Montgomery ruling drives compliance unknowns, opportunities

“Most clients are asking, ‘What should we be doing differently, if anything?’ ” Green said. (Alex Potemkin/Getty Images)

Freight brokers and their partners are scrambling to understand how their systems and services must be updated after a recent Supreme Court decision.

The court ruled in Montgomery v. Caribe Transport II that freight brokerage providers aren’t protected by federal law from state-level negligent-hiring lawsuits. While the decision removed federal preemption of laws across states, it left open the key compliance question of how to apply a so-called reasonable care standard that requires brokers to carefully vet the carriers they hire to haul freight.

“There’s certainly a higher awareness of the need to have some improved processes in place for those that are making these decisions,” said Steve Murray, chief operating officer at J.J. Keller & Associates. “We’ve had services in this space for a while. But it certainly has increased demand and requests for getting help and assistance.”

J.J. Keller has been advising clients as they evaluate their existing processes or build new ones, especially around how to apply the reasonable care standard.

“There is no black and white answer,” Murray said. “We’re going to have to make some assumptions and use data and research in order to substantiate some of those and just be able to feel good that we’re able to demonstrate reasonable care through these solutions.”

Murray warned that brokers will likely take varying approaches to applying the standard but suggested eventual clarity could come from the courts or the Federal Motor Carrier Safety Administration.

Meanwhile, he suggested that brokers and shippers adopt plans tailored to their specific operations but also adaptable. This includes having written standards, documentation and an established escalation process.

“The entire industry — including shippers — are asking the same thing, which is, ‘Are we using reasonable care when vetting carriers, and how do we protect ourselves?’ ” said Adam Green, senior vice president of logistics at Brown & Brown. “Most clients are asking, ‘What should we be doing differently, if anything?’ ”

Green said that the industry has had sophisticated carrier vetting tools and processes for more than a decade and that companies are improving and modifying those systems in response to the ruling. He also stressed that, absent more clarity, the industry must work together.

“I wouldn’t necessarily say that we could list or identify tools or resources born out of that ruling because, truthfully, I don’t think we, as an industry, had enough time.”

The Transportation Intermediaries Association has petitioned FMCSA to develop a standard that provides clear guidance to brokers and juries and has asked the government to publish a list of “high risk” motor carriers.

“We are still in the early days of navigating this new landscape, but we have already seen many TIA members revisiting their qualification thresholds, incorporating new technology, and making changes to their documentation and agreements to adapt to this new reality,” said TIA President Chris Burroughs. “By taking these steps, FMCSA can provide additional clarity and guidance for brokers and shippers that will improve safety outcomes and give the traveling public greater confidence that high risk carriers are identified and addressed before an accident can occur.”

Descartes Systems Group responded to the ruling by announcing new review management and audit capabilities within its carrier onboarding platform. The system automatically documents the carrier and review process when decisions are made.

“This ‘snapshot in time’ approach helps organizations maintain a record of what information was available and considered during the review process, as carrier profiles, safety records, operating authorities and risk factors may evolve over time,” said Andrew Wimer, an associate general manager of transportation management at the company.

BeyondTrucks responded to the ruling by announcing a software integration with Vehicle Licensing Consultants that allows fleets to embed real-time driver qualification and equipment compliance data into dispatch workflows to flag risky assignments and access safety data.

“What we’re doing specifically for our customers is to build a product that helps their people make better decisions,” BeyondTrucks CEO Hans Galland said.