Podcast: Navigating Trucking Law with Attorney Marc Blubaugh

One of the wisest things you can do in the logistics and transportation industry is to be aware of the rules and regulations you must follow.

The best way to do this? Learn from someone on the inside.

In this episode of Freight Nation: A Trucking Podcast, host Brent Hutto is joined by Marc Blubaugh, Partner at Benesch, Friedlander, Coplan, and Aronoff. Together, they explore the need for business owners to be proactive in keeping up-to-date with the laws that affect them, how to navigate broker-carrier relationships, and the widespread implications of the passing of Assembly Bill 5 (AB5) in California. 

A Proactive Approach

Having worked in transportation law since 1997, Marc has seen the best and worst cases of business owners following or not following the laws that affect them. To him, it is vital to understand the laws that govern your business as you build it. 

“You’re trying to do that due diligence on the front end. What is it that I’m engaged in? What service am I providing to the marketplace? Are there those existential risks that I need to be aware of?”

By being proactive, you can mitigate the risks that could derail your business, such as not procuring the appropriate licenses. Although this mistake is easy to rectify, it would hurt your reputation if you had to shut down and lose customs while waiting for the right licenses to get cleared. So it’s common sense—be aware of the rules that are in place.

Contracts Make for Good Relationships

Everyone in the trucking industry relies on relationship building to get and maintain business. Marc explains that a good relationship ultimately depends on good contracts, where both parties understand their relationship to one another.

“Having a good business relationship depends on good contracts, with that old saying about fences making good neighbors. You want to understand your relationship to one another.”

For broker-carrier relationships, in particular, he recommends ensuring you are on the same page for certain considerations. These include the exposure for any given party, what constitutes a high-value load requiring more insurance, and how to match up insurance and liability limits.

Brokers often see large exposure coming from a failure to match up the promises they make to a customer with the promises they extract from the carrier. A solid contract can help to remove this gap and limit the exposure they face.

Navigating AB5

Five years ago, Assembly Bill 5 (AB5) was passed in California, coming into effect in 2022. This bill changed the transportation market as it imposed new rules on independent contractors, who comprise a large portion of the industry.

“With AB5, your listeners need to make sure they understand it’s a three-part test, essentially, what we call the ABC test. And the real key is the letter B, which means that somebody is going to be deemed to be an employee unless the company hiring them, so to speak, can demonstrate that person is doing something that’s outside the usual course of the hiring company’s business. And so you think about trucking, how do you do that? Because I’m hiring a truck driver. They’re moving freight from A to B. I’m a trucking company. That’s the business I’m in; is moving freight from A to B? So you fail the test automatically.”

Since its introduction, AB5 has caused widespread problems with capacity across California, with worries that copycat legislation will come out across the USA. There are workarounds to the bill. Some companies now exclusively work with employees, others go through a 12-factor test to prove they don’t fall under it, but most have switched to a broker-carrier model. This has involved businesses switching from being a carrier to being a broker so that they can employ their former drivers as independent contractors.

Even with these workarounds, smaller carriers are going under, as they cannot afford to change their business model. This has had a knock-on effect on smaller brokers who rely on smaller carriers to keep afloat. There has been a lot of backlash to the bill, but it is still in place and something we all have to be aware of.

To learn more about AB5 and how to navigate trucking laws, tune into this episode of Freight Nation: A Trucking Podcast on Apple, Spotify, or your favorite podcast platform.