Overdrive Magazine

January 2020

Issue link: https://dmtmag.uberflip.com/i/1197294

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20 | Overdrive | January 2020 Roadrunner Transportation System announced it sold its flatbed business unit for $30 million cash, with pro- ceeds from the sale going toward debt. The company did not say who pur- chased D&E Transport, Roadrunner's flatbed subsidiary. The move came just over two months after the 3,500- truck fleet announced it was down- sizing its dry van division and cutting 10 percent of its workforce, 450 jobs. Roadrunner in November also announced it had sold its intermodal division for $50 million cash. In its third-quarter earnings report released in November, Roadrunner said its revenue took a nearly $50 million hit in September and October due to the six-week strike at General Motors. The company also reported that a malware attack cost it another $10 million. Roadrunner reported a $97 million net loss in the quarter and a $266 million net loss through the first nine months of 2019. The Downers Grove, Illinois-based company operated more than 3,500 power units in 2018, according to CCJ. Roadrunner in October announced it would downsize its dry van busi- ness due to a lack of profitability in the segment. In addition to dump- ing more than half its dry van fleet and cutting jobs, the company said it would close five terminals. Sliding in on the coattails of California's September passage of a law that has undercut leased owner-operators' ability to work in the state, New Jersey has introduced similar legisla- tion in its Congress. Like California's A.B. 5, New Jersey's S. 4204 would restrict businesses' ability to use independent contractors, in effect blocking carriers from contracting with owner-operators. Also like California's law, which took effect Jan. 1, legal challenges likely would mount if the bill passes. In that case, such lawsuits could reach the U.S. Supreme Court. New Jersey's law is nearly identical to California's, said attorney Bob Roginson, a partner at Ogletree, Deakins, Nash, Smoak & Stewart. He represents the California Trucking Association and two independent owner-operators in their lawsuit against California's A.B. 5. That lawsuit is currently at the Ninth Circuit Court of Appeals, a step below the U.S. Supreme Court. The lawsuit targets the three-part ABC test, which is at the core of A.B. 5. CTA's lawsuit seeks to have courts deem the ABC test invalid for determining whether a trucker should be classified as an independent contractor or an employee. The crux of A.B. 5 for trucking is the B portion of the test that prohibits employers from striking agreements with independent contractors in the same line of business as the employer, effectively invalidating trucking company lease agreements with owner-operator independent contractors. Some carriers have cut ties with owner-operators who live in California, in some cases offering to transition them to com- pany driver or offering them the chance to move out of state and continue leasing on. New Jersey's S. 4204 intends to enact the same ABC test. If challenged via the courts, a subsequent lawsuit could reach the Third Circuit Court of Appeals. Decisions in both circuit courts are likely years off, but if the rulings are split one for and one against, the issue then would be ripe for the nation's high court, said Roginson. Split circuit court decisions "normally would mean the U.S. Supreme Court would weigh in and resolve any lingering disputes," he said. "I think it's clearly setting up for a likely split," Roginson said of the potential circuit court decisions. He feels the Ninth Circuit will side with him and his plaintiffs (CTA and the two owner-operators) in California. He bases that on standing Ninth Circuit decisions, which have deemed the more nuanced Borello test, established in a 1989 case, as the proper way to determine whether a truck driver is an employee or an independent contractor. Long term, he said, it may be best to have the issue "con- firmed and clarified" by the Supreme Court one way or the other. A Supreme Court ruling in favor of laws using the ABC test would be a disaster for the common leased owner- operator business model and potentially damaging for some independents. In a ruling against the test, the Supreme Court could clarify that any state-level laws requiring ABC tests to determine independent contractor status are not applicable to motor carriers and owner-operators. Anti-owner-operator laws could reach Supreme Court Owner-operators in New Jersey would face virtually the same restrictions that took effect this month in California if proposed legislation passes. New Jersey's S. 4204 bill seeks to curb the misclassification of workers, including truck drivers. Roadrunner further downsizes

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