted the SC Defense Trial Attorneys Association Trial Academy in Greenville on May 20-22. Kurt Rozelsky added some comic relief on trial notebooks and jury selection.
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Rob Moseley gave people indigestion in discussing new trucking regulations at the May 21 lunch meeting of the Charleston Motor Carriers Association.
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Matt Stone taught the litigation segment of NATMI course at GMTA in Atlanta in May.
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Rob Moseley attended the Annual Meeting and the meeting of the Board of Directors of the SC Trucking Association at Myrtle Beach on June 11-13.
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Fredric Marcinak went to Arizona for the TLA Annual Conference on May 13-16. He spoke on cargo theft and co-chaired the Freight Claims Committee.
Matt Stone was in Omaha for the CLM Transportation Meeting June 18-19. | Transportation Newsletter | Summer 2015
You’re Invited! “Your Sales Staff Is Yours, Until they Aren’t – Then What?”
The “goodwill” embodied in a loyal customer base is perhaps the most valuable of any corporate asset. You pay good money to a dedicated staff of salespeople to develop and foster those customer relationships. In the process, your sales staff learns a wealth of information about you, your customers, and oftentimes competitors—all on your dime—that could enable them to compete against you unfairly if the relationship ends. This webinar will survey some common judicial attitudes toward non-compete agreements, steps an employer should take to best ensure enforceability, how to pick your battles when a salesperson departs, and what to expect if you decide to sue. We will also cover what you should consider when hiring an employee who is currently under an agreement that contains non-compete, non-solicitation, and confidentiality obligations. Date: Tuesday, September 15, 2015 Time: 2 pm - 3 pm EST Presenter: Peter Rutledge Partner Moderator: Rob Moseley, Partner Register: www.smithmoorelaw.com/Webinar-Sept-15. Please contact Michelle LaFata at michelle.lafata@smithmoorelaw. com for more information about this webinar.
The Road Ahead •
On July 9 Rob Moseley, along with Tommy Ruke, will present an MCIEF Webinar entitled, “We denied coverage, NOW WHAT?” They might want to issue a reservation of rights on Rob before then.
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Rob Moseley will be discussing dangers and pitfalls of brokering and other issues at the TEANNA annual meeting in Chicago July 10-12.
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Fredric Marcinak will be the presenter at the next of SML’s webinar series on July 14. The topic will be cargo theft. To register, see www.smithmoorelaw.com/transportation-webinarcargo-theft-protecting-yourself-before-and-after-the-crime.
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Rob Moseley will be talking about HR issues on driver hiring at the NCTA Annual Meeting July 18-21 at Hilton Head. Among the topics will be EEOC, ADA, NLRB and other random letter clusters. Marc Tucker will also attend the meeting as a member of the Board of Directors.
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Matt Stone will teach the litigation segment of NATMI courses at GMTA in Atlanta in July and September. For more information and to register, visit https://gmta.site-ym.com/ events.
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Rob Moseley will attend the August 20-21 meeting of the American College of Transportation Attorneys in Chicago. He serves as Vice Chair, and barring a restoration of sanity among the group, he will be elected as Chair for the next two year term.
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SCTA will offer Safety training in the Greenville SML office on August 26. To register, go to sctrucking.org.
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The Greensboro office will be hosting Transportation night at the Greensboro Grasshoppers on September 2. More to come on this.
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Matt Stone will teach in the transportation school at CLM Claims College in Philadelphia on September 10.
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On September 15 Peter Rutledge will present a webinar on noncompetes for salespeople entitled, “Your Sales Staff Is Yours, Until they Aren’t – Then What?” To register: www. smithmoorelaw.com/Webinar-Sept-15.
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September 17 marks the annual Arkansas Trucking Seminar. Rob Moseley will be presenting on broker liability issues.
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Rob Moseley will be talking about the interplay between maintenance and liability on September 22 at the ATA Maintenance Council Meeting in Orlando.
Cohen and Reis JoinTransportation Industry Team in Atlanta and Charlotte Offices We are pleased to announce the addition of Stephen Cohen and John Reis to the Transportation Industry Team in our Atlanta and Charlotte offices, respectively. Stephen brings several years of experience to our Atlanta office in litigation involving trucking companies, motor coaches, public schools and municipals bus authorities, para-transit providers, and limousine services. “Stephen brings us a unique skillset given his experience in both law enforcement and insurance claims,” says Rob Moseley. “We are very blessed to add him to our Atlanta trucking team.” John brings more than 20 years of litigation experience to our Charlotte office. His practice includes subrogation and commercial claims involving loss or damage to structures, heavy equipment, trucks, motor coaches, vehicles, vessels and other property damaged by fire, water, collision or collapse. “I have
Stephen J. Cohen Of Counsel, Atlanta
John W. Reis
Partner, Charlotte
had the privilege to work against John in the past and can attest to his quality,” says Rob. “He represents an expansion of our existing practice in that he is first and foremost a prosecutor of subrogation actions. We are excited to add his hat to the rack.” For additional information and details on each of the attorneys’ experience and practice focus, visit: www.smithmoorelaw.com/ attorneys. Smith Moore Leatherwood LLP | Attorneys at Law |
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Congratulations to Joseph Rohe on Passing the Customs Broker exam The Transportation Team is pleased to announce that attorney Joseph Rohe recently passed the challenging US Customs & Border Protections’ (“CBP”) Customs Broker Exam. CBP administers the Customs Broker exam twice a year to ensure that applicants have a solid understanding of customs laws and regulations - including bookkeeping, accounting, and all other appropriate matters necessary to render valuable service to importers and exporters. The distinction demonstrates a certain level of proficiency in the import/export arena and gives Joseph the background and knowledge base to advise clients on a number of customs-related matters including the entry (a/k/a import) process,
tariff classifications and protests, foreign trade zones, customs bonds, and related import/export matters. This exam is one of the most difficult professional tests in the United States. There are only a few attorneys in the country that are also licensed customs brokers. CBP does not formally track results, but according to industry news services the pass rate for this exam was approximately 28%.
Joseph Rohe Greenville, SC
Joseph is a litigator practicing with the firm’s Transportation Industry and Litigation Groups in our Greenville office. His practice involves litigating various matters related to transportation and general commercial litigation.
SC Expands FTZ Alternative Sites Framework On April 20, 2015 the South Carolina Ports Authority announced that Foreign Trade Zone 21 (Coastal South Carolina) will be reorganized under the Alternative Sites Framework of the US Foreign-Trade Zones Board. With this reorganization, Zone 21 will join Foreign Trade Zones 38 (Upstate South Carolina) and 127 (Midlands South Carolina), which already operate under the Alternative Sites Framework. This streamlined process allows for Foreign Trade Zone (“FTZ”) approval to be granted in as few as 30 days. The Alternative Sites Framework (“ASF”) is an optional framework to manage FTZ sites utilizing “minor boundary modifications” to avoid the more complicated and time-consuming procedures required to obtain FTZ designation under the Traditional Sites 6
Framework (“TSF”), which has been previously criticized for the extensive burden placed on applicants, substantial expense and lengthy approval process. Under the ASF framework, FTZ approval can be obtained within 30 days—rather than the typical six-eight months, or longer, under the former regulations. Obviously, this streamlined application process can equate to huge savings for applicants.
| Transportation Newsletter | Summer 2015
Additionally, the ASF is not site specific as in the zone/subzone configuration of the TSF and, as such, a company wishing to participate in the ASF would not be required to relocate their operations into a zone/subzone. To read more about the changes in South Carolina’s Foreign Trade Zone visit: www. smithmoorelaw.com/TNLFTZ.
TRANSPORTATION CONTRACTS IN THE AGE OF BIG DATA In this age of big data, the transportation industry is increasingly utilizing e-commerce and leveraging data to increase productivity in the areas such as managing customers, capacity information, pricing information, fleet maintenance, fleet management, and driver compensation analytics. Data collected is often shared with third parties, which raises the risk of a data breach. Businesses commonly protect against such risks through enhanced employee training and, more recently, through the purchase of cyber insurance. An often overlooked method of mitigating the risk of a data breach or other cyber threat is contract drafting.
data within its control: • Does your business share data with third parties? • Does your business collect data from third parties? • With whom do you share data or collect data from? • What data do you share or collect? These key pieces of information enable a business to assess potential cyber risks and respond accordingly. When contractually addressing cyber security issues, there are two key focuses: the protection of data and the allocation of risk. Protecting Your Data
The transportation industry is replete with contractual relationships between the various parties in the supply chain. Each contractual relationship provides an opportunity for a business to protect its own data, mitigate the damage resulting from the loss of its data, or protect against the loss of another’s data. To manage these cyber risks, it is essential that a business first have a thorough understanding of the
When data is shared between two or more entities, it is essential that all parties acknowledge and agree who owns the data. Determining ownership is critical as it is the foundation for the ability to restrict access to data and how it can be used. A business should consider placing reasonable restrictions on the use of its data. Restrictions may include limiting
ACT of GOD PREVAILS! While both the Carmack Amendment and the Carriage of Goods by Sea Act (“COGSA”) provide for an Act of God defense for carriers to assert against shippers’ claims, these defenses are rarely successful. One reason is the demanding burden of proof placed on the carrier to prevail under this defense. To be successful in an Act of God defense, a carrier must show “that the damage from the natural event could not have been prevented by the exercise of reasonable care by the carrier or bailee.” Mamiye Bros. v. Barber S.S. Lines, Inc., 241 F.Supp. 99, 107 (S.D.N.Y. 1965). For example, in Bunge Corp. v. Freeport Maine Repair, Inc., 240 F.3d 919,
926 (11th Cir. 2001), the Court of Appeals affirmed the rejection of an Act of God defense when the district court found that reasonable preparations were available to the defendant vessel owner to prevent damage caused by Hurricane Opal. See also Omega Apparel, Inc. v. ABF Freight System, Inc., 2012 WL 2814300 (M.D. Tenn. July 10, 2012) (denying summary judgment on an Act of God defense based on conclusion that carrier could have taken measures to avoid damage caused by 2010 floods in Nashville, Tennessee). To read more about this ruling visit: www. smithmoorelaw.com/TNLActOfGod.
access to certain employees, restricting the storage of data for future use, or restricting the sharing of data with third parties. Additional steps should be taken to ensure the safeguarding of data. Many businesses now have some form of cyber security policies and procedures to ensure the safe guarding of sensitive information.... To read more about ways trucking companies can protect data visit: www. smithmoorelaw.com/TNLBigData.
Plan to join us on Tuesday, October 6, 2015, for the 6th Annual Atlanta Transportation Seminar – The Commercial Motor Vehicle Collision: How to Protect Your Company. Smith Moore Leatherwood and the Georgia Motor Trucking Association will co-host this seminar designed for trucking companies and their insurers. This year’s program will include an interactive mock crash scene and investigation with the Georgia State Patrol and the Georgia DOT Motor Carrier Compliance Division. Other topics include avoiding pitfalls when your driver or company representative testifies, driver medical issues, and taking advantage of available technology inside and outside of the truck. This year’s program will be at the Georgia International Convention Center, adjacent to Hartsfield-Jackson International Airport. Watch for updates and registration information on our website.
Smith Moore Leatherwood LLP | Attorneys at Law |
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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
TRANSPORTATION INDUSTRY TEAM Our Transportation Industry Group has developed a nationally recognized presence in representing both large and small trucking companies, trucking insurers, shippers, and brokers/intermediaries. We serve as a national and regional counsel for several trucking insurers and national counsel for a number of trucking companies with headquarters in the Southeastern United States and beyond. The largest part of the group’s work is related to the defense of catastrophic accidents, including the work of the emergency response team. As part of the array of transportation services provided to firm clients, an emergency response team is standing by to service clients with urgent needs following a catastrophic accident. The team is available any time, and has handled numerous night time and weekend emergencies for our clients. For more information on our Transportation team, please visit www.smithmoorelaw.com/transportation.
GEORGIA | NORTH CAROLINA | SOUTH CAROLINA Smith Moore Leatherwood LLP | Attorneys at Law | www.smithmoorelaw.com