For-Hire Vehicle

Lawyers as Strategic Advisors in the Trucking Industry

The transportation industry is an unpredictable environment in which to do business. The trucking industry is a heavily regulated industry that involves many pitfalls and hurdles. Advisors to the transportation industry know that the best way to handle this challenge is to plan for it. Transportation entrepreneurs often need a full range of services to complement their management team. Such services often include crafting alternate carrier practices, creative planning, utilizing innovative information technology solutions and the implementation of best business practices.

Businesses today don’t need armchair philosophizers; they need business-savvy “real life” counselors who can help guide their company to success. Those in the trucking and logistics segments of the transportation industry often need advisors who can focus on business issues such as carrier profit improvement, enhancing margins, gaining efficiencies and driving down operating costs. Consultants often provide a thorough analysis of the current business operations and identify issues that need improvement. But an outside consultant usually lacks the trust of the leaders of a company and does not often grant them a seat at the decision-making table

Succeeding in the trucking industry requires allocating time and resources to the areas that your business will most benefit your bottom line. Beyond developing your services to target the market, transportation entities most often need advisors who have the heart and soul of your business in mind. The most accomplished lawyers are those that become "trusted advisors" to their transportation clients. This means that their counsel is sought not only for discrete cases, but also on an enterprise level- and not just for "legal" matters. The trusted advisor has a profound understanding of the clients’ business, the industry the client works in and can provide professional judgment, emotional intelligence, candor and experience tailored to the client’s risk tolerance and enterprise objectives. The trusted advisor must be more than just someone who knows the law or who can handle a case. The trusted advisor must be a part of the company's DNA.

Business leaders in the transportation industry today expect their lawyers to counsel them on legal matters, but not all realize that a lawyer who is knowledgeable in the business of transportation can contribute to the success of their business by serving as strategic advisors. While everyone ultimately seeks to earn a seat at the table and be considered a strategic advisor, many lawyers fall short. Nothing is more frustrating for the business team and the lawyer when this relationship doesn’t exist.

A lawyer can only be viewed as a strategic advisor to a transportation entity if they know the industry and the specific business well enough to selflessly contribute to the issues facing the company. Moreover, if the lawyer views their role as to only weigh in on legal issues or the legal implications of issues instead of the business implications, they will be viewed as a legal advisor and will not be thought of as being able to add value beyond that. The business lawyer is the one who leaders want to invite to participate in meetings which are viewed as strategic. Oftentimes, legal issues are raised in the typical “non-legal” meetings and, if a lawyer is not present, decisions may be made that need to be undone or modified in the future. A lawyer will be viewed as a strategic advisor when they are not just available, but are solution-oriented and well-respected by their peers in the company

The job of the strategic lawyer is to provide advice to the business decision makers regarding the legal risks of the various courses of action, devise practical legal and compliant solutions that get management and the company where they need to go to achieve the company’s goals, and objectives and aid the CEO, COO and Board in making those hard decisions. The strategic lawyer communicates his or her understanding of that role and who the proper decision makers. Too many lawyers think that they should be making the decisions. That’s fatal. Of course, the lawyer needs to always urge compliance with applicable laws and regulations and reports up the chain of command. The strategic advisor lawyer must be focused almost entirely on the company’s business and not just on the competitors of the company. They must be the innovator disruptors in the industry, focusing on executing plans and making the competition irrelevant.

The main reason lawyers fail at being strategic advisors is risk tolerance. Most lawyers are programmed to be risk adverse. How many attorneys have you heard of that won’t make decisions when there is a risk involved in the decision? I know a lot. While I subscribe to the general principle that corporate attorneys are advisors and not usually decision makers for business operations, corporate attorneys in the transportation field need to be ready to help the leaders make decisions and then support those decisions even when those decisions present risks. The best strategic advisors identify the risks for the business and then assist the business to mitigate and manage the risks. If the risks are extreme, a good strategic advisor will highlight those to the business as completely as possible which may include “what if” scenarios and case examples of other companies or other decisions AND if available, alternate decisions that may accomplish the same or similar purpose. A strong lawyer strategic advisor will have to work against the way he or she is programmed to avoid all risk and instead will have to consider the best interest of the company in advising management or the Board. If decisions are made by the company with the right information available and the right approach to manage the known and potential risks, the lawyer has done his or her job.

Lawyers succeed as strategic advisors by being appropriately balanced regarding risk and exercising good judgment. An excellent strategic advisor needs to constantly strive to find the right balance between supporting the business’s operational and strategic objectives and mitigating legal, regulatory, and reputational risk. The calls at either end of the spectrum are easy. The calls in the middle are typically far more nuanced and require good judgement in balancing multiple, often competing, considerations. The other way they fail is by not providing actionable advice or recommendations. A lawyer who simply describes the risks and opportunities of various options without providing a clear recommendation on which option the business ought to pursue is unlikely to be viewed as a good strategic advisor. A good strategic advisor will listen, truly understand, speak up and adapt to the changing needs of the business organization.

Properly serving the company as a trusted advisor means you have to be proactive with your business owner clients. Most lawyers who are serving business owners focus on incorporation or agreement review, intellectual property, trademarks, copyrights – things that are reactive. So they wait until one of their business owner clients comes to them with an issue and then they handle it. If there’s business litigation that’s needed, they handle it.

But what very few lawyers do – and I’m suggesting that transportation clients need – is to create a more proactive advisory relationship with your counsel.

The first thing that proactive counsel is going to do is to really get to know your clients’ business model. How do they earn their money? What types of customers do they have? How can you help them to collect payment and close deals more easily? This is one of the areas that the lawyer as trust counsel can provide, but is often overlooked by business owners. As a corporate trusted advisor, one of the things that counsel can and should do that will help the client make money (more money) right away is to help them to be able to close their deals more quickly and easily. The attorney as trusted advisor has a direct influence on this by how agreements are drafted and how counsel suggests that the agreement be signed. The Council as trusted advisor to a business owner must proactively meet with them at least one time per week. Speaking with the client on a regular basis empowers the trusted advisor to proactively make recommendations and be working on matters that will help to grow the business and secure the perimeter of the business.

The trust advisor must also meet with the company's leadership and financial team. This is one way that the trusted advisor can make a huge impact on their bottom line, by making sure that their financial systems and their financial controls are being maintained properly.

That also allows counsel to support them in getting in place a strong asset protection plan

Once you get involved in coordination and quarterbacking, transportation clients begin to see their counsel as the trusted advisor they can turn to when anything happens in their business and sometimes in their personal life. In the heavily regulated and dangerous field of trucking and transportation, there is simply too much at stake to rely upon old-school methods of business operations. Business leaders in the transportation world are always worried about disruption. Some high-tech rival might, after all, do to their sector what smartphones did to the photography industry, what e-commerce is doing to retail, and what financial technology (fintech) is threatening to do to consumer banking. 

When disruption does affect a company, it is frequently because the enterprise was already vulnerable in some fundamental way; moreover, many incumbent companies accelerate their decline through their efforts to forestall it. Panic-driven efforts to avoid or combat disruption can easily lead to hasty, reactive, short-term-oriented decisions that move a company in many directions at once, distracting its management and squandering its resources. The fear of disruption can thus be worse for a company than the actual disruption itself.

Of course, complacency or inaction can be just as problematic. Technological changes in the transportation industry, and other external competitive forces, affect many business realities in the transportation world. Proactive measures are often needed. But they should be well thought out. The best means to be proactive is to look to your trusted advisor. While many transportation entities these days have counsel to turn to when there is a problem, many do not have an attorney as a trusted advisor who can be proactive and beneficial in many more ways than the legal industry has traditionally provided service to their clients.

The disruption in the transportation, and in other industries, has also caused a disruption in the traditional modes in which business leaders seek advice. The best means to proceed with a business decision or a corporate transaction is not to seek counseling after the fact, but to receive proactive advice from someone. That someone is increasingly becoming the attorney as trusted advisor. But this type of relationship between the attorney of trusted advisor in the business owner and/or CEO does not develop overnight. Sometimes it takes many years to find a counselor as trusted advisor. This is partly due to the fact that it takes time to find someone who a business leader can share their deepest darkest secrets as well as their confidential business plans. It is also partly due to the fact that not all attorneys see themselves as the person who should be providing proactive counseling to a company.

In my experience over the past 20 years, the businesses who succeed the most and are prepared to deal with the worst-case scenario are the ones who have an attorney as their trusted advisor in the corner to help deal with all aspects of the operations of the company. The transportation industry is changing right before our very eyes. The trucking industry is in a state of flux. The peer to peer car sharing industry has provided a means by which to revolutionize the trucking industry. To stay ahead of the curve in the trucking industry you must not only have a trusted advisor, but such trusted advisor must be able to be proactive for the day-to-day operations while keeping their eye on the horizon for changes and developments in the industry. The failure to do so can lead to disastrous consequences. Remember what happened the Kodak?

 

HR Departments Should Review Uber's Conduct as a Precautionary Tale.

We have all seen the news coverage of the sexual harassment and discrimination problems at Uber. According to reports, Uber has long suffered from a culture of pervasive sexual harassment and discrimination toward female employees. The issues first came to light publicly in February, when one former Uber employee published a blog post about the sexual harassment that she and other women experienced at the company.

Based on the information available, it appears that the problem at Uber did not stem only from the harassers themselves. Rather, the problems stemmed from a misguided Human Resources department that allowed the problems to go unchecked, despite receiving multiple reports of sexual harassment and discrimination from female employees.

According to reports, when a female employee reported harassment or discrimination to Uber’s Human Resources department, she was more likely to be chastised by HR than to have her concerns addressed. According to allegations, HR representatives told employees who reported such issues that, because the conduct complained of was the harasser’s “first offense” and the harasser was a “high performer,” he would receive a warning, nothing more. HR allegedly told one woman (the author of the February blog post referred to above) that the fact that she had made multiple complaints indicated that it was she, not the male employees she was reporting, who was the problem.

If true, these allegations suggest that Uber’s HR department believed that its highest priority was to protect “high performers” at all costs, even if that meant allowing sexual harassment to run rampant within the company. Generally, when an HR department adopts such an outlook, it comes from the top. HR staff who believe that management expects them to protect harassers and sweep complaints under the rug will, quite often, do so. Like any other employee, an HR rep wants to keep his or her job.

That is why it is imperative that management sets the tone for a company’s culture. HR must receive clear directives that harassment and discrimination are not to be tolerated, and employees must be made to feel that any issues they report will be taken seriously and dealt with appropriately. These messages must be conveyed through both the words and actions of management. HR must understand its role to be a watchdog for compliance issues and an advocate for employees, not a puppet of management.

Uber has terminated at least 20 employees in the fallout from the sexual harassment and discrimination scandal, and its CEO has resigned. Clearly, the company will be feeling the impact of the scandal for quite some time. Any company that has not taken proactive steps to assure that its HR department understands its true purpose and role should view this story as a cautionary tale.

Uber is NOT creating Jobs- do the Math

Based on Uber’s “job creation” projections for update New York, $80 million in revenue will be brought in and 13,000 jobs created.  Do the math, that is $6,153 for each driver before paying for gas, insurance and wear and tear on the vehicle. This is NOT creating jobs! $6,153 pay be extra income for someone who wants to supplement their income for and already has an existing job. This is not even part time job wages when you consider how much time this theoretical driver must work to earn the $61,53. This is called job destruction, all at the hands of Uber. The 13,000 people who will supplement their income with an additional $6,153 (before expenses) will have eliminated thousands of full time jobs for drivers who are actually professional drivers who do this for a living and not as a hobby. This is not job creation in my book, but a cute spin that Uber has placed on their actions in an attempt to get the public and the media to buy their bad bill of goods.  

Comments made to DCA by Steven J. Shanker, Esq. re: amendments to NYC Sick Leave Act

In the City that never sleeps, a for-hire vehicle base station never closes. The members of the Livery Roundtable run businesses that operate 24 hours per day 365 days per year. As such, a number of issues face the livery industry that is not prevalent for the average employer who does not operate 24/7/365. The requirement that livery bases be staffed every single minute of every day has caused certain provisions of the Earned Sick Time Act to result in unintended adverse effect upon these employers.

The average company in New York City is not open on Christmas, New Years Day, Labor Day and a number of other holidays. Members of the public need for-hire transportation every day, but on these and other certain well-defined holidays, the public is often traveling to gather with friends and family to celebrate. The added travel by the public on these days makes our clients even busier than usual, thus they need each employee who is scheduled to work to actually show up. Of course, most people prefer to not work on these holidays. This causes many employees to “call-out” and claim they are sick and unable to work when such is not truly the case. This ultimately leaves our clients short staffed. This not only results in the obvious adverse effects upon the operations of our clients business, but also causes the transportation needs of our clients’ customers to be unable to be satisfied. 

Holidays

As the law now stands, if an employee calls out on a holiday at the last moment, the employer has virtually no recourse. The employee is not required to produce a doctor’s note to verify that they are ill and the employer is left short staffed, thus causing harm to our clients business. Their reputation becomes sullied when they do not have sufficient operators to answer the telephone and less than the number of anticipated dispatchers that serve to ensure that the requests for transportation from the public are effectively sent to the for-hire vehicle operators who are the ones who are actually providing transportation to the public. Thus the vicious cycle begins of there being a holiday where more people are seeking to travel, but the for-hire vehicle bases that facilitate such travel are unable to effectively operate because they have a number of employees who did not come to work under the guise of “being sick”.

We believe it is not on onerous burden on the working persons of the City who are scheduled to work on certain well-defined holidays to be unable to use an accrued sick day unless they produce a doctor’s note to document their illness. This would be more equitable because it will allow the employer to be able to rely upon those who are scheduled to work on certain well defined days to show up to perform their job duties, all while permitting those who are legitimately sick to take the day off without any fear of adverse consequences to their job or their income.

Minimum increments for use of paid sick leave

While the New York City’s Earned Sick Time Act allows an employee to earn up to 40 hours of sick time per year, the employer can only mandate that the employee be paid for up to 4 hours if the employee takes a sick day. In other words, if an employee is scheduled to work 8 hours and calls out sick for the day, the employer can only require that the employee be paid for 4 hours. For an employee who has 8 or more hours of time in their “sick bank”, taking an entire day off (8 hours), but only asking to be paid for 4 hours leaves an additional 4 hours in the employee’s “sick bank”. The unintended effect of this is that employees are using the system to obtain 10 sick days instead of 5. The result is that the employee takes 10 sick days and is paid for a total of 5 of them. In essence, time and experience has proven that an employee is more satisfied to take off 10 days and only be paid for 5 of them because it allows them to effectively use some of the sick days as personal days. This was not the intent or purpose of the law.

We believe it would be more equitable if an employer can require that if an employee has 8 or more hours in their “sick bank” and they take 8 hours off, then the employer have the right to pay the employee for the full 8 hours. If the employee has less than 8 hours in their “sick bank”, then the employer should be able to pay the employee for whatever hours remain in their in their “sick bank”. This is not the act of giving something to the employer while taking something from the employee, but simply the act of creating a system where the employee is kept honest in using a sick day for a day in which they are truly sick. To do otherwise, allows the employee to game the system to maximize their days off, all the while hurting the operations of our clients businesses. There does not seem to be any legal or factual rationale for limiting the employer to mandating that an employee who has more than 4 hours in their in their “sick bank” to use and be paid for only up to 4 hours of time off.

Carry Over

As the law now stands, an employee may carry over up to 40 hours of unused sick time from one calendar year to the next, unless the employer has a policy of paying employees for unused sick time at the end of the calendar year and providing the employee with at least 40 hours of sick time for the immediately subsequent calendar year on the first day of such year. If the employee is paid for all of their unused sick time at the end of the year, then the employee is paid for exactly what they earned. In such circumstances, there seems to be no rationale for requiring the employer to providing the employee with at least 40 hours of sick time for the immediately subsequent calendar year on the first day of such year. This would, in essence, be penalizing an employer for paying the employee for their unused sick time at the end of the year. Why should an employee be entitled to 40 hours of sick time that they did not earn at the beginning of the calendar year when the employer paid them for their unused sick time at the end of the preceding year? Under these circumstances, the employee should be required to earn each hour of sick time as if they had used all of their sick time prior to the end of the preceding year. We believe it would be more equitable if an employer chooses to pay employees for all unused sick time at the end of each year for the employee to earn “new” sick time in the usual fashion. To do otherwise, would give the employee an unearned benefit by being given sick time that they did not earn. This surely was not the intent and purpose of the law

Unions and Collective Bargaining Agreements

One of the premises behind the enactment of the New York City’s Earned Sick Time Act was that an individual employee does not have the bargaining power to be able to require employers to give them certain defined sick leave benefits. The law enables the employee to obtain these benefits automatically because without it, the disparity in bargaining power between the employee and the employer will result in the employee gaining little or no sick leave benefits. This is simply not the case when a union represents a class of employees and their employment relationship is governed by a Collective Bargaining Agreement. In such a case, the union that represents a group of employees is arguably in a much greater position to be able to bargain with an employer to obtain at least as much sick leave benefits for the employee union members as possible. In these cases, there is no disparity in bargaining power. To require each employer to still comply with the mandates of the New York City’s Earned Sick Time Act places the employer in a worse position because the mandates of the Earned Sick Time Act thus become the floor for negotiations and not the norm.

A union regularly obtains added concessions from the employer, such as 48-56 hours of sick time for each employee per year. When this occurs, the parties should not be bound by the prohibition that an employer can only require a note from a doctor after more than 3 days of consecutive absences. In other words, if an employer who is subject to the terms of a Collective Bargaining Agreement is willing to give employees the ability to earn and/or use 48-56 hours of sick time per year, then the employer should be able to bargain with the union to require the employee to produce a note from a doctor to document their sick status after 2 days of consecutive absences. Under the law, as it now stands, the employer may be required to bargain with the union and give more benefits than the law requires, but is not permitted to require any benefit in return. In a nutshell, when there is a union and a Collective Bargaining Agreement, there is no rationale, since there is disparity in bargaining power between the employee and the employer, to require the employer to comply with each and every provision of the New York City Earned Sick Time Act.

Pattern of Abuse

Employers are permitted to take disciplinary action against employees who use sick time for purposes not covered by the Act, but on the whole, if the employer is not able to ask the employee to produce a doctor’s note for certain days off, then there is virtually no way for the employer to verify that the employee used sick time for purposes not covered by the Act. Furthermore, while Employers are permitted to take disciplinary action against employees who engage in a pattern of abuse of leave, there is no guidance for employers as to what the Department of Consumer Affairs (“DCA”) would consider to be a “pattern of abuse”. Some employers may consider abuse to be the use of unscheduled sick time on 3 adjacent weekends, while the DCA may not consider this to be a pattern, but merely a coincidence. The same holds true for holidays. Employers are gun shy in taking adverse action against an employee even in the face of a pattern of abuse simply because the employer has no guidance as to what the DCA may find if a complaint is made by the employee and thus, what penalties the employer may face if the DCA disagrees with the employer’s view as to what constitutes a pattern of abuse. We believe it would be more equitable if an employer is given some leeway in determining a pattern of abuse. Such leeway would be afforded and fairness can be meted out when the burden is placed on the employee to provide some kind of documentation or objective proof to document the use of unscheduled sick time on 3 adjacent weekends, 2 consecutive Mondays (to enable the employee to have a longer weekend) or the use of unscheduled sick time on 2 out of 3 consecutive holidays.

Overall, the law is never perfect, especially at the it is enacted, but when our local government that enacted such rules requests comments from stakeholders in certain industries, such as the for-hire vehicle industry, I sincerely hope that they take such comments under well advisement and consider the negative impact as well as the rationale behind such rules. To do otherwise, would be tantamount to purposefully perpetuating certain aspects of a law that has no rationale and is disproportionately unfair to one party to the equation without any rhyme or reason. 

Uber and Lyft in Danger of being found to have Misclassified their Drivers

March 11 was a tough day for ride-sharing start-ups Uber and Lyft as federal court judges in the U.S. District Court for the Northern District of California issued separate decisions in class action lawsuits brought by drivers from both companies. Those drivers allege that Uber and Lyft misclassified them as independent contractors (ICs) instead of employees — thereby depriving the drivers of many employee benefits. Both Uber and Lyft had filed motions with the court seeking summary judgment on the grounds that they had properly classified the drivers as ICs. The courts in both cases denied the motions and ruled that juries would have to decide whether the drivers are employees or ICs. O’Connor v. Uber Technologies, Inc., No. 3:13-cv-03826-EMC (N.D. Cal. Mar. 11, 2015); Cotter v. Lyft, Inc., No. 3:13-cv-04065-VC (N.D. Cal. Mar. 11, 2015).

These cases will likely have far-reaching implications for Uber, Lyft and other companies in the “on demand” economy. Companies that use a 1099 business model or that have failed to properly structure, document and implement their IC relationships in a manner that complies with applicable laws should take affirmative steps to avoid being the next Uber or Lyft in an IC misclassification lawsuit. 

The ONLY real way to prevent this is by consulting with an attorney who is not only experienced with labor and employee misclassification lawsuit, but one that is experienced in the For-Hire Vehicle industry.