U.S. Court of Appeals upholds ELD mandate, denies OOIDA’s request

In a decision published on October 31, the U.S. Court of Appeals for the 7th Circuit said it would not overturn the Federal Motor Carrier Safety Administration’s (FMCSA) Electronic Logging Device (ELD) mandate, which is set to take effect December 2017.

This decision was in response to a challenge to the ELD mandate issued by the Owner-Operator Independent Drivers Association (OOIDA).

FMCSA formally announced late last year that the federal mandate for electronic logging devices (ELD) for commercial motor carriers was official and would take effect in December 2017, basically confirming the inevitable in some ways within the freight transportation and logistics sectors.

The objective of the rule, according to FMCSA, is to strengthen commercial truck and bus drivers’ compliance with hours-of-service (HOS) regulations that combat fatigue. The rule will take full effect on December 10, 2017, two years after the date of the final rule being issued. ELDs automatically record driving time and monitor engine hours, vehicle movement, miles driven, and location information.

Many trucking observers maintain that the need for ELDs is obvious, with most explaining that the industry has been reliant on paper logs for far too long. And there could likely be economic benefits through ELD usage, as observers say it could likely reduce the effective number of miles a driver could log, further tightening trucking capacity at a time of ongoing limited truck driver supply, rising pay, and higher overall fleet costs.

In its decision, the court said that the ELD must pass a three-part reasonableness test in which: 1-the regulatory scheme must be informed by a substantial government interest; 2-the warrantless inspections must be necessary to further the regulatory scheme; and 3-the inspection must provide a constitutionally adequate substitute for a warrant.

And in addressing the three elements, it explained that for the first one the public safety concerns inherent in commercial trucking give the government a substantial interest, and for the second one it said that ELD records and administrative inspection of them are necessary to further the government’s regulatory scheme, with “falsification and errors in the traditional paper records…a widespread problem,” adding that during the Agency’s listening sessions, drivers said that motor carriers sometimes pressure them to alter their paper records.

The court said that the ELD mandate met the third part, because the FMCSA provides a constitutionally adequate substitution for a warrant, and to meet this requirement the inspection must advise the owner of the commercial property that the search is made pursuant to law and has a properly defined scope and must limit the discretion of the inspecting officer, with the ELD doing both.

As previously reported, OOIDA, which claims 157,000 members nationwide, says there is no relationship between ELDs and improved truck safety. Instead, it calls them a harassment tool and a violation of the 4th Amendment covering illegal search and seizure.

And in a report by Land Line, OOIDA also maintains that ELDs will not record enough information automatically and that the rule’s benefits will not outweigh the costs.

“Because this issue is of vital importance to our members and all small-business truckers, we are reviewing our next steps to continue our challenge against this regulation,” said OOIDA President and CEO Jim Johnston in the report.

Mike Regan, chief relationship officer at TranzAct Technologies, said that the impact of the rule on truckload capacity is still to be determined, given the implementation period.

“There are those that say this is actually a good thing for capacity, because many large carrier are already using ELDs are going to be able to determine where their trucks are,” he said. “In the quest for the ‘Uberization’ of trucks, this rule may be something that facilitates that push. But the real wildcard is that nobody knows just how much capacity is running illegally right now, so you can speculate on that. Some large carriers already using them say it has reduced their capacity by 3-to-5 percent.”

This sentiment by such a respected figure in the trucking industry highlights how even though the ELD mandate does not take effect for almost a year, it remains top of mind from a regulatory and operational perspective.

Stephens Inc. analyst Brad Delco commented in a research note that ELDs will more effectively and efficiently track a driver's Hours-of-Service (HOS) duty status, while helping to prevent the intentional falsification of records.   

“As a result, we believe there will be a leveling of the competitive playing field, which will give no carrier a distinct advantage over another due to falsifying log books,” he wrote. “We believe this will result in a more rational pricing environment where best-in-breed carriers with a low-cost operation can compete by having greater flexibility to raise driver pay per mile, which historically could have been trumped by a driver running more (albeit illegal) miles.”

What’s more, Delco said that by his firm’s estimates, around 70 percent of the industry is without ELDs, explaining that the falsifying of logbooks is prevalent, with the ELD mandate expected to reduce capacity by up to 10 percent in utilization, and will have a positive impact on supply/demand dynamics for the entire TL industry, which could be in addition to supply correction that is occurring with weak equipment orders.