Court upholds electronic logs for trucking industry, analyst says ruling will prevent ‘falsifying of logbooks’

Semi-truck drivers can still expect to use electronic logging devices for hours-of-service compliance starting Dec. 18, 2017, after a federal mandate requiring the devices was upheld in court.

On Oct. 31, the 7th Circuit Court of Appeals in Chicago denied a petition by Owner-Operator Independent Drivers Association to overturn the mandate requiring the drivers to use the devices. Jim Johnston, president and CEO for the trucking association, was disappointed and disagreed with the ruling.

“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,” Johnston said in a statement.

But the mandate has received support from the American Trucking Associations and Arkansas Trucking Association trade organizations.

“ATA is pleased that the court has cleared the way for this important regulation, and we look forward to its implementation,” Sean McNally, vice president of public affairs and press secretary for American Trucking Associations, said in an email.

“Traditionally we have supported the use of ELDs,” said Bethany May, communications director for the Arkansas Trucking Association, adding that the ruling wasn’t a surprise.

In December 2015, Owner-Operator Independent Drivers Association, based in Grain Valley, Mo., filed the lawsuit against Federal Motor Carrier Safety Administration in attempt to overturn the mandate after the final rule was announced. On March 29, the trucking association filed an opening brief, challenging the rule, and presented its arguments in a hearing Sept. 13. The association argued the rule didn’t do the following:
• Require ELDs to record changes in duty status automatically;
• Ensure ELDs wouldn’t be used to harass drivers;
• Show it would reduce hours-of-service violations and crash risk;
• Protect confidentiality and limit data disclosed to law enforcement; and
• Defend drivers’ Fourth Amendment rights to prohibit unreasonable searches and seizures.

In August 2011, the same court upholding the ELD mandate threw out a proposed electronic logbook rule based on the argument that drivers would be harassed. But the ELD mandate prohibits harassment, according to the rule, and carriers could face civil penalties, if drivers are harassed. However, the biggest challenge to the mandate was seen as the argument the rule violated the Fourth Amendment, according to a report by analyst Benjamin Hartford of Robert W. Baird & Co.

“We had previously considered this to be the most substantial challenge to the ruling, so this court ruling makes future challenges much more difficult, in our view,” Hartford wrote.

If challenged, the ruling can be appealed to the U.S. Supreme Court.

‘SHIP HAS SAILED’
Whether the case is headed to the high court is uncertain, but David O’Neal, director of safety services for Arkansas Trucking Association, expects the rule will go into effect as planned.

Carriers should not wait to start upgrading to electronic logging devices, he said.

“My advice to the industry will be not to wait,” O’Neal said. “The ship has sailed.”

Analyst Brad Delco of Little Rock-based Stephens Inc. estimated 30% of the truckload industry uses ELDs, “implying 70% of the industry was without an ELD.” Electronic logging devices will “more effectively and efficiently” keep track of semitrailer driver’s “hours-of-service duty status” and help to prevent intentionally false record making, Delco wrote. “We continue to believe the falsifying of logbooks is prevalent.”

In separate reports Nov. 1, Hartford and Delco shared a positive outlook about the ruling.

“We remain encouraged by the court’s decision and maintain our view that the ELD mandate with a compliance date set for Dec. 18, 2017, will level the competitive playing field for all truckload carriers, reduce industry capacity and have a positive impact on safety and TL fundamentals,” Delco wrote.

Hartford said the ruling was “in line with our previous expectations,” and viewed it as a positive for “long-term industry dynamics. However, in the short term, we remain patient while awaiting a trough/inflection in industry pricing growth.”

Carriers have discussed reducing capacity of up to 10% after installing electronic logging devices, and this is expected to have a positive impact on the industry, according to Delco’s industry note. Stephens’ truckload (TL) stock index is up 15% so far this year and is outperforming the S&P 500, which is up 4%.

“We believe investors expect an impending inflection in TL fundamentals next year driven by supply-side correction that is taking place in a reduced CapEx environment, continued inventory de-stocking trends that support the need for re-stocking and the effects of the ELD mandate on capacity and pricing discussions with carriers/shippers,” Delco wrote.