Many years ago, a fleet industry veteran took a position with a Fortune 500 company; his title was "Manager of Corporate Personnel Transportation." The title fit the job far better than "fleet manager" since his responsibilities extended beyond the fleet of company vehicles.
No matter the job title, fleet managers' span of authority often extends beyond the fleet itself and includes drivers who are reimbursed for occasional business travel. While this task may seem simple, a number of considerations should be kept in mind.
Reimbursement a Useful Option
Reimbursing employees for the use of their personal vehicles on company business is a time-honored process and very useful as an alternative to company vehicles under the following two circumstances:
■ When employees are required to drive regularly on company business and their mileage does not meet the minimum standard for a company vehicle assignment.
■ When employees are only occasionally, or rarely, required to drive on company-related business.
This article addresses the incidental or occasional driver in the second example, who sometimes falls through the cracks when developing policy.
A number of common situations call for an employee, normally working in an office, to drive somewhere on company business. Banks, for example, often must transfer paperwork, checks, or other documents between branches or offices in addition to other courier-type tasks.
Some sales and marketing employees must drive to customers' locations, but may not have a territory large enough to qualify for a company-provided vehicle. Occasional deliveries, picking up other employees or customers from airports or hotels, and attendance at off-site meetings are also among the circumstances in which employees must drive on company business.
The most common method of "providing" transportation for incidental company drivers is via reimbursement. The process is simple: the driver notes the mileage driven and the company applies a cents-per-mile reimbursement to the mileage - most commonly the IRS "safe harbor" amount - and pays the driver via expense reimbursement.
Maintain Vehicle Pools
Another method some companies use is maintaining a pool of surplus vehicles. A branch or regional office or corporate headquarters at which incidental driving on company business is required may keep one or several vehicles around for the purpose.
Most such vehicles are out-of-service fleet vehicles or surplus vehicles formerly assigned to a driver who has left the company. The vehicles are kept at the office and signed out by drivers tasked to drive during work. The vehicle expense can be charged-out in a number of ways:
■ The company would (or should) know the cost of holding the vehicle, i.e., fixed and variable costs such as depreciation, finance or lease expense, fuel, and maintenance. These costs can easily be converted to a cost-per-mile charge applied directly to the mileage driven and assessed to the appropriate department.
■ Alternatively, the charge can be per-diem, which can be divided equally among the departments/accounts using the vehicle in any one day. If the vehicle remains unused for an entire day, the full charge can be absorbed by the providing office.
■ Other permutations of the same idea, such as hourly rates, can also be used to spread the cost among users.
Obviously, it is critical the company actually knows the total holding and operating costs. If the vehicle is a fleet vehicle, these numbers should be relatively simple to obtain.[PAGEBREAK]
Incidental Drivers Pose Pitfalls
It may seem a simple matter: an employee is asked to travel via car from point A to point B, does so, and the company either provides the transportation (pool vehicle) or reimburses the employee for the use of a personal vehicle based upon the mileage driven. However, several potential pitfalls are involved.
Fleet managers have known about the tort law concept of "negligent entrustment" for years. The concept simply holds that an employer (and/or individual working for the employer) can be held responsible for injury or other harm caused by an employee driving a company-provided vehicle.
For incidental drivers who use their own vehicles to travel on company business, the concept seldom applies. But for companies using pool vehicles, it most certainly does. If a vehicle is driven by an employee whose driving record, for example, contains violations, the company can be put at great risk if the employee is "entrusted" with what is called a "dangerous instrumentality" (in this case a vehicle) and the company knows the driver has a record of unsafe operation of a motor vehicle.
Further, the company can also be held liable under the negligent entrustment concept even if it did not know the employee had such a record, i.e., did not review the employee's MVR prior to "entrusting" him or her with a vehicle.
A related legal tort concept is less known in the fleet industry: "vicarious liability." This concept holds the "superior" has strict, secondary liability for the actions of the "subordinate," in this case, the employer for the actions of the employee. The application of vicarious liability requires the action or actions be sanctioned by the employer. It is easy to see how in instances involving third-party damage or injury, an employer can be held responsible for an employee's actions while conducting company business even if the employee is driving his or her personal vehicle.
Thus, despite the fact that the employee is only occasionally or incidentally required to travel on company business, the company can be held responsible for injury or damage to a third party. The risks can be substantial, and the fleet manager is in a unique position to help manage them.
Fleet managers regularly check the MVRs of company vehicle drivers to make certain each has a valid license and their record is violation-free. Corporate fleet policy usually outlines consequences for moving violations, minimizing risk of negligent entrustment while at the same time keeping drivers on the road conducting business. (A single citation for a burned-out signal or expired registration should not be cause for taking drivers off the road; a DUI or speeding violation might be.) Since incidental drivers carry similar risks, there is little reason such policy should not be applied to them as well.
The risks inherent in incidental driving on company business, therefore, are twofold: negligent entrustment if the company provides the vehicle and vicarious liability when the company endorses or requires the driving. So where does the fleet manager fit into the process?[PAGEBREAK]
The first step in managing incidental drivers is establishing a recordkeeping system that accomplishes the following:
■ Identifies any and all employees at each location who may be required to drive on company business.
■ Contains a process for the review of these employees' motor vehicle records (MVRs).
■ Includes a method by which such transportation is accomplished, i.e., via pool vehicle or personal vehicle.
■ If pool vehicles are provided, a means by which to "charge-out" the costs associated with providing the vehicles.
■ If personal vehicles are used, a means by which drivers are reimbursed for personal vehicle costs.
■ A tracking system to capture employee names, dates, times, mileage, and either reimbursement calculations or pool vehicle charges.
Most of these procedures and processes are aimed at two areas: cost tracking/containment and risk management. Both are important, and both are areas of fleet management expertise.
Determine Pool Vehicle Cost
For companies that provide pool or on-site vehicles for incidental drivers, the first step is to determine the costs of providing the vehicle, then decide how that cost will be allocated upon employee use.
As a fleet vehicle, the cost of maintaining a pool unit consists of the fixed (depreciation, lease/finance cost, insurance) and variable (fuel, maintenance/repair, tires, oil) expenses fleet vehicles incur. For example, assume the total lifecycle cost of the company's typical fleet vehicle is $500 per month. Before establishing a pool vehicle value, however, it is necessary to adjust for mileage driven (and those expenses related to use, such as fuel), since it is unlikely a pool unit use will be as extensive as an in-service fleet vehicle. Reasonable assumptions can be made as to the usage, with adjustments "on the fly" as the true use becomes more clear.
Let's also assume this adjustment for lower mileage brings the holding costs down to $450 (lease and depreciation costs do not change). The next step is determining whether the unit cost is charged-out by the mile, hour, day, or some other method.
If the vehicle is taken out on long-term assignments, such as audits, a daily charge is reasonable. But for the usual type of incidental use - delivery, courier, and transport of visiting employees - an hourly or per-mile charge is more suited to a fair distribution of cost.
Basic assumptions for a time-related charge should be 260 working days/year, eight hours per working day. Thus, applying this usage history to the $450 per month vehicle example, the daily charge is $20.77 ($450 X 12 / 260), and the hourly charge is $2.60 ($20.77 / 8).
Cost-per-mile numbers are more difficult to determine, as pool and fleet usage differ, perhaps substantially, and pool usage is not nearly as predictable. Daily and hourly charges are likely the easiest to use.[PAGEBREAK]
Track with 'Trip Tickets'
The next step in managing incidental drivers is tracking usage, knowing who drove how many miles, on what day, for which department or function.
Many fleets use fleet management software that provides a "trip ticket" function. This function is usually a simple "fill-in-the-blanks" form on which the driver's name, department or accounting code, date, in and out times, and odometer readings are entered. The "ticket" is a permanent record of each trip, and the charge rates can then be applied to recoup costs.
All in all, tracking incidental driver usage, whether using company-provided or personal vehicles, is a relatively simple process once the basics have been worked out.
The second step in managing incidental drivers concerns the risks of both negligent entrustment and vicarious liability, as well as the risk of personal injury to the employee and physical damage to a pool vehicle.
Fleet managers, as previously noted, usually check the MVR of all fleet drivers as part of the hiring process and on an ongoing basis. A properly structured fleet policy document contains a process for a new hire and existing driver to approve obtaining and reviewing his or her MVR, and accepting the consequences the policy holds for violations.
The same policy provisions can be applied to incidental drivers. Fortunately, technology is available that enables a company to obtain MVR reports in nearly real-time. Thus, the record of an employee tasked to travel from point A to point B can be scanned quickly and easily, with necessary action taken.
Another method might mandate driving record reviews of all employees at certain locations or in certain job functions where incidental travel is common. Whichever method is used, it is in the company's best interests to take those actions necessary to mitigate the risk of liability.
Don't Overlook Risk & Expense
In any large company, incidental driving by employees on business is usually viewed as a simple and routine occurrence. But the risks and expense involved may be overlooked. Fleet managers have the tools and experience to establish simple processes that can track and manage the costs, as well as mitigate the risks.
■ Determine whether the transportation is provided (company pool vehicles) or employees drive their personal vehicles. A combination of these two methods is often the best solution, particularly in locations where such travel is commonplace.
■ Establish methods to determine the cost of incidental driving. For company-provided pool vehicles, a daily or hourly rate can be used. For the use of personal vehicles, a cents-per-mile reimbursement is nearly universal (using the IRS safe harbor rate).
■ Track such travel carefully. Use trip tickets to manage pool vehicle check-out and check-in, noting date, time, and mileage driven. Do the same for personal vehicle use, to ensure neither the company nor the employee is shortchanged.
■ Mitigate the risks of both negligent entrustment and vicarious liability by reviewing MVRs for all employees who drive occasionally on company business. A driver using a personal vehicle can put the company at risk, and the consequences can be serious.