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Transportation Industry Newsletter

Transportation Industry Newsletter


The Transportation Newsletter
(Winter 2017)
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FMCSA Poised To Launch Long-Awaited Drug And Alcohol Clearinghouse

Just when you think you're in compliance . . . they change the rule! OK, sarcasm aside, this is actually a much-needed and long-overdue change.

After several years of debate, lobbying, and fine-tuning, the FMCSA is poised to launch its Commercial Driver's License Drug and Alcohol Clearinghouse, which will significantly expand the duty of motor carriers and select officers and agencies to report, and check for, commercial drivers' positive drug and alcohol test results or refusals. 

Starting January 5, 2017, just in time to beat the Trump administration's expected regulatory moratorium, motor carriers and their designated service agents will be required to report, within three business days:

  • Alcohol tests with a concentration of 0.04 or higher;
  • Alcohol and drug test refusals;
  • All instances of known drug or alcohol use (observations, admissions, DUI citations, etc.);
  • Negative return-to-duty drug test results; and
  • Successful completion of follow-up tests.

Medical review officers will be required to report, within two business days:

  • Positive, adulterated, or substituted drug and alcohol test results; and
  • Alcohol and drug test refusals.

Substance abuse professionals will be required to report, within one business day, when they conduct an initial employee drug or alcohol assessment and when the employee completes the return-to-duty process. 

Further, motor carriers will be required to query the Clearinghouse (1) before hiring any CDL applicant to verify the driver is compliant with drug and alcohol regulations and, (2) once annually to verify current CDL drivers are compliant.  So, unlike the PSP, which is a one-and-done check, the Clearinghouse will be checked annually.  Motor carriers will be required to keep a record of each query for three years, through January 6, 2023; thereafter, they will be relieved of that requirement if they maintain a valid Clearinghouse registration. 

Finally, state licensing agencies will be required to query the Clearinghouse before issuing, renewing, or transferring commercial driver's licenses. 

The Clearinghouse is being hailed for its potential positive impact on safety, cost reduction, driver turnover, and simplification of driver hiring.  Notably, the Clearinghouse is expected to have a net benefit of $42 million in expected crash reductions, close the loop-hole of drivers changing employers without reporting failed drug or alcohol test results, and relieve a motor carrier from the tedious "three-year lookback" requirement during the hiring process—after three years, the Clearinghouse will take the place of carriers querying drivers about their last three years of employment history. 

In a statement, FMCSA Administrator Scott Darling praised the Clearinghouse as "a major safety win for the general public and the entire commercial motor vehicle industry.  Drivers who test positive for drugs or alcohol will no longer be able to conceal those test results from employers and continue to drive while posing a safety risk to the driving public."

Although the rule goes into effect on January 5, 2017, motor carriers and affected officers and agencies will have until January 6, 2020 to be compliant.  The three-year lag time is designed to allow all involved, including the FMCSA, sufficient time to implement policies and procedures to ensure compliance. 

The FMCSA, or a designated vendor, will charge subscription fees from entities required to query the Clearinghouse.  

Let’s NOT Get Personal:  Protecting your Personal Assets

By: Rob Moseley and Megan M. Early-Soppa

Of course we love our clients and want to get to know each and every one of you, but we can all agree you do not want to get too personal when it comes to maintaining your corporate liability shield. We frequently get inquiries from owners and managers of trucking companies asking, “How can I protect my personal assets if something happens involving the business?” In the transportation industry, in light of recent jury verdicts, there is a high level of risk no matter the size of the trucking company. An accident could erase an owner’s equity in a blink. It is important for all business owners to follow the proper procedures to ensure their business is set up to protect themselves, shareholders, and officers from personal liability for the company’s debts and liabilities.

For the courts to impose personal liability on an owner of a trucking company there must be (1) personal actions of the officer or (2) the courts must “pierce the corporate veil.” In other words, the court ignores the protections afforded by the status of corporation and holds the shareholders or another affiliated corporation liable.

As to the first possibility, officers and managers make decisions every day that could impose personal liability on them for those actions.  For example, a safety director approves a driver hire, or a dispatcher assigns a load to a driver when he should have known the driver did not have the credentials for the shipment.  However, plaintiffs’ attorneys rarely take this approach.  Doing so would create issues concerning coverage under a standard motor carrier policy, and plaintiffs’ attorneys don’t normally like to get bogged down in pursuing personal assets where the collection efforts would be akin to a land war in Eastern Europe in the winter.

However, the veil piercing issues arise on a regular basis, especially when insurance limits may be insufficient.  So, how does a Court determine whether or not to “pierce the veil”? Before we get there, one thing that comes up is, “When can the plaintiff raise the issue?”  The majority rule is that a plaintiff can’t conduct discovery on veil piercing issues until the plaintiff has a judgment which is unsatisfied.  This makes sense because the point would be moot if the plaintiff doesn’t ultimately recover more than the available coverage.

Once the issue is relevant, a court will typically consider the following when determining whether or not to pierce the corporate veil:

  1. Was the corporation involved in fraudulent behavior? Was there any wrongdoing or injustice? The Court will look to see if the owners/shareholders acted recklessly or committed fraud with regards to the running of the business.
  2. Did the companies fail to maintain separate identities? Stated another way, did the parent company use a subsidiary company as merely an alter ego, maintaining control of the subsidiary, providing all the financing, etc.?
  3. Did the company or the owners/shareholders fail to maintain separate identities? The court will look to see if the owners/shareholders formed a company but continued to fund the business out of personal checking accounts or commingled business funds with personal funds.
  4. Was the company adequately capitalized? The court will look to determine if the company’s level of assets available to the creditor is fair.
  5. Did the company follow corporate formalities? The court will look to see if corporate formalities were properly followed. In instances where they find that they were not followed, courts have found that the legal liability protection typically afforded to owners/shareholders was waived, and thus the personal assets of the owners/shareholders can be reached by the claimant.

It is important to note that while the Courts typically look at all the factors above, the weight placed on these factors will vary by the facts of the case.

It is of the utmost importance for any business owner to ensure their business is properly structured to afford the proper protections. In The Custom Companies v Azera, LLC and Mammadov, 2015 WL 4467020 (N.D. Illinois July 21, 2015), the Court found that the trucking company owner did not properly file his corporate paperwork to be considered a proper LLC in the state of Georgia or Texas. He forfeited his corporate existence in Texas by failing to pay his annual registration fees, and was never reinstated. He also never successfully reorganized the corporate existence in Georgia. One year had passed since he forfeited his corporate existence and entered into a contract with the Plaintiff. The Court found that he was afforded no protection, and he was personally liable for the damages. This is a great example of how not simply following corporate formalities and staying on top of business filings can lead to disaster for a business owner.

One must remember that the FMCSA does not do any sort of investigation as to whether your corporate status is correct.  If you say ABC Trucking, Inc., is your company, they will issue authority as a motor carrier, even if you have not established ABC Trucking, Inc., as a corporation with the state Secretary of State.  These processes are completely separate and they need to match.

Taking the proper steps to protect yourself from personal liability could make the difference between the effective creation of a corporate structure versus the daunting effects of personal liability. From the creation of the business to everyday business decisions, owners, officers, and shareholders should be mindful of the separate corporate structure and acting in a manner that maintains that distinctiveness.  This also applies to affiliate entities.  The corporate walls between the companies must be maintained with “shared services agreements” and other similar devices to allocate resources and expenses. 

A Chinese proverb is credited with the following: “The best time to plant a tree was 20 years ago. The second best time is now.”  The same goes for putting your corporate house in order.

Electronic Logging Devices – Two Steps Forward, One Step Back

On December 11, 2015, the day after the Federal Motor Carrier Safety Administration (“FMCSA”) published its final rule mandating the implementation of electronic logging devices (“ELDs”), the Owner-Operator Independent Drivers Association, Inc., (“OOIDA”) challenged in court the FMCSA and its implementation of the ELD rule. One year from the rule’s December 2017 effective date, the 7th Circuit Court of Appeals has rejected OOIDA’s challenge and cleared the way for implementation. However, just when it appears that all roadblocks have been removed and the path towards implementation is clear, questions still linger.

On October 31, 2016, the 7th Circuit denied OOIDA’s request and upheld the final rule mandating the implementation of ELDs. Owner-Operator Independent Drivers Association, Inc. Mark Elrod, and Richard Pingel, Petitioners, V. United States Department Of Transportation, 2016 WL 6407405 (7th Circuit Oct. 31, 2016). In its challenge, OOIDA made five arguments against implementation: (1) the rule allows for ELDs that are not entirely automatic; (2) the FMCSA’s definition of “harassment” is too narrow; (3) the FMCSA’s cost-benefit analysis fails to justify implementation; (4) FMCSA did not sufficiently consider privacy protections for drivers; and, (5) the ELD mandate imposes an unconstitutional search and/or seizure on drivers.  Id. at 1. The 7th Circuit rejected each of these arguments noting that: (1) Congress did not intend to require constant surveillance and that the devices prescribed by the FMCSA satisfy the “automatic” requirement.  Id. at 6; (2) the definition of “harassment” was reasonable, not too narrow, and developed by soliciting input from drivers, carriers, and trade organizations. Id. at 7; (3) a cost-benefit analysis was not required in order to implement the rule. Id. at 8; (4) the FMCSA adopted a reasonable approach to protect ELD data and maintain a driver’s privacy. Id. at 9; and, (5) the Fourth Amendment is not implicated by the ELD rule, and alternatively, the rule would nonetheless be reasonable under the exception for pervasively regulated industries. Id. at 9-10. The 7th Circuit thus concluded that the ELD mandate was reasonable, not arbitrary or capricious, and enforceable. Id. at 11-12. On December 14, 2016, OOIDA filed a petition with the 7th Circuit requesting a rehearing on the decision. There is no deadline by which the court has to respond to this request.

While the OOIDA challenge moves forward, drivers and carriers alike are faced with the December 18, 2017, deadline to move from paper logs to ELDs. The looming ELD mandate is on the minds of many within the trucking industry. According to the American Transportation Research Institute’s (“ATRI”) Annual Survey for 2016, the ELD mandate is the top overall issue facing the industry, a jump of five places from 2015. See American Transportation Research Institute Critical Issues in the Trucking Industry – 2016, October 2016, at p. 2, available at http://atri-online.org/wp-content/uploads/2016/10/ATRI-2016-Top-Industry-Issues-10-2016.pdf. Uncertainty and apprehension surrounding implementation of the ELD mandate is shaping up to cause a bumpy rollout. Although the enforcement and effects on customer relationships are two legitimate concerns with the pending mandate, the transition from paper logs to ELDs is paramount. Scenes of holiday shoppers braving long lines at the local mall in order to buy the latest and greatest holiday gift may be supplanted by carriers rushing at the last minute to locate a certified ELD. While some carriers have adopted ELDs, or are using an Automatic On Board Recording Device (“AOBRD”) and availing themselves of the additional two-year grace period, it is estimated that more than one million carriers have not. See Seth Clevenger, “Expected Surge in ELD Demand Could Lead to Messy Rollout,” Transport Topics, (Nov. 21, 2016). If the switch to ELDs has not been made, now is the time to do so. The potential for a last-minute rush and ensuing bottleneck is real; you do not want to be at the end of the check-out line on December 17,, 2017. It is unknown if supply will keep up with demand, although it is anticipated that the market will see an influx of certified ELDs in the coming year. A word of caution if you are waiting to the last minute to make the switch; ELD manufacturers listed on the FMCSA website are self-certified. FMCSA does not vet or otherwise approve the manufacturers or their devices. It is ultimately the carrier’s responsibility to make sure the ELD selected complies with the new rule. When purchasing, it is essential to perform due diligence regarding the manufacturer and device.

Electronic logging devices are coming and early adoption is encouraged. Avoid the last-minute rush, reap the benefits of improved CSA scores, and ensure compliance and comfortability when compliance counts.

Making Tracks – Fall 2016

October 2–3 marked the American Trucking Association’s (ATA) Management Conference and Exhibition, along with the joint meeting of the National Accounting and Finance Council (NAFC) and the IT Leadership Community (ITLC), in Las Vegas. Rob Moseley spoke on transportation contracts.

The South Carolina Trucking Association (SCTA) Board of Directors Retreat on October 10–11 in Columbia, SC, was rained out by Hurricane Matthew.

October 13 was the Minnesota Trucking Association food safety seminar in Minneapolis, MN. Rob Moseley and Fredric Marcinak presented on the legal issues relating to the Food Safety Modernization Act and its regulations.

At that very moment, Matt Stone and Kurt Rozelsky were in Charm City (Baltimore, MD) for the Trucking Industry Defense Association (TIDA) annual meeting.

The ATA’s Safety and HR Council met on October 24–26 in Oklahoma City, OK. Alex Maultsby and Rob Moseley led sessions on Employment Traps for Trucking Companies.

Also, Rob presented another installment of the freight claims boot camp.

Marc Tucker attended the North Carolina Trucking Association (NCTA) Board of Directors meeting and the NCTA Foundation Golf Tournament in Greensboro, NC, on October 26.

Matt Stone and Rob Moseley presented at the 7th Annual Atlanta Trucking Conference on Thursday, October 27 in Atlanta, GA.

Alex Maultsby was the leader of the November 15 installment of the SML Transportation Webinar Series. Alex spoke on the new overtime rules. Fredric Marcinak was the emcee. For the archived version see http://www.smithmoorelaw.com/transportation-webinar-applying-the-new-overtime-regulations-in-the-trucking-industry.

On December 7, Rob Moseley attended the Board meeting of the SCTA.

Road Ahead

Fredric Marcinak will make the trek to the left coast for the Conference of Freight Counsel meeting at Dana Point, CA, on January 8–9.

January 17 is the next Transportation Webinar. “The FMCSA’s Latest: Drug and Alcohol Clearinghouse and Entry Level Driver Training,” will discuss the new Drug and Alcohol Clearinghouse and how it will effect motor carriers. Register at ttps://attendee.gotowebinar.com/register/4067825065697377540

January 19–20 marks the annual Chicago Regional Seminar of the Transportation Lawyers Association. Rob Moseley and Megan Early-Soppa will be attending. Rob will be teaching a session on the MCS-90 endorsement and Megan will try to explain that Rob is smarter than he looks.

On January 24–25, Rob Moseley, Marc Tucker and Fredric Marcinak will head to Atlanta for the SMC3 Jumpstart conference in Atlanta’s Midtown. Rob will be teaching an 8-hour contract class. Fredric and Marc have breakout sessions on the safety fitness rating for carriers and cyber security, respectively. For more information go to www.smc3jumpstart.com.

Fredric Marcinak will be attending Specialized Carriers & Riggers Association Specialized Transportation Symposium in Orlando Feb. 14-17 and leading a panel on The Mitigation of Litigation for specialized carriers.

On February 16, SML will present a webinar for the Iowa Motor Truck Association.

Rob Moseley, Matt Stone, Marc Tucker, Shawn Kalfus and Bennett Crites will head to Knoxville, TN, for the Great West Leadership conference March 1–2. Great West always puts on a strong group of speakers.

Kurt Rozelsky will attend the Winter Meeting of the Federation of Defense and Corporate Counsel in Charleston, SC March 6-10.

March 21 marks the next date in the series of SML Transportation Webinars. Stay tuned for more on the topic.

On March 29–31, Matt Stone will co-present on “Trending issues and tactics in truck accident claims and litigation: Are you prepared for what’s coming down the road?” at the CLM Annual Conference.

FMCSA Establishes National Entry-Level Driver Training Standards: First ELD, Now ELDT

The FMCSA recently announced a final rule establishing national training standards for entry-level commercial truck and bus drivers. The new rule, which is decades in the making, requires that entry-level drivers demonstrate proficiency in the classroom and behind-the-wheel through training obtained from an instructional program that meets FMCSA standards. Much to the delight and surprise of the transportation industry, the final rule does not require a minimum number of hours for the classroom or behind-the-wheel training. The new rule is set forth at 81 FR 88732 and will be implemented at 49 CFR parts 380, 383, and 384 of the FMCSRs. The rule goes into effect on February 6, 2017, with a compliance date of February 2020.

Who is subject to the training requirements?

The training requirements apply to first-time Class A and Class B CDL applicants, as well as current CDL holders seeking a license upgrade (e.g., Class B CDL holder seeking to upgrade to a Class A). Additionally, anyone seeking to add an endorsement to transport hazardous materials or to operate a motorcoach or school bus will also be subject to the training requirements.

What training is required?

Drivers who are subject to the entry-level driver training (ELDT) requirements must complete a prescribed program of instruction provided by an entity that is listed on the FMCSA's training provider registry. A complete list of the items required for the ELDT curriculum is set forth in appendices A through E of 49 CFR 380. These items include classroom and behind-the-wheel training on basic operation of a vehicle, pre-trip and post-trip inspections, hours of service, backing and docking, coupling and uncoupling, distracted driving, emergency situations, roadside inspections, maintenance, cargo handling, and post-crash procedures. The behind-the-wheel training requires that certain training be first conducted in a range and before being conducted on a public roadway. 

There is no required minimum number of hours for the classroom or behind-the-wheel training curricula, but training providers must determine that each trainee shows proficiency in all required elements. For the classroom theory portion, trainees must undergo a testing assessment and receive at least an 80 percent overall score. For the behind-the-wheel portion, trainees must proficiently demonstrate all required skills to the satisfaction of the training instructor.

The classroom training can be delivered through an online format from a qualified instructor. Moreover, separate training providers may deliver the classroom and behind-the-wheel portions of the training. However, both the range and public road portions of the behind-the-wheel training must be delivered by the same training provider.

Who can be a training provider?

Training providers seeking to provide ELDT must be registered in the FMCSA’s training provider registry (TPR).  Training providers may include, but are not limited to, training schools, educational institutions, rural electric cooperatives, motor carriers, state/local governments, school districts, joint labor management programs, owner-operators, and individuals.

To be eligible for the TPR, a training provider must have a curriculum that covers all required items set forth in the in the rule. Classroom and behind-the-wheel instructors must hold a CDL of the same (or higher) class and with all endorsements necessary to operate the CMV for which training is to be provided and have at least two years of experience driving a CMV requiring a CDL of the same (or higher). Training vehicles must be in the same group and type that driver-trainees intend to operate for their CDL skills test.

Training providers listed in the TPR will be subject to audit or investigation by the FMCSA or its authorized representative, if requested.

Why was the hours requirement omitted from the final rule?

According to the FMCSA, it decided to forego any mandatory minimum number of behind-the-wheel training hours because it was not able to obtain sufficient quantitative data linking mandatory minimum training hours with positive safety outcomes, such as crash reduction. With respect to classroom training, the FMCSA reached the conclusion that minimum hours were not necessary given that testing should verify whether a trainee has demonstrated an understanding of the material.

Where do we go from here?

So what will we see next? We expect to see private schools providing this training, as well as motor carrier owned operations. Will the mainstay truck insurers take a different look at entry-level drivers once the training is in place, or will the 2-year-minimum experience still apply? Will plaintiff attorneys looking for more pockets go after the training school claiming that an accident was the result of the driver being given insufficient training? Probably. Only time will tell for sure. 

OSHA’s New Regulations and Drug Testing: What Does It All Mean?

“I heard that OSHA has issued new regulations that change post-accident drug testing.  It sounds like OSHA won’t you let you do that anymore.” This comment has been popular in HR and Safety Department circles the past few months, as commentators, consultants, and, yes, even some lawyers have been passing around alarming sound bites.

What is really going on here?

OSHA has updated (read: changed) regulations on reporting workplace injuries and illnesses, and the main rule-writing relates to electronic record-keeping for and by the government. Employers with twenty or more employees must begin to submit reports electronically; the deadlines and the required forms depend on whether the employer also has at least 250 employees. 

The agency has also relied on a basic point—that the only data worth having is accurate data—to state a few seemingly simple and obvious rules on how employers talk to their employees about reporting injuries and illnesses:

  1. Involve employees in the recordkeeping system. 
  2. Inform employees they have a right to report a work-related injury or illness, and establish a reasonable procedure for it to happen promptly and accurately.  A procedure is not reasonable if it deters or discourages employees from accurately reporting.
  3. Tell employees they have a right to be free from retaliation; don’t retaliate. 
  4. Provide employees with access to your illness and injury records.

That seems simple and logical enough. Who would want uninvolved employees, an unreasonable reporting requirement, a deterrence to accurate reporting, acts of retaliation, or secretive files?

Of course, the devil always lies in the details when it comes to administrative regulations—it would not be the DOL, or its OHSA division, if there were not also directives on how to do these things. So, while not in the regulations themselves, OSHA has separately published its opinions on how to accomplish these objectives and, more importantly, on what it views as unacceptable barriers. Those opinions and views appear in responses to Frequently Asked Questions and in “Guidance” points that OSHA promises are “advisory in nature and informational in content, . . . [and] do not create any new legal obligations or alter existing obligations created by OSHA standards.” 

On the issue of a “reasonable” reporting procedure, OSHA now says that an employer must devise a way to “account for work-related injuries and illnesses that build up over time, have latency periods (i.e., time between exposure and appearance of symptoms), or do not initially appear serious enough to the employee to require reporting to the employer.” Also, a procedure should not be “so difficult or complicated that a reasonable employee would be discouraged from reporting an injury or illness”—for example, by having to “report the same injury or illness multiple times to multiple levels of management.” Again, simple enough.

On the issues of reasonableness and non-retaliation, OSHA will look at incentive, disciplinary, and drug testing policies to be sure they do not “discourage workers from exercising their right to report workplace injuries and illnesses.” When would that happen? According to OSHA, an employer interferes with the right to report injuries or illnesses when it penalizes injuries instead of penalizing unsafe practices, and when it requires employees who make reports or are named in reports to undergo mandatory alcohol or drug testing, with no more questions asked.   

OSHA believes that mandatory post-accident drug testing, applied in all situations without any assessment of whether the possibility of drug or alcohol use is indicated, discourages employees from exercising their “right” to report accidents. Who is going to report an accident that seems minor or might otherwise go unnoticed if he knows that making the report means going to a lab for a urine sample to be tested, OSHA worries.

How intrusive is OSHA really being here? First, OSHA is quick to state that its guidance on the topic does not affect drug testing rules under DOT authority. So, nothing about the new rule will change DOT drug and alcohol testing, post-accident or otherwise. Similarly, OSHA says that it will not issue any citation to an employer for post-accident drug or alcohol testing conducted under a state workers’ compensation law or other state or federal law that regulates or covers testing.

Second, and more generally, OSHA acknowledges that post-accident drug and alcohol testing, even for non-DOT personnel, is appropriate where an employer sees “a reasonable possibility that employee drug use could have contributed” to the illness or injury, as opposed to when “employee drug use could not have contributed to the injury . . . and testing would not contribut[e] to the employer's understanding of why the injury occurred.” This is the principal part of the rule: where circumstances say alcohol or drug use could have been a factor, testing is appropriate; where no reason exists to think such use was a factor, testing is not appropriate. 

But, isn’t the whole purpose of post-accident testing to find out whether an injury (and it is usually an injury, not an illness) was caused by a workplace condition or by employee impairment? Isn’t that extremely relevant to identifying corrective actions or precautions to undertake? 

OSHA is telling employers that there is somewhat of a balance here and is answering these questions with “Yes, but...” Yes, but you need to exclude from mandatory testing situations in which there is simply no reason to think an employee’s behavior or conduct on a particular occasion caused an injury to occur. Is this a latent injury from repetitive stress? Was the employee who would be tested merely a bystander? Was the injury based on clearly defective equipment the employee had no reason to notice? Each of these is a situation, OSHA is saying, where nothing suggests testing will add value. 

On the other hand, it would be reasonable for an employer to require post-accident drug testing for a worker who reported an injury experienced while operating a crane or a forklift if the employee's conduct contributed to the injury. Employers need not specifically suspect drug use based on observations of impairment—OSHA is not directly merging post-accident with reasonable suspicion testing—but there should be a potential connection between possible impairment and the nature of the cause of the accident. It is early and the lines are still blurry, but it appears OSHA is permitting the right to test for drug or alcohol use when an employee’s conduct or behavior could have caused an accident resulting in injury. 

As with much in the regulatory world, it is hard to know where a Trump Administration will take agency rules and regulations.  Formally eliminating a rule requires the same rulemaking process as creating a rule, meaning this particular OSHA regulation will not quickly disappear. But, again, OSHA’s pronouncements regarding drug and alcohol testing appear in commentary and guidance publications, not in the rules themselves—and those can be revised and re-issued by new leadership within the DOL on much shorter notice. Will the position of OSHA and the DOL change yet again? As with everything in Washington, DC these days . . . stay tuned.