Career choice comes under scrutiny

The U.S. Supreme Court’s recent Montgomery v. Carib Transport II decision has raised questions about freight brokers’ approach to carrier selection, documentation, and liability risk, even as many in the industry say it will make existing practices more formal, consistent, and defensible rather than introduce new operational responsibilities.

“For those of us in the industry who take risk seriously, nothing is really going to change,” he said Jeff TuckerCEO of Tucker Companies Worldwide, who said the issue has long been part of responsible brokerage practices. “To me, it’s interesting and maybe a little worrying that people think this is a new issue.”

That said, brokers are already at risk if they are not exercising due diligence in selecting carriers. greg sandersCEO of RDS Capacity Solutions.

He said the decision primarily draws broader legal attention to broker liability in all jurisdictions. “What it did was put a microscope on it and opened it up to all judicial districts.”

As part of the May 14 decision, the Supreme Court held that negligent hiring claims are not preempted by the Federal Aviation Administration Authorization Act because they fall under the statute’s security exception.

“There were 30 states that already had it in place. This opens it up to all 50 states,” Sanders said.

The ruling reinforces the need for brokers to be “thoughtful, consistent and well-documented in their processes.” chris burroughsCEO of Transportation Intermediaries Association. “This means having a written carrier selection policy, using reliable data sources, maintaining records of what was reviewed, and enforcing standards consistently.”

However, the primary concern for brokers is that there is no single national standard, which can lead to different expectations depending on the state and put pressure on brokers to over-improve in ways that may not improve security, Burrows explained.

Brainy Transportation Inc. has already tightened its requirements. The company uses Highway, a freight security and fraud detection platform, to vet carriers and has added four steps to its carrier approval process.

“We monitor each carrier and they must agree to tracking during remittances to our brokerage,” said Joyce BrainyCEO of Brainy Transportation. The company also requires photographs of the driver’s license, driver and motor carrier numbers displayed on the side of the truck prior to loading.

One of the biggest problems is the lack of a formal safety rating from the Federal Motor Carrier Safety Administration.

When Brainy started 30 years ago, he said, it was audited and rated within six months of starting the business.

“What happened to that deadline?” Brainy asked, and said she wouldn’t use unrated carriers.

shannon breenThe CEO and founder of Freightvana said that about 90% of carriers are unrated by the FMCSA.

Brokers are already conducting their own investigations, but Breen questioned the expectation that they can assess carriers more deeply than regulators. “(The question is) how are we expected to know more about the carriers than the government, which licenses and oversees about 400,000 of them,” he said.

TIA’s Burroughs said brokers cannot replace FMCSA’s role in ensuring carrier safety.

“Brokers do not inspect equipment, hire drivers, oversee training or manage carrier operations,” he explained.

TIA has asked FMCSA to clarify what standards brokers should use when selecting carriers. The association also supports stronger safety oversight, better data and more effective enforcement.

Burroughs said, “Post-accident litigation does not prevent unsafe carriers from operating. Better federal data and enforcement can.”

Tools and data fill the gaps

Brokers are generally left to evaluate insurance, authorization status, inspection history, compliance information and their past experiences with the carrier. Many people are also turning to external technology devices.

RDS uses Bluewire, a safety analytics platform used by insurers to evaluate carrier risk, and Highway to help assess risk. Sanders said companies need a well-documented policy.

“You check it out with your insurance company and your attorney, and you train your associates to be very consistent,” Sanders said. “If there’s going to be an override, it’s up to your management.”

Carrier evaluation may also need to be done more frequently. Historically, a broker might check out a carrier during onboarding, but Sanders said today’s environment requires ongoing evaluation.

“The basic check is the first step, but at the time of dispatch, you also need to double-check with the carrier to make sure everything is in place,” he said.

The tools can help verify whether a driver picking up a load has a valid commercial driver’s license and proper insurance, but Sanders said brokers lack the level of driver-specific visibility available to asset-based carriers.

“As a broker, we do not hire drivers,” Sanders said. “We select only the carriers, and we use the best information we have to make sure the carrier is safe to operate.”

The driver-level gap at major shippers is not small. Doug CantrielFord Motor Company’s head of North American transportation and modernization said he asked his transportation partners what they were doing since the decision and found that scrutiny was increasing.

“They’re really coming down to the driver’s level when they’re looking at it,” he said. “There’s a cognizant approach to the point that they’re going to make sure they’re investigating these drivers more deeply than ever before.”

John PembertonThe CEO of Pemberton Truck Lines said asset-based carriers have a different level of visibility and control.

“With asset-based operations, we are in charge of the entire transportation process,” he said. “They’re our trucks, our drivers, we’re the ones who qualify the drivers, and we can track visibility on shipments 24/7.”

Litigation after an accident does not prevent unsafe carriers from operating. Can do better federal data and enforcement.

Chris Burrows, Transportation Brokers Association

The ability to vet drivers is one of the key differences between asset-based and brokered transportation.

Pemberton expects shippers to increasingly favor carriers that can demonstrate safety and not just a clean record.

“I think shippers are going to trust carriers more who have a deep culture of operational and accountability excellence,” he said. “It depends on the accountability that a carrier takes to the drivers they partner with.”

The decision may prompt shippers to look more closely at asset-based carriers or brokers that also conduct asset-based business, which could signal accountability.

Asset-based providers may benefit

kenneth johnsonThe executive chairman of Leonard’s Express, which operates both asset-based and brokerage divisions, said many clients who previously allowed the company to broker their commodities have since requested the asset-only service. Others have structured agreements that set a base percentage on the company’s trucks with the ability to fill brokerage.

“I think it can be an advantage in some circumstances,” Johnson said of property and brokerage operations.

din albertThe vice president of operations for Grand Island Express said the decision is motivating shippers to place greater emphasis on defined standards and reputable partners.

“This decision is prompting shippers to look to more reputable solutions than in the past and to see where the standards are set,” he said.

For Grand Island Express, which also has asset and non-asset operations, functionally nothing will change.

“As a carrier, we are safe and known for that. On the non-asset side, increased testing is something we have done without regard,” Albert said. “It doesn’t change our carrier selection, but it formalizes it, so we have a very defined process to stand by.”

Tucker said any party, not just brokers, should independently evaluate security beyond federal authority when selecting a carrier. “About 80% to 90% of global forwarders are using outside carriers for most of their ground transportation, and forwarders, generally speaking, are much less fluent, practiced and trained in carrier selection,” he said.

Greater focus on testing may also impact load boards, which remain an important source of capacity and market information.

“Posting services should require more than just someone paying to post, allowing anyone who has a truck to haul stuff,” Brainy said.

When brokers establish carrier relationships through load boards, technology tools and internal controls become more important to ensure they meet carrier screening standards, said RDS’s Sanders.

“With the right technology tools, you can ensure that your carriers are pre-screened,” he said.

Sanders notes that major shippers are already beginning to step up their expectations, in some cases developing recommended screening selection criteria for the use of third-party brokers in their networks.

“It’s a brand issue, but it’s also a safety issue,” Sanders said. “I suspect that most shippers with good reputations in the supply chain will start moving in that direction.”

The Supreme Court’s decision is expected to drive some brokers and carriers out of the market, but Tucker said those companies are best positioned to demonstrate that they have good processes in place.

“It will be mandatory for everyone to participate in the program,” he said.