Did you have a chance to attend our recent webinar, “The Costs of Non-Compliance: Safeguarding Your Company’s Reputation & Financial Stability ”? We addressed and received a variety of questions during this event, so our guests Brandon Wiseman, President of Trucksafe Consulting, and Lisa Gonnerman, President of Bay and Bay Transportation, answered them below in this Q&A-style blog post for anyone who missed it.
If you couldn’t join the live webinar, don’t worry – you can watch it on-demand anytime!
Question: What have been some of the more significant recent changes we’ve seen in regulatory oversight?
Answer:
Brandon: I think the most significant regulatory changes in recent years have been the ELD mandate, entry-level driver training for CDL drivers, and the federal Drug/Alcohol Clearinghouse.
Question: How have these changes impacted your business? Has the risk of ever-increasing verdicts and settlements had any impact on how you operate?
Answer:
Lisa: The ELD mandate has had a significant impact on the business, not only in terms of getting drivers to switch from paper logs to electronic ones, but also in terms of the back-office work required. This includes recording and auditing various aspects such as assigned driving time, yard moves, diagnostics, and malfunctions. While some aspects may have become easier with ELDs, there is also additional work involved in ensuring drivers do not try to circumvent the system. Overall, ELDs have brought positive changes to the industry, but there are still tasks such as driver certification, filing training materials, and maintaining up-to-date data that companies need to address.
Question: I often hear that the top reason carriers fall out of compliance is due to a lack of education on the rules. Considering that ignorance of the regulations doesn’t offer a reprieve, what are some suggestions you have for our audience on ways to keep abreast of new and evolving regulations?
Answers:
Brandon: I personally like to follow industry publications on social media (e.g., LinkedIn). I also subscribe to the FMCSA’s rulemaking page on the Federal Register.
Lisa: To stay informed on evolving regulations, I recommend developing a strong network within the industry. Safety is an area where people are willing to share and help each other. Utilize associations, both at the state and national level, as they often provide different training materials.
Question: What are some suggestions for carriers that may not have the staff or resources (smaller carriers may have a person that’s responsible for safety & compliance but wear other hats as well)?
Answer:
Brandon: Consider outsourcing some of the tedious tasks that go into compliance, as resources allow. For example, subscribing to a service to help you keep tabs on your drivers’ qualifications can really help close gaps and keep you out of the crosshairs.
Question: How disruptive and costly can the audit process be to an operation?
Answer:
Lisa: The audit process involves a significant amount of work and time, and the duration and scope of the audit are unpredictable. Audits can lead to fines, not only for the company but also for the drivers. The results of an audit can impact the company's rating and even its customer base, as contractual obligations may require notifying customers of audit outcomes, potentially resulting in a loss of business. The stress of undergoing an audit is significant, regardless of how confident the company feels about its compliance.
Question: Can you also reflect on the opportunity costs - the loss in revenue when trucks are taken off the road? That’s something that may not always be considered, but can be a sizable cost associated with non-compliance.
Answer:
Lisa: The opportunity costs associated with non-compliance, such as taking trucks off the road, are significant. When a truck is out of service due to maintenance or a driver being unavailable, it results in a loss of potential revenue. This affects the ability to cover fixed costs and can have implications for insurance rates. Insurance costs are already challenging, and any compliance issues can further increase those costs.
Question: What about insurance premiums? I know they’ve been rising steadily over the years. How much control do we have over increases to insurance premiums?
Answers:
Brandon: There are certainly some things that are outside of the carrier’s control. As we see more and more of these so-called “nuclear verdicts” and large insurers leaving this market, we are seeing corresponding increases in premiums, despite the carriers’ efforts to minimize exposure. That said, there are certainly things carriers can do to improve their safety posture and perhaps make a dent in their premiums. Namely, keeping their CSA scores in check.
Lisa: During insurance reviews or renewals, presenting a comprehensive overview of safety practices, compliance management, and staffing dedicated to these areas can have a positive impact. Insurance companies assess factors such as loss records, claims history, accidents, and injuries when determining premiums. Improving safety results and cultivating a strong safety culture within the company, supported by top-level executives, can positively influence insurance premiums. Every individual within the company, regardless of their role, has accountability for safety, and their actions can impact insurance costs. Providing thorough information and building confidence with the insurance company can help mitigate premium increases.
Question: How about Reputational Damage? What’s the potential revenue loss if shippers and/or brokers won’t do business with you?
Answers:
Brandon: Shippers and brokers are being increasingly targeted in highway accident litigation, so they have skin in the game. To minimize their own exposure, many of these customers are taking a closer look at their carrier partners and refusing to do business with those that have compliance problems, as evidenced by their safety metrics (e.g., safety ratings, CSA scores).
Lisa: Reputational damage can have a significant impact on revenue as it affects the willingness of shippers and brokers to do business with a company. Potential business partners consider the background and history of carriers when making decisions. Employers conduct thorough research on the career background of potential hires to assess their reputation. The long-term consequences of reputational damage can negatively impact a company's ability to secure business and have implications for individuals' careers in the industry.
Question: Does that reputational damage go beyond the carrier? Could there be personal reputational damage to the VP or Director of Safety?
Answer:
Brandon: It’s rare but certainly possible for officers and directors to be held directly responsible for non-compliance. We occasionally see the FMCSA, with the assistance of the DOJ, pursue criminal cases against owners for egregious violations. Aside from that, there can certainly be reputational damage to those who are in charge of a carrier’s compliance program when that program is not up to snuff. If I’m a carrier that is hiring a new safety director or VP, you can be sure that I’m looking closely at the compliance metrics of any carriers for whom the candidates have previously worked.
Question: You were highlighted in a Transport Topics article recently where you referenced the importance of properly vetting drivers. Can you share some of the common compliance deficiencies you see when you’re working with carrier clients?
Answer:
Brandon: What we’ve seen from studies over the years, including one done by ATRI in 2020, is that there are certain compliance deficiencies that tend to sway juries in the nuclear verdict cases. The most prominent issues seems to be driver history (e.g., failing to properly qualify the driver) and hours-of-service issues (e.g., allowing drivers to exceed their HOS limits).
Question: I imagine this is an area that’s really important to you given your safety and compliance background. Are there any common mistakes you’d like to add?
Answer:
Lisa: I would suggest regularly assessing your accident results, injury outcomes, and compliance status to understand your performance and identify areas for improvement. If these indicators are not favorable, seek help and take immediate action to address the issues before an accident occurs. If you invest in technology, make sure that you have the necessary processes and personnel in place to manage the information. Documentation is crucial as well. Properly document your safety measures, actions taken, and outcomes to ensure accountability.
Question: How do you instill a culture of compliance where safety is a priority?
Answers:
Brandon: It has to be top-down. If the owners and top-level management is sending mixed messages about compliance (e.g., we need to get the job done), then you can’t expect drivers to do what you are expecting of them in that regard.
Lisa: It’s important to focus on corporate culture and core values. Hiring individuals who align with the company's core values is crucial. Building a culture of compliance and safety takes time and requires consistent demonstration and reinforcement of core values. Every decision made within the company should be filtered through a safety filter. The culture of compliance and safety is built through consistent actions, communication, and prioritizing safety in all aspects of the business.
Question: How important is leveraging technology to stay on top of safety and compliance?
Answers:
Brandon: It can play a big part. In my experience, fleets that rely on technology to identify gaps in their compliance and to proactively address violation trends tend to be better off.
Lisa: Inadequate documentation, such as outdated med cards or failure to comply with drug and alcohol testing programs, can pose significant risks and lead to the abandonment of potential acquisitions. Technology plays a key role in managing and maintaining proper documentation, ensuring compliance, and mitigating risks.
Question: Can a broker check the clearing house on carriers?
Answer:
Brandon: No. The Clearinghouse is only available to employers (e.g., carriers) and their TPAs.
Question: How often should internal training be conducted for employees to maintain an appropriate level of compliance in an organization?
Answer:
Brandon: I don’t necessarily care what cadence carriers pick for their internal training, but they should have some cadence (e.g., monthly, annually). And that training should target areas where the carrier knows it is struggling.
Question: What are the conditions for accepting certain risks of non-compliance, for example, if eliminating the risk is more expensive than receiving a fine? Are such questions considered at all?
Answer:
Brandon: You’re never going to achieve 100% compliance. FMCSA recognizes this and looks more at “patterns of non-compliance.” So that’s what I recommend fleets focus on. Closely watch your data (e.g., SMS data) and look for trends that suggest you may have a systemic problem, and then tackle those issues first. And then work your way down from there.
Question: A bit unrelated to compliance, but have you seen an increase in fraud in the industry and if so, how have you seen companies combat this?
Answer:
Brandon: Fraud in what sense? We’ve definitely seen an uptick in large-scale schemes to defraud carriers by staging highway accidents. Just recently, several dozen people plead guilty in this type of scheme in Louisiana, including plaintiffs attorneys.
Question: What about settlements outside of courts to mitigate the event from getting to court/jury?
Answer:
Brandon: The vast majority of highway accident cases settle early. And that’s often advisable unless we’re dealing with unrealistic demands.
Looking for more ways to recruit safe drivers? Check out our eBook, Making Safety Happen: Recruiting Drivers Who Have a Safety-First Mindset.