Lightning like Steve McQueen I make a fast lane when the light turns green and I built tough I ain't nothing but grit cause I made rugged blood, sweat and spit yeah, like a horse I fly better put yourself in for a bumpy ride I like to play hard but I work harder and I weather the storm cause I'm built stronger.
What is up, ladies and gentlemen, we are back. We are live. It is the Freight Coach podcast, the top podcast in transportation coming to you guys every single weekday, 08:30 a.m. Pacific, 1030 central to break down some industry headlines, but most importantly, provide some actual insight into what you can do with all of this information. This is your first time tuning in. Welcome. This is the real side of freight, ladies and gentlemen. And I said that before every single show. And what I mean by that is I only speak with transportation professionals because at the end of the day, I want to talk to the right individuals who have done what you're looking to do or who are currently doing what you're trying to achieve.
So you can take that information, apply it, utilize it, and see a meaningful difference in your business and your life. Nick, my man, let's go over on YouTube. Carla isted. Good morning. She's watching over on LinkedIn here, ladies and gentlemen. We go live on YouTube, LinkedIn, I think Facebook too, because I don't pay for Twitter and I'm trying to stay off as many social media sites as possible right now because I want to focus on building my company and I not deal with all the noise that's out there. But speaking of a guy who makes a lot of noise about a very specific topic, and he has, I think he might be announcing his candidacy today as a one issue candidate here. But with that being said, we have our favorite attorney, Mister Matt Bleffler, back on the show.
What is going on, my man?
Thank you for having me back on to tilt at my absolute favorite windmill. Non competition agreements, as always. It's a pleasure. Freight coach. Thank you for having me back on the program, dude.
Absolutely. Cody Kaler, let's go. Happy Monday to you, sir. Yeah, man, I have to talk about it. Seems like it's every other day. There's a new thing coming out in the news regarding non competes. Are they here? Are they done? What does Chevron have to do with this? Is price controls going to work in the federal government? And there's just so much that we can break down and ironically, they're all kind of tied together here to this industry. So what's new out there, my man.
I mean, it has been essentially six days since we had a major ruling in this country around the FTC's ban on non competition agreements. For the folks who haven't been paying attention, you can be forgiven. This is a very complicated issue. But the FTC back in, earlier this year, they announced the rule back in 23, but they put the rule into place back a couple months ago. This is a ban on all 30 million non competition agreements that affect american workers. One in five working americans have a non compete, and the FTC put out a rule banning non competition agreements. The US Chamber of Commerce filed when they made the initial like proposal. They're like, you can do that, but we're going to sue you. And they absolutely did sue.
And what we have on August 20 is a ruling out of a district court in Texas that has effectively knocked down the rule banning non competition units. There's a lot to unpack, but as of right now, the FTC's rule is absolutely in jeopardy. Very likely it will not make it to the light of day.
Speaker one, what are your thoughts on that?
Matt, I. I love the ability for an employer to tell a worker, hey, we have an at will relationship. If you and I, or if I decide that you should go somewhere else, I can fire you for any reason, as long as it's not an illegal reason. So if you file workers compensation, I fire you. That's against the law. But I can fire you because it's Monday, because it's Tuesday, it's fine. But after you leave me, I want to know what you're up to. I want to know who you're talking to, what job you're performing, who you're performing it for. And I want to know that maybe for the next six months, maybe for the next twelve months, and maybe for the next 18 months, maybe even two years.
And if I think you're violating the document that I made you sign, I can ruin your day. I could ruin your week, I could ruin your life by tying you up in litigation and bankrupting you. That's really what the issue is about this FTC rule trying to ban non competes. These are, again, 18. 18% of working Americans, about one in five have one of these things. So I am generally averse to non competes unless you pay separate consideration or it's for a senior level person. But that's not the world we live in. The United States. The United States. About 40% of people that have a non compete are making under $20 an hour. We should all be a little bit skeptical of when businesses want to know what you're doing after they leave your employ.
You know, Matt, you've done. Probably not. Probably you've done more research on this topic for the transportation industry than literally anybody I know outside of. Not like the attorneys for some of these large companies that literally enforce this for everybody inside of their organization. Why is it so prevalent inside of transportation in particular? Because it seems like, you know, like you said, one in five. Was it one in five Americans working Americans?
That's right.
One in five working. I would love to see, have you ever found the stats on inside of transportation?
I mean, honestly, it's very similar to the national average where you see this stuff the most pervasive. And this might shock some people who are listening to us right now. It's in the medical industry. Nurses, anesthesiologists, doctors like you would not suspect that every single person working in that hospital has a non compete, but almost every single one of them does. So our industry is not an aberration. We're really just like everybody else. And functionally, it goes back to how do you attract and retain great talent, and how do you build a moat so that your competitors can't steal your business. So one of the ways you do that is to offer great benefits, to offer great compensation, to be a great place to work.
But the other way you can do that is to tell somebody, if you decide to leave me and you try to compete with me, I'll sue you. And so fear coercion is another way you can drive this ability to retain talent, or at the minimum, get them out of the industry entirely so they're not competing with you. In six days or five days or.
Two months, what would you support from a, you know, maybe. Maybe it's a non solicit agreement. Or, like, how does a company protect its ip and minimizes that? Right. Because, like, you know, again, I fully agree with you on the majority of these things. If you're an entry level sales rep out there, like, you shouldn't be adhered to, you know, but proprietary information, senior leadership, I understand the need for that, but how do you minimize that? Right? Because as a business owner, say there's non compete out there, but somebody has direct access. And I think that this is most people's complaints. It's not that I'm in fear of losing an account, but it's the fact that this individual might have access to all of this data. Right?
They have lane data, they have rates paid, they can go in there and if, you know, competitively sell to get in the door based on some of these things. So, like, how does an organization protect itself without, you know, cutting off somebody's knees, essentially unemployment, if it doesn't work out with that organization?
It's a great question, and I deal with this question, like, literally every day. And so let me kind of break down, like, what we're really focusing on. Non competes, non solicits, non disparagements, non disclosures, and increasingly, training repayment agreement plans. They also call them traps. These are a flavor of a post employment restrictive covenant. Post employment, it's after you've left the job covenant. It's an agreement, it's a contract. And then it is this idea that when you leave, what can I control you to do? So how do you protect your information? How do you protect proprietary information? A non disclosure and trade secret agreement, those exist. It's essentially an agreement that says you will have access to information that you wouldn't otherwise have. You cannot use this information when you leave us.
Now, I will also challenge most business owners as to what is actually confidential proprietary, because, look, Zoom info knows more about your customer than you do. Google probably knows more about your customer, your contacts, than you do. LinkedIn certainly knows more about your customers and your contacts than you do. But again, what is confidential proprietary? You define the terms, everyone understands what you're dealing with, and if someone breaks it, you sue them and you get an injunction and they stop disseminating it. But that is how you protect real intellectual property. The secret sauce, the recipe, the coke zero recipe, that's how you protect those.
The non solicitation agreement, what that does is it has a time, duration, and specific Personas that you can't reach out to, usually your customers or prospective customers, generally your employees, as well as maybe the contractors are at that company. And that's how you can protect, to an extent, the relationships that you had when that person was working for you. The thing to keep in mind, and what a lot of employers don't like, is the non solicit binds you. It doesn't bind your customer, it doesn't bind your former employees. If they want to come work with you, if they want to solicit you, they absolutely, positively can. Now, if I, as an employee lawyer go, oh, I think you solicited, I'm going to sue you anyway. I'm going to subpoena your social media, I'm going to subpoena your cell phone records.
I'm going to verify that the customer reached out to you. So at the end of the day, it still has a similar kind of function of let's make your life difficult, the non compete. Chris, what that all boils down to is what job do you do right now and how long will I ban you from doing that job? Will it be a year? Will it be two years, whatever. But it's all about stopping you from practicing at all in your craft. And we define what that craft is. And it ultimately means that you have to leave the industry or risk being sued.
Yeah. With, as large as the potential market share is inside of transportation. So let's. Let's primarily focus on freight brokerage here only, you know, because, like, the market share overall, I think it's like $200 billion that's available for higher transportation. Sean Smith with denim, he always comes on for his financial Fridays, you know, because we want to teach people about market sizes, we want to teach people about financial literacy, you know, financial responsibility inside of business and how to grow and scale and stuff like that. So it's like when you look at a $200 billion market share and we're just going to stick with this number for easy conversation piece here, right? Because I'm sure some fucker out there could probably.
Yeah, absolutely.
But, you know, if we're looking out there, I mean, $200 billion, right? And then if you look at Ch. Robinson has been number one for a very long time, they're at like $12 billion. But I don't know if that number accounts just for their freight brokerage revenue or if that's all of their business units. Right? Because they have multiple service offerings that comes along with it. So it's like, if you look at that, I mean, man, there's not one to hell, even ten players in the brokerage space that account for more than 15% of the overall market. Right? So it's like, if we're looking at it from an overall market standpoint, why is this so strict, do you think? Because, like, dude, $200 billion, that's a lot of freight that we're talking about.
This is a really good question. It really goes back to the motivations of the senior leadership team. They've taken advice from council to put these things in place. What they think is happening generally is, one, you're going to increase retention. You will increase the retention of your workers because they're not going to be legally allowed to go work for a competitor or start their own business. Number two, there's a piece of, we're all the team when I'm throwing a new water bottle at you or a new hat at you, making you feel like you're part of my organization. It's when I can slip in something that says, look, I'm hedging my bets. I'm going to invest a ton of resources into your success with this company.
If you aren't successful within us, I need to make sure that I have some protection on the investment that I threw at you. So this is a pathway of driving retention, hedging your bets, and then way I look at this, is really just a technique in bullying, right? So if you, the only reason you retain a business is one key employee who's just really good, you probably should get out of the business. Like, if you're so scared that one person leaving your organization jeopardizes the fundamentals of the business. I question that.
So what's happened over the last, let's say, two decades has been this pervasive nature of people buying organizations, whether it's through private equity, other types of deals and inserting these things if they're not there, or conversely, they've had them all along and they've been carefully building out how they enforce these things. They're not typically enforced, Chris, through a litigation. They're usually enforced through a letter sent to your new employer and to you that basically tells the new employer, fire this person. And most employers fire the person. They listen, they don't want to get litigated. They don't want to sue anybody.
I, you know, again, this is, this is honestly my opinion on why they are as prevalent as they are out there. Because I think most sales organizations, whether it's in freight brokerage or other ones where, you know, you're a broker, right, you don't technically own anything, right? Like, we have our computers, we have our stuff, but like, ultimately, when it boils down to it, most businesses are funded by one or two key accounts that kind of covers, I mean, the Pareto principle. You guys can go out there and Google it, you know, 80%, you know, the 80 20 rule.
I think in most startup businesses and most freight brokerages, I would argue that it's probably more 90 ten, because, you know, ultimately, you know, the reality is, you know, everybody has that one key account that kind of takes up the most of your time and resources, right? And, you know, the reality is you're out there and you're building your book of business and your business or whatever that looks like, and then you finally get that one high volume account, where you start to see some results on, then you can build up a team around it, and most people stick in that, and then they don't go and continue to develop new business because, you know, why go out into the big, bad, scary sales world when you have somebody who's kind of feeding you, right?
It's that comfort thing is what it boils down to. And now, this isn't everywhere, but this is just my honest opinion on why it is this way is because they want to protect that one or two account. You know, that kind of funds everything. And I get it. Right? Like, you want to protect your business and stuff like that. But I think you almost need to look at it is. Is, why did we stop developing business? You know, why did we stop going after new accounts and developing other accounts? Because generally speaking, your priorities shift, right? Because it's like, again, you get that one account, you're out there, you're servicing that one, they're getting all your attention that other accounts fall to the wayside, you know?
So it's like, I think it's a lot of, again, this is all pie in the sky, perfect world scenarios, but you really got to focus on every individual account and see, are you actually truly maximizing that? Because every business falls into this at some point, but the really smart businesses, the ones that I feel like make it the longest out there, are on a mission to diversify everything. So not one accounts for more than a certain percentage out there. Like, I'm going to make a very bold statement here, but one goal of mine is I want to have it be like 10%. I want to get it down to no accounts for more than 10% of our overall revenue.
And now that's a very long term thing, because as we're building and scaling, we're definitely falling into and are currently operating inside of that Pareto principle, right, that 80 20 thing. But long term, I want to keep, like, as a leader, I want to keep chipping away at that to get that down to where our exposure isn't all tied to one thing. Because ultimately, as a broker, no matter what, you're only as good as your last shipment. I hate to break it to everybody. You're only as good as your last shipment. It doesn't matter how long of a relationship you have, people you can lose your business at the snap of a finger. Nobody owes you anything. And I think a lot of people need to get back to that sense of urgency behind it, right?
Because I would argue that there's probably a lot of people out there who are losing business and they're like, I don't know what to do. What happened? And then they're. They're focusing on their comfort as opposed to getting uncomfortable. Because, dude, I cold call every single day. It's very uncomfortable to go out there and try and develop business. Right? It's very. It's so many no's. You're instantly, you know, whatever, but that's all part of it. But again, I think to kind of summarize a lot of that, I think that's why they're so strict, man. There's so many people out there that are pushing it is because they're trying to protect their one egg as opposed to going out there and farming a fucking dozen of them.
I think you're right. I mean, I think ultimately, it's a decision by management that is short sighted. It is an idea of, we put these things in place, we will prevent the churn of our customers by making sure our key leaders or our key personnel can't go do this somewhere else. The challenge I have for any leader who has these non competes in today is how much of your time are you spending looking in the rear view mirror? How often you have to take your eyes off of what you're focusing on? Just delivering value for your customer every single day. If your focus and your preoccupation is. What's Steve doing today? Who's he working for now you're just poising yourself up to be knocked down because you're not focusing on the value of the customer.
Yeah, no, I. I agree, man. Let's, let's shift, this for the last kind of, because, like, there's another big ruling out there with chevron that is kind of tied into a lot of this and how it could actually have some pretty major trickle effects in. Inside of the transportation industry. You know, I'm a massive fan of the Chevron ruling that happened.
Yeah.
I am all going to go as far as saying disband the fed entirely, get it down to as bare minimum as possible. I am not a big government guy at all. I believe in the structure of it, of course, but I feel like some of these agencies have gone way too far, way above and beyond. And then especially inside of the department of Transportation, the, you know, and the FMCSA, like the. I mean, come, like, when it comes down to speed limiters, for example, right? Like that, if. What's the point of the speed limit, right? Like, honestly, what is the point of the speed limit. That's been my argument about this the entire time. And this is what I think with Chevron, what we're going to start seeing is curbing their gross overreach, in my opinion.
Yeah, to kind of tee this up to help people understand. So loper bright is the Supreme Court case that reversed chevron. Chevron was a 40 year old precedent just a little bit than I am. And Chevron stood for the proposition that if you were an administrative agency and there was ambiguity in the law that made you, they call it an enabling statute. But if there was some ambiguity, word didn't have a definition. The agency was allowed to define the term themselves. And if it was appealed to the judiciary, you know, the district courts, the appellate courts, the supreme Court, those courts had to give deference. They had to be like, yeah, we think that's right. Unless it's, like, completely bananas. We call it arbitrary and capricious. But realistically, it's. If this rule makes no sense, we're not going to let you do it.
But removing Chevron now means that agencies must act within their charter. And if it's basically a close caller's ambiguity, they're going to let the courts decide. And so speed limiters is going to be a very interesting case. I'll kind of throw this out there with the Eld mandate. So, Elds, there was actual congressional legislation that said, you, FMCSA need to make something about this. So they did have authority in some parts of it, but there was questions about what was considered harassment. And the agency, the FMCSA, was given Chevron deference in making Elds. Now, as we look at the speed limiters, this is, I think, Elds 2.0. When you put the Elds and trucks, truck drivers drove faster. There's data that shows that you're going faster because now you have less time. Essentially, you can't fudge the numbers.
And so you saw this rise of speeding. Well, the megaflets had already been using elds. The megaflets already do speed limiters. So now if we see a final rule, it will absolutely be challenged, but it may still be, in fact, a thing that happens. And then you have to take your truck to a dealer or a service provider and have them reprogram the truck to go slower. And that might be $300 per truck in the United States. That talking millions of trucks would have to be governed if this rule ultimately finds the light of day.
And that, like that right there to me, is an absolute kill to the small business out there, right. And I think, like, I broke down an article here, it hasn't been recently, but ELds did not lead to safer roads. It actually, the accidents were on par with what they were pre Elds, right. And I think it's kind of has to do with that thing that like people are going to break the law no matter what because they don't care about the law. But anyways, but you know, back to the topic at hand. I think, though, that speed limiters is an absolute joke. I truly do. And then it's like, why should a smaller provider out there be forced? Like when is enough, right? Because I feel like, all right, Elds is first, speed limiter second. Then what?
Automation? I mean, Chris, like this is the natural progression.
Exactly right. Automation, electrification, complete gut of the small business and the american dream is really ultimately the big picture with it.
I look at this as this, the continuation of deregulation in 1980. If you go to the way back machine, 1980, 60% to 70% of truck drivers reunionized. That was just the nature of the business. They deregulate, it fragmented. You had mega fleets arrive and they used all these safety measures to your point about like the safer roads. El days, I think, have not shown that it's a safer road, but we have seen hours of service violations go down as a result. So there is some compliancy aspect.
But your real point about what happens with a small business owner, look, if you are given a government mandated subscription service to an ELD, which is what the government did, they force you to buy something where one in five of those devices that have been put out in the market have been taken off the market, because in our industry, these ELDs are self certified. The manufacturer says, yeah, I can do all those things, and there's no testing by the feds. But once you get past this eld mandate, you look at the speed regulators, the natural progression is now every fleet behaves the same way. They're all moving the same speed. Automation becomes far easier to get. Now, I will say this, there is a very good reason to go slower.
If you're a truck driver and you want to save money on tires, save money on fuel, save money on maintenance, yeah, you go slower, but that's your decision. You can make that decision. It should not be a government coming in and saying, we think every road should go this fast. States have the rights to make speed limits. Let the states decide what the truck limit should be as opposed to the feds.
Yeah, I'm right there with you. Man, I think that at what point is enough going to be enough? Right? Because, like, it's just, like, with man, I view a lot of these things is. It's like, I mean, it is literally killing the american dream. It is killing the small fleet, the owner operator, and it's removing them from the roads. Right. Like, and it is only a matter of time because anybody could be like, oh, well, there's 90. Some percent of the trucks are small, you know. Yeah, yeah, for now, because they're able to afford to be able to operate. But you know, how many people are that are. Small businesses are like, oh, $300 to, you know, do the speed limiter. I know that it's not just, it's gonna be probably $300 a year to do that. Like, there.
It's gonna be another fee that's. And then there's gonna be a speed tax, and then there's gonna be everything that comes along with it. Right? Like, there's just so many after effects. It's. I just ultimately feel like this Mandez just leave us the fuck alone and let us be, like, let us operate our business. Right? Like, there's. There's already enough rules and regulations that are out there. And again, I'm not saying it needs to be the Wild west and that there shouldn't be any laws. I don't believe. I'm not that fucking libertarian with my mindset, but I'm. But I'm pretty, very much stop the overreach.
So the thing is, I agree with you generally, but I'll kind of bring out a couple things where I think we really need to consider what the long term outlook is. And if you look at our industry right now. Sorry. Yeah, the insurance limitations we have, the minimum insurance for a motor carrier is $750,000. That's been set since 1980, never adjusted for inflation. That is the number today. If you want to get a truck and start rolling interstate, you have to pay insurance to get a minimum of $750,000. In addition, the national average for out of service trucks, when you inspect the equipment, is 21.6%. Again, one in five commercial vehicles on the road at any time are unsafe. So the question becomes, are we doing enough to inspect these things for safety? Or maybe we just make the safety things more lax.
We have more companies that can meet the minimum threshold, but if we look at our industry and we say, this is good enough, I disagree. I think fundamentally, our industry must get better at the maintenance of their vehicles and the safety of their vehicles, and ultimately the insurance risk that they bring to the world. When you're out there driving an 80,000 pound machine with two months of training, there's a question. So I look at it and say, I would love to see our existing regulations enforced far more vigorously. We probably have way too many motor carriers on the road that are operating underinsured and unsafe, and that should give everybody pause when you're on the highway with your family, because we all want to get home in the same condition that we left.
And I think that ultimately, this boils down to when the government is as large as it is. There's so many redundancies that come along with it, because you got to ask yourself, ultimately, why hasn't the FMCSA or the dot actually done anything about this? Why don't they do their jobs? Ultimately, the doesn't want them to.
I mean, if you get Oida and AtA to agree that we shouldn't raise insurance limits, or if you get to a place where, like, we don't want to have more than one inspection a year, this is the natural outcome. Like, we have the exact supply chain that we designed 2040 years ago. And if we look and go, that's a problem. That's because it was designed this way, not because it's accidental.
And then we take it a step further. And this is why we need to eliminate or limit lobbying to a certain amount.
We just need more robots, Chris. The robots will tattle everything. They're so good. They're so safe all the time.
It's. Yeah, it's wild, though, right? Like, it really is, because it's, like, the rules and regulations that are out there. I would argue that there's probably so much that just gets overlooked, because it's like, you know, like, let me ask you this, actually, before I ramble here, and I know that we're kind of running short on time, what do you think is the core issue, then? What is the catalyst or the stepping stone to the gateway drug? Of all the issues, everybody likes to say weeds the gateway drug out there. But what's the gateway drug of transportation?
With the beginning, we talked about the non competition. Here's what should happen. The FTC should simply make a rule that says, any job description out there must include disclosure of a non compete or non solicitor or non disparate. Whatever the things are, you should have to disclose them before you join the job. That's a simple thing for our industry, for trucking man, the simplest thing in my mind is FMCSA should mandate two inspections a year. We shouldn't just have one inspection, have two, and then have far more ability to enforce the regulations. And I ultimately think you have to raise the insurance limits. That will reduce the carrier capacity. That'll make brokers more money. It'll cost shippers a little bit more. And that means it'll cost us as consumers of products more to buy things, which is not ideal.
But this system that we have now is broken. It was broken by design. And either we have to come to grips with the fact that it is not a good system or we have to make changes to make it safer, which is what we all should be passionate about.
We should just insert price controls that'll. Sorry. Anyways, I'm done. We're done. Say it. Say it. I'd say this.
I had this conversation with my good buddy Ken Adamo over at dat just a few weeks ago. I am not in favor of this, but I do think it's interesting what happens when you're moving freight at a price below the operational cost to maintain the truck. It means you don't maintain the truck. And is that the thing that we want? Do we want to have people moving things at a number that is nothing, enough to cover the maintenance of the vehicle? I don't know. Personally as a lawyer, I've seen enough of these catastrophic accidents. I don't want to see any more of them. And I think that would be one really interesting place to start.
I was more talking about to curb corporate greed, you know? Anyways, that's going to be it for today. We will be back tomorrow. I got guests coming on, I think, three of the next four days. I. But, but yeah, you guys will be seeing other pretty faces besides mine out there. As always, if you guys got value in what you heard, subscribe to the show. You guys rank it out there. You guys, honestly, that is what I'm being told. Really helps get this message spread out is through ranking on iTunes and Spotify. So if you think I got five star worth of value and that's what I provide, drop that on there, you guys. Again, I just want to reach more people to help them.
Ultimately, when it boils down to it, I want to put enough quality information out there, you guys, to keep people in business. I don't know everything, but a lot of the people that I do know, who I bring on know a lot. And we're just trying to build an education platform for the transportation industry out there. But we'll be back. I appreciate you guys. I love you guys. And we'll be talking to you soon. Yeah, man. I think next.