Detail of the taxi car on the street
The public health impact on society and the economic impact of the novel coronavirus (COVID-19) on most businesses and on the entire transportation industry has been nothing short of catastrophic, putting it mildly. This new normal is beyond surreal, and our world in general, and the mobility world, will never be the same again. In just a few short days, business dropped to a stand-still and most transportation companies have ceased operations, laid off employees, deactivated drivers, received account and event cancellations or bill collection deferment requests, parked their vehicles on lots, and are struggling to manage cash flow and reduce costs to a trickle in order to live to fight another day.
My heart and prayers are with everyone at this difficult time, and I am here to help in any way that I can. A little more than a week ago, when the government started seriously considering quarantines and lock downs and air travel ceased, the alarm bells starting ringing loudly. The situation became eerily reminiscent of the weeks following 9/11, when I had just taken the helm as Commissioner/Chair/CEO of the NYC Taxi & Limousine Commission. Having lived through the 9/11 crisis from a government insider’s viewpoint, including the economic aftermath and recovery, there are some similarities. However, this is an entirely new and different threat and disaster that I do not believe anyone ever realistically expected or thought would happen in our lifetimes. The economic repercussions will be felt for a long-time, and may be worse than the Great Recession, 9/11, and Hurricanes Sandy or Katrina combined.
So, what should transportation companies, or whatever is left of them, do to survive? In my view, every company should act on two fronts: (1) take care of your shop, doing what needs to be done to survive temporarily to keep the lights on, even if just dimly lit for now; and (2) reach out to your industry organizations and get involved to fight for relief money as soon as possible.
In terms of internal triaging, the primary objective of transportation businesses right now should be to: ensure the health and safety of employees, drivers and passengers; deploy risk management measures to avoid liability; and to triage policies and business decisions in light of the immediate and impending severe economic impact of this pandemic.
On the outside front, any relief that for-hire regulators can provide is minimal, and a small “band aid” for a large open wound given the dire economic consequences we are facing. The most pressing relief will come from financial aid, including emergency loans and grants, which are intended to help kick the can down the road, until economic life begins anew. These are matters for the federal, state and local governments, and will only be obtained by aggressive lobbying by trade organizations – which is starting to happen already – and media stories casting a spotlight on our devastated industry – which has not yet happened, but which will soon. This will prompt the legislators to act, and hopefully there will be some money left.
As a transportation lawyer now, I still have that public service mentality, so I have been trying to help the industry any way I can. I thought the best way I could do that immediately would be to hold a comprehensive emergency webinar, where my law firm, Windels Marx, would help transportation companies explore how to mitigate liabilities and risks – or potential lawsuits and disputes – that may inevitably arise many months after we are on the road to recovery, and which could pose setbacks if labor, contracting, insurance, and other issues are not handled properly. The last thing your company needs to be dealing with are the repercussions of acting in haste without counsel, and without keeping our collective cool. Also, the government has not yet issued any comprehensive or specific guidance or protocols for transportation companies, including motorcoach, bus, limousine, black car, livery, taxi, paratransit/NEMT, or other related private modes – as there is mostly a government focus on public transit and air travel right now.
COVID-19 reactions, facts, policies and the true extent of the threat are a constantly moving target, changing day-by-day. Since this is the first time in modern history anything like this has happened, many companies (including transportation providers) did not have contingency plans in place and everyone is making it up as they go along – often, by reacting to news events and official guidance. We seek to fill this information gap though the webinar we held and the informational resources we are making available to everyone for free throughout the crisis. I assembled top experts in multiple areas of legal discipline that work for our Transportation Practice Group that I have chaired for the last 10 years, including the following disciplines: labor and employment, tax, contracts, finance, civil rights, torts and insurance, regulatory and legislative.
The webinar was held on Friday, March 20, 2020, entitled “Emergency Webinar on COVID-19 Transportation Industry Risk Mitigation & Resiliency.” We had hundreds of attendees from all over the world, including but not limited to all modes (public transit, taxi, limousine, bus, NEMT, TNC, black car, and transportation industry trade organizations representing all such modes), as well as transportation regulators, the federal government, and universities. We fielded hundreds of questions and have provided counsel to a plethora of clients, friends and colleagues.
The webinar can be viewed for free, on demand, at this link: https://bit.ly/3duv3PF.
In addition to the webinar, we have prepared three documents for transportation industry stakeholders to be used as resources for the coronavirus pandemic:
- COVID-19 Resource Guide for Transportation Companies (https://bit.ly/3bnV9l8);
- Frequently Asked Questions (FAQs) by Transportation Companies About COVID-19 (https://bit.ly/2WHp43N); and
- COVID-19 Risk Management Checklist for Transportation Companies (https://bit.ly/39cKRDg).
Detailed instructions on how to use the above documents were provided during the webinar, during which we fielded extensive questions. Your company or organization is welcome to download and distribute the PowerPoint presentation used during the webinar, the webinar itself and all other materials therein and above. This is the least we can do to help.
Another new initiative I am deploying at Windels Marx are daily transportation news updates relating to the COVID-19 pandemic. This news service provides our friends, clients and colleagues with comprehensive real-time developments that only focus on transportation and mobility impacts. There are few sources out there that are devoted to providing dedicated coverage and developments of all transportation modes and sub-modes, internationally, nationally and locally.
To sign-up for this free news service, please email my Executive Assistant, Kim Ramkishun, at [email protected]
This article summarizes some of the many topics covered during the two-hour webinar and raises the potential lawsuits or claims and other risks which need to be managed. The below is just a sampling; to probe further I recommend listening to the webinar, reviewing and using the checklists, and if you have any questions or need help, reach out to me directly at [email protected] or at 212-237-1106.
The State of the Industry
The COVID-19 pandemic has hit the various sectors of the ground transportation industry particularly hard. Due to the cancellation of major events like March Madness and the suspension of professional sports, limousine service has declined by 85% or more in impacted cities. Corporate black car service is down by three-quarters due to the imposition of travel restrictions and employees working from home. Community car services have lost two-thirds of their business as non-essential trips for shopping, travel or commuting have diminished. With the loss of tourism, taxicab service has dropped by more than 50%. Some lenders have offered extending due dates for payments on loans to support taxi owners who are necessarily reducing their taxicab lease rates to keep their taxicabs operating.
The decline in business has been seen in the bus and motorcoach industries as well. In some instances, commuter bus services have either been scaled back or suspended. The “safe distance” requirements had already affected ridership. Tour bus companies have suspended services since there is no customer demand. With the shutdown of school districts in impacted areas, school buses are idle. In some districts, however, the operators are still being paid a percentage of their payroll and other expenses based on their contracts. But, this relief is not uniform in all school districts. For non-emergency medical transportation (NEMT) operators, the story is largely the same. Business is down by one-half across the nation. Government contracts have provided some business, but the reduction of non-essential trips has impacted the industry. In addition, national and regional NEMT brokers have canceled shared rides. With the reductions in the number of overall trips, the “pie” has shrunk further and taxicabs and other for-hire vehicles that contract to provide trips have seen their services evaporate.
In addition to transportation providers, the pandemic has impacted the vehicle leasing and rental industry. Rental reservations at airports are down dramatically and cancellations are at unprecedented levels. Rental companies normally purchase 1.75 million each year, but the industry leaders are already predicting that they will reconsider future purchases as their fleets are underutilized. In response, the large vehicle rental companies have joined together to ask Congress to treat the industry with the same consideration as the airline industry for any financial relief. The companies are seeking relief from minimum airport payments from those airports that receive federal funding. In addition to government support, the larger fleet owners are seeking to reduce their payments to lenders through loan workouts.
Labor & Employment Liability & Civil/Consumer Rights Risks
Worker Classification Lawsuits & Labor Department Enforcement
Each state differs in how independent contractors are classified and have standards to determine if the purported employer is exercising control over the drivers. For example, in New York, the determination of whether an employer-employee relationship exists turns on whether the alleged employer exercises control over the method or means by which the worker performs the job. No single factor is determinative, and courts will examine all factors relevant to assessing the degree of control exercised by the purported employer. One factor the courts look at is whether the employer provides equipment or supplies for the worker to use to perform the work. To avoid worker classification issues, businesses whose drivers are independent contractors should allow drivers to be absent from work without prior permission. Businesses should review the independent contractor agreements. If they do not have such agreements, the businesses should utilize such agreements.
Civil Rights, Employment Discrimination & Consumer Laws
The New York City Human Rights law makes it illegal for a TLC-licensed driver to refuse service because of a passenger’s actual or perceived “race, creed, color, national origin, age, gender, disability, marital status, partnership status, sexual orientation, uniformed service or alienage or citizenship status.” New York’s General Business Law § 396-r prohibits “unconscionably excessive prices” for essential goods and services during an “abnormal disruption of the market” or other cause of an abnormal disruption of the market which results in the declaration of a state of emergency by the governor.” Transportation providers should review their policies and pricing guidelines to ensure compliance with such anti-discrimination laws, or any provisions enacted during emergencies.
Transportation businesses in all sectors are facing the immense economic pressure to “downsize” their workforce as they reduce services to meet the diminished ridership demands. Before deciding upon a reduction in the workforce, employers should consider whether other, less problematic, measures would achieve the necessary savings. These may include hiring freezes, salary freezes, elimination of discretionary bonuses, or reductions in work hours with proportionate pay cuts. Employers may also consider reducing or eliminating certain fringe benefits and requiring employee contributions to benefit costs. As alternatives to layoffs, businesses could assess whether expected job attrition will address the organization’s needs or permit affected employees to transfer to other vacant positions within the organization to address departmental budgetary issues. Businesses may consider furloughing employees. Furloughs allow for cash savings, while providing the impacted employees with access to benefits. Furloughs are a temporary remedy that allows for fast re-hiring when circumstances improve and also maintains some level of employee morale.
When necessary, layoffs should be appropriately planned. Ordinarily, the WARN Act would require advance notice. In circumstances such as this with the COVID-19 pandemic, there is a strong argument that exceptions to the notice requirement apply. Businesses may consider first terminating employees with substandard performance grades, terminating recently-hired employees during introductory periods before benefits are awarded, or terminating temporary and part-time workers, transferring their duties to existing full-time employees. Finally, to avoid company-wide layoffs, some employers devise early retirement programs or request volunteers for separation with incentives to encourage acceptance such as enhanced severance benefits. Although less drastic, such actions present their own legal complexities and demand appropriate planning to achieve the desired savings and avoid the pitfalls associated with standard layoffs. Care should be given to avoid discriminatory layoffs, including both intentional and unintentional disparate treatment. Severance, in exchange for a release, is recommended.
Negligence and Tort Liability Mitigation and Insurance Coverage Issues
Potential Liability to Customers, Clients & Contractors
Businesses that have contact with the general public could be targets of claims that their negligence led to a contract worker, customer, or client’s exposure to an infection of COVID-19. In the case of a virus, there may be a duty to warn such third parties, or to prevent access to certain facility areas or vehicles. To reduce risk of liability, companies should identify risk levels in their business settings and determine appropriate control measures to implement to address the specific exposure risks, including staying up-to-date and following guidelines established for employers by the World Health Organization (WHO), the U.S. Center for Disease Control and Prevention (CDC), and the federal Occupational Safety and Health Administration (OSHA).
Transportation companies may protect themselves against potential claims for the above-referenced actions in a variety of ways, including 1) following guidelines established by WHO, CDC, and OSHA to protect against exposure to the virus; 2) developing an infectious disease preparedness response plan that considers and addresses the risk level of the worksite and job tasks; 3) ensuring employees implement basic infection prevention measures; and 4) performing routine environmental cleaning. Businesses should review their emergency operations to determine what procedures and coordination are designated for a pandemic, and there are detailed items on the Windels Marx Checklist to do so.
Workers’ Compensation Claims
While “ordinary diseases of life” (i.e., those to which the general public is equally exposed) are generally excluded from workers’ compensation insurance programs, if an employee can establish a direct causal connection to the workplace, there may be a valid argument for workers’ compensation insurance coverage. To the extent that other claims for employee-related coronavirus illness do not qualify for workers’ compensation benefits, coverage might still be afforded under certain insurance policies. Business should review their insurance policies for relevant provisions.
Transportation providers may have insurance coverage addressing business interruption or other claims from employees or customers related to the COVID-19 emergency. Businesses interested in proactively managing their exposure should review their existing policies and confer with their broker to evaluate the adequacy of existing coverage and review the types of policies that may exist to provide coverage for coronavirus and other infectious disease related losses.
Contractual Liabilities Amid the COVID-19 Crisis
The COVID-19 pandemic has raised questions as to whether the outbreak and ensuing government restrictions will excuse non-performance of otherwise binding contracts. Changing COVID-19 developments impact a party’s ability to potentially excuse contractual nonperformance through multiple legal theories, including without limitation, force majeure provisions. The results will depend on the contractual language, the state law governing the contract, and purpose of the contract.
Force Majeure Provisions
Force majeure clauses can excuse a party’s nonperformance under a contract when extraordinary events prevent a party from fulfilling its contractual obligations. As defined by the leading treatise on contracts, a force majeure clause provides a means by which the parties may anticipate, in advance, a condition that will make performance impracticable. When parties find that their contracts are silent on the force majeure issue, parties should assess alternative common law mechanisms for excuse of nonperformance. In the present circumstances, impossibility of performance via various government declarations would enable a viable argument that performance was rendered impossible “by law.” As the COVID-19 pandemic continues to develop, businesses should take proactive steps to ensure continuity of operations sufficient to meet existing contractual obligations and evaluate whether their counterparties are doing the same. There are potentially multiple grounds to excuse non-performance due to the COVID-19 pandemic and ensuing government actions, which requires particular examination of the contractual language and the case law of the relevant jurisdiction.
Transportation Related Legislation, Rules and Emergency Declarations
On March 13, 2020, the Federal Motor Carrier Safety Administration (FMCSA) issued an Emergency Declaration exempting commercial drivers assisting in COVID-19 relief efforts from hours-of-service regulations of the Federal Motor Carrier Safety Regulations (FMCSRs). The declaration covers the transportation of passengers designated by government authorities for medical, isolation, or quarantine purposes and persons necessary to provide medical or emergency services. With regard to the electronic logging device rule, since the hours-of-service rules do not apply when operating under declaration of emergency issued under 49 CFR 390.23, drivers/fleets do not have to maintain a record of duty status. However, for future reference, drivers should explain the activity in the log “remarks” section without completing the detailed grid.
State & Local Emergency Orders and Regulations
Are Transportation Company Employees/Drivers Essential Workers? New York Governor Andrew Cuomo directed that all businesses and not-for-profit entities implement, to the maximum extent possible, any telecommuting or work from home policies and ordered all businesses to reduce the number of employees who show up to the workplace by various percentages. All employers in the state were ordered to reduce the in-person workforce at any work locations by 100% no later than March 22 at 8:00pm. Similar orders have been issued by the governors of California, Connecticut, Illinois, Louisiana, New Jersey, Ohio and Pennsylvania. All but Louisiana consider transportation providers essential services exempt from the restrictions. Transportation providers should review any relevant state emergency orders and local travel restrictions for guidance and disseminate those operational parameters to drivers and customers.
Group or Shared Ride Bans: On March 17, 2020, NYC Mayor Bill de Blasio signed an executive order (No. 101) banning all pooled ridesharing. The ban remains in effect for 5 days unless extended. The ban applies only to those who would not otherwise be riding together but are traveling on the same route. The only exception is for paratransit. Uber and Lyft had announced earlier that same day that they would be suspending those services. Given the concerns with spreading the coronavirus, transportation providers in other localities may expect similar restrictions, and should consult and disseminate shared ride or other restrictions included in such emergency orders.
For-Hire Vehicle Plates in Storage: On March 19, 2020, the NYC TLC announced that, effective immediately, the agency will allow For-Hire Vehicle (FHV) owners to place their TLC Vehicle License(s) in storage for up to 90 days. The “pause” for operating these FHVs during this time is critical since there is a cap on the issuance of FHV licenses in place. The execution of the TLC Industry Notice will still require additional procedural adjustments given that the suspension of the FHV license for 90 days contemplates in-person appearances at the TLC and the NYS Department of Motor Vehicles. Transportation providers will need to monitor updates from their regulatory agencies for compliance as “normal” regulations are suspended or modified, and signing up for our e-mail distribution list for COVID-19 Transportation Updates will get you the latest on this and other news from regulators.
Grants, Financial Relief and Assistance
In this crisis, transportation businesses have seen immense business disruption. For these stakeholders, relief is being “rolled out” and expanded at the federal, state, and local level.
The U.S. Small Business Administration (SBA) has funds available for small businesses in states affected by COVID-19. The program offers up to $2 million in low-interest loans to small businesses. In NYC, the Department of Small Business Services (SBS) has a program to provide relief for small businesses seeing a reduction in revenue because of COVID-19. Businesses with fewer than 100 employees may be eligible for zero-interest loans of up to $75,000. Businesses with fewer than five employees may receive a grant to cover 40% of payroll costs for two months to help retain employees, up to $27,000 per business.
Tax Payment Deferral
On March 20, 2020, Treasury Secretary Steven Mnuchin announced that the deadline for filing taxes for “all American and businesses” would be extended to July 15, 2020. Some states have already extended the tax filing and payment deadlines as well. Additional tax relief and updates may be included in the stimulus package that is being considered by Congress.
Tax Credits for Paid FMLA and Sick Leave and Grant of $1 Billion Dollars for Emergency Unemployment Insurance (Families First Coronavirus Response Act (H.R. 6201))
On March 18, 2020, the President signed into the law the Families First Coronavirus Response Act (H.R. 6201). The Act provides refundable tax credits for employers providing paid sick leave or paid FMLA as required by the Emergency Paid Sick Leave Act. In the case of gig workers and others who are self-employed, the Act provides a similar refundable credit against the self-employment tax.
Industry Support – Lobbying Efforts & Programs
The Push for Financial Aid by National Industry Trade Groups: A number of ground transportation associations have formed a coalition to coordinate efforts for action by the federal government that is germane to this industry. Thus far, the coalition includes The Transportation Alliance, American Bus Association, Global Business Travel Association, United Motorcoach Association, Near Airport Parking Industry Trade Association, and National Limousine Association. The Coalition wants the transportation industry deemed a national “essential service” and seeks $12 billion in immediate cash grants and additional financial support for fleet operators as key items for action by Congress.
NY Black Car Fund Benefits: In addition to these government programs and industry organization efforts, support is available from the industry itself. For example, black car drivers in New York are eligible for telemedicine – a critical public health resource during this particular crisis – paid for by The Black Car Fund as part of its Driver Wellness Program. Drivers and their families can consult with a doctor for a non-emergency consultation by phone, secure online video, or through the MDLIVE App (https://driversbenefits.org/benefits/drivers-telemedicine/). Trade associations and other non-government organizations may expand available resources and business operators should review the member pages for resources and information sharing.
Our Path Forward… United Together!
Although the information I have included herein is current as of this writing, the past few weeks have shown that the state of the government relief programs, restrictions on travel, and the economic downturn during this pandemic are shifting rapidly. It is highly likely that the number of positive coronavirus cases will be significantly higher than the approximately 43,963 cases in the U.S. now. The coming days and months are going to be very difficult for everyone. We will all get through this together, united in purpose and resolve, and we will recover stronger than before. We need to make “resilience” our middle name, and keep optimistic for your employees, drivers and family.
Do not lose hope. Remember: This will end! It is just a matter of time. Most of all, please know that our prayers and best wishes are with all of you and your families to stay safe and healthy. Godspeed!