Automating driver pay (part 1): the challenges of California labor laws, ELDs

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Updated Dec 14, 2017
California’s labor laws have created an administrative headache and legal risks for carriers who compensate drivers using piece-rate pay structures.California’s labor laws have created an administrative headache and legal risks for carriers who compensate drivers using piece-rate pay structures.

California has a reputation for passing controversial laws that are later adopted by other states and the federal government.

Recent changes to its labor laws may be no exception. The laws created new administrative headaches and legal risks for California-based fleets with intrastate operations. And these challenges could spill beyond its borders.

At the heart of the issue is piece-rate pay. While the industry standard for interstate fleets is to base driver pay on mileages, percentage-of-revenue, or flat rates for loads, the practice is under scrutiny by California courts for intrastate haulers.

Since November, 2016, Wal-Mart, Schneider Logistics and XPO have been ordered to pay millions to settle class-action lawsuits. The lawsuits argue that labor laws require the fleets to account for all work-related activities in their pay structure, no matter if some activities — like fueling, vehicle inspections, waiting for dispatch, etc. — are not considered productive.

Going to an hourly pay structure is not necessarily the solution. Fleets still have to relieve drivers from all duties for required meal and rest breaks, or otherwise pay drivers for the time. The state’s overtime laws are also complex. The 10-hour breaks drivers normally would log as off-duty can be counted as work if drivers have to stay with the vehicle.

The state’s labor laws only apply to intrastate operations, at least for now. But the precedent has been set for requiring fleets to account for all time and activities in pay. On a national level, the electronic logging device mandate could be another impetus for restructuring driver pay to activity-based models.

Over the next week, CCJ will have a series of articles on how fleets can use technology to automate driver pay. First is an inside look at how one private fleet supports activity-based pay.

Automating activity pay

Jerry Robertson, chief technology officer of BOLT software.Jerry Robertson, chief technology officer of BOLT software.

ELDs can record more than on-duty and drive time. Drivers can also electronically record fueling, yard moves, weighing loads, vehicle inspections, loading and unloading, meetings with fleet managers and other activities.

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Fleets can use this and other data activity data from ELDs, telematics, mobile applications and various back-office software to automate their driver payroll systems. And the more driver activity and performance data fleets have, the more opportunities to innovate and create new pay programs and incentives.

Activity-based driver pay is already common among private and for-hire fleets with dedicated pickup and delivery routes, explains Jerry Robertson, chief technology officer of Bolt, an Internet-based fleet management and dispatch software provider.

Activity pay helps fleets stay competitive, and even exceed, pay from over-the-road operations that can offer more miles and no-touch freight, he says.

Bolt software is designed to capture a lot of data on shipper and receiver delivery requirements as well as real-time data about the load — the miles, hours-of-service, arrivals and departures, etc. — by integrating with mobile fleet management systems, he says.

With these data sources, fleets can use Bolt software to automatically compare driver activities and performance with their planned dispatch and routing in terms of miles, loads, stops, pickups, deliveries, fueling, dropped trailers, and more.

The activity-based pay features of Bolt were a major reason why Mennel Milling Corporation of Fostoria, Ohio, chose to implement the software after using a different fleet management system.

The company operates 70 trucks and delivers up to 200 different types of flour from six mills to customers in a Midwest and Eastern regional operation using dry van and bulk trailers. The trucks are stationed at select flour mills and elevators within the system.

Mennel Milling Co. uses the Bolt software system integrated with its PeopleNet mobile platform to automate driver pay, says Jeremy Decker, transportation safety manager.Mennel Milling Co. uses the Bolt software system integrated with its PeopleNet mobile platform to automate driver pay, says Jeremy Decker, transportation safety manager.

Mennel Milling’s pay structure is different by region, by terminal and by the type of work drivers perform. Some drivers are paid straight mileage; that is “easy to keep track of,” says Jeremy Decker, transportation safety manager.

Other drivers spend a lot of time loading and unloading.

“In our pay package drivers are compensated for the hours they are putting in. That doesn’t mean they are given an hourly wage, but we calculate the hourly wage into a trip rate based on how long it takes, on average, to load or unload a trailer,” he explains.

Trips that depart loaded and return empty to the same terminal pay a flat rate. For trips that do not return to the same terminal, the company pays drivers an open-ended flat rate. Decker says the rate is open-ended because it is flat for the first segment of the trip and then becomes mileage based for all subsequent pickups en route to the driver’s home terminal.

In other words, Decker says driver pay is a series of partial flat rates. But time of day also comes into play.

“If, for example, a delivery is scheduled and made after midnight on a Friday, a multiplier can kick in to assign additional value,” said Decker. “There are a lot of moving parts with our structure. We like how Bolt makes all of this easy for us, and eliminates extra paperwork and tracking on our end. And, our drivers like it too. They see the workflow and know how they get paid.”

The software automates payroll by tracking the planned dispatch assignments and routes with the driver’s execution of those activities. The geo-fencing capabilities of the company’s PeopleNet mobile platform help to automate the workflow by capturing arrival and departure data for planned stops.

As long as drivers complete their loads, as planned, the payroll is automated says Decker, who besides managing fleet safety administers the PeopleNet system and Bolt integration.

“The integration between PeopleNet and Bolt was straight forward and we were able to get payroll set up with minimal effort,” he says.

When Bolt starts working with fleets that have activity-based pay programs, “almost 100 percent are doing it with paperwork,” says Robertson, adding that within six months most payroll processes can be automated.