In this episode of Freight Nation: A Trucking Podcast, host Brent Hutto is joined by Marc Blubaugh, Partner at Benesch, Friedlander, Coplan and Aronoff.

Since 1997, Marc has been Partner and Co-chair of the Transportation & Logistics Practice Group at Benesch, Friedlander, Coplan and Aronoff. There, he has litigated a variety of transportation and logistics-related cases in both state and federal courts throughout the USA, as well as before administrative bodies.

[10:59 - 12:43]  When you’re building a business, it is vital to understand the laws that govern it. In doing so, you can mitigate the risks that could derail your business, such as forgetting to procure the appropriate licenses. Although mistakes like these are simple to fix, they can hurt your reputation and cause you to lose customers, so it’s essential to address them proactively. It’s due diligence that will pay off in the long run. 

[17:16 - 20:05] To Marc, good business relationships depend on good contracts. Both parties need to understand their relationship with one another. For broker-carrier relationships, you need specific considerations to ensure you are on the same page. 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. For brokers specifically, Marc sees large exposure coming from a failure to match up the promises a broker makes to a customer with the promises they are extracting from the carrier. By creating a gap, they face exposure.  

[28:06 - 37:25] In 2019, Assembly Bill 5 (AB5) was passed in California, changing the transportation market due to new rules for independent contractors comprising a large portion of the industry. Essentially, companies must complete the ‘ABC’ test to determine if their workers are deemed independent contractors or employees. The key part that affects the trucking industry is the ‘B’ portion, which looks to see whether the hiring company can demonstrate that the person is doing something outside the usual course of the business. Because of the nature of trucking, it’s almost always an automatic fail, so workers cannot be classed as independent contractors. AB5 has been in effect since 2022, causing impacts on capacity across California. There are complicated workarounds involving a 12-factor test, but most companies have pivoted to a ‘broker-carrier model,’ in which they switch from being a carrier to being a broker so they can employ their former drivers as independent contractors. Ultimately, this bill has caused widespread problems, with smaller carriers going under and smaller brokers losing their business as a result.

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