Breaking Free

Todd Dills | September 01, 2011

Independent Truckers Association state chapter heads Buzz Flury (left) and Wayne Norman protest high taxes on the steps of Minnesota’s Capitol. The photo ran in Overdrive’s July 1979 issue, which reported on trucker strikes in June.

The owner-operator of yesteryear struggled to prosper amid a complex web of Teamster pressures and over-regulation. Shutdowns and other conflicts lined the highway that led to today’s climate in which the self-employed contractor is integral to the industry and able to operate with much greater independence. From fighting for enhanced freedom to haul in its early days to stressing smart business practices later, Overdrive has championed the owner-operator’s concerns.

1950s and ’60s: Fast track to a golden age

When Overdrive launched in 1961, trucking was dominated by the Teamsters union. Even in the unregulated area, where owner-operators and small fleets had hauled commodities deemed exempt from price regulation since the industry’s infancy in the 1930s, union organizing pressure was exerted. Overdrive founder Mike Parkhurst is said to have been driven to launch the magazine in part by a personal affront chronicled in historian Shane Hamilton’s 2008 book “Trucking Country: The Road to America’s Wal-Mart Economy.”

Then owner-operator Parkhurst was at a receiver in Mansfield, Ohio, when “a Teamster organizer informed him that he would have to pay union dues to unload his produce,” Hamilton wrote. Along with the complicated regulatory structure of the Interstate Commerce Commission, the Teamsters, Parkhurst believed, “had ‘strangled the healthy growth of the free enterprise system.’”

The options for owner-operators wishing to haul regulated freight prior to the mid-1950s were limited to finding one of the relatively few regulated carriers who leased owned and operated equipment. Most operators of the time carved a niche in produce markets.

No motor carrier authority was necessary, thanks to agricultural interests securing an exemption from price and lane regulation in the first Motor Carrier Act in 1935, which directed the ICC to regulate the movement of any non-exempt freight. As a result, “a lot of your early owner-operators – especially in produce – come from farms,” says Brian Kimball of the Kimball Transportation brokerage (whose family is pictured). “They’re hard workers. They have a knowledge of the machinery – they could repair their own equipment.”

Kimball’s father, Ed, hauled produce with his five sons in Ed Kimball & Sons Trucking. Before that he leased to different produce-trucking outfits in Florida and, by the late 1950s, typically hauled refrigerated commodities back under trip-lease arrangements. Enabled by legislation enacted in 1957, trip-leasing (running under a regulated carrier’s authority for a single trip agreement) expanded options for owner-operators. Deadhead miles were reduced as obtaining regulated backhauls became more common.

Through the 1960s and into the ’70s, says consultant Jay Thompson, in spite of the limitations to entry in the regulated market, a small-town Indiana boy could buy a truck and “make a decent living” just trip-leasing with carriers. Thompson and his brothers did just that.

After repeated scandals among Teamsters leadership under Jimmy Hoffa in the 1960s disillusioned many drivers – and more carriers began to view independent owner-operators more favorably – the average income of the self-employed driver rose above the average wage earnings of employee drivers for the first time nationally.

The promise of business ownership and added earning potential, paired with the independence of the road, attracted drivers to ownership. Yet, as Hamilton puts it in his book, truck owners’ “dream of economic independence…in 1960s trucking was based only tenuously in reality.” Trip-leasing required a constantly shifting carrier identity (complete with trucking-company signs duct-taped to operators’ rigs’ doors, depending on the load).

The exempt trucking market was “the most cutthroat business there ever was,” says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association. “Brokers stiffing truckers was routine.” With lax ICC regulations governing carrier leases with owner-operators, many of those who leased owner-operators prior to the late 1970s had the upper hand, he says.


The 1970s: The road to deregulation

As owner-operators increased in numbers, so did their recognition within the industry. Parkhurst in the 1960s launched a national trade group, the Independent Truckers Association, and later the Roadmasters.

Avoca, N.Y.-based owner-operator David A. Margeson, who hauled exempt potatoes, was a Roadmasters member. He recalls that the organization put the owner-operator “on Main Street. Up to that time there’d been no recognition of owner-operators.”

He also recalls the frustration of independents, who felt the ICC had outlived its original intent. “When it was first formed and set up regulated routes, carriers had to obtain rights so that no area of the country would be left out of the picture,” Margeson says. After trucking was well-established across the nation, “to the independent, it seemed like we didn’t need that system anymore. Areas would get taken care of without it – it seemed like a hindrance to interstate commerce to have rights to a particular area.”

Owner-operators leased to regulated haulers, too, banded together to force carriers and the Teamsters to recognize them. In the Midwest, the Fraternal Association of Steel Haulers formed to fight for the union’s consideration of the “unique economic interests” they had as owners of their “own expensive equipment,” Hamilton writes. They launched strikes in 1967 and 1970, feeling as if they were paying dues for little representation from the union.

As union disillusionment spread, volatile fuel prices and runaway inflation provided a key mobilizing force for industry change. During the independents’ shutdown during the 1973-74 Arab oil embargo, a new owner-operator organization emerged, the Owner-Operator Independent Drivers Association. OOIDA focused on regulation of carrier leasing practices.

As more all-owner-operator carriers emerged and operator numbers surged in the 1970s, abuses of leased drivers were rampant, says Charles Myers. Now general manager for freight at uShip, he was a district supervisor with the ICC beginning in 1976 in Harrisburg, Pa.

Myers recalls the typical owner-operator complaint in which an individual sets up an office, promises freight to “all these owner-operators who commit to running for him. He’d run them for a while and never pay them,” Myers says. “You’d have to come back and make a case for violation of the leasing rules of the time. Most of the time they’d just get an injunction and shut the guy down and try to get restitution for the owner-operators.” Penalties were small, so repeat offenders were common.

Congressional hearings in the ’70s exposed such practices, in part at the instigation of OOIDA. In 1979 the ICC adopted the Truth in Leasing regulations, adding “transparency to the relationships” between leased owner-operators and their carriers, Spencer says.

After a series of unsuccessful bills throughout the ’70s to allow owner-operators to compete in the regulated freight marketplace, conditions climaxed in the late 1970s. The leasing regs were hitting the books. Independents were shutting down in protests prompted by 1979’s fuel shock.

As Hamilton recounts it, the unstable economic environment was seized upon by Sen. Ted Kennedy, then eyeing the Democratic Party’s presidential nomination. Kennedy and others pitched wholesale trucking deregulation as a solution to the problems of independent owner-operators and price inflation of consumer goods. Deregulation was achieved when President Jimmy Carter pushed through the Motor Carrier Reform and Modernization Act of 1980.


The 1980s and ’90s: An industry transformed

The new environment did not immediately translate to more pay for independents. Unrestricted as to lanes, areas of operation and freight, carriers with capital to invest in new trucks and drivers expanded quickly. As a guy with one truck, says Margeson, “we were still out of the picture, because what can we do with one truck?”

Many have characterized post-deregulation as a “race to the bottom” in terms of rates and driver pay, says Spencer. “The rising stars rejected the mold that trucking had evolved to,” largely a patchwork of regional businesses. “Everyone was going to be a national carrier,” he adds. “They weren’t interested in hiring drivers who only wanted to work in regional areas with good pay.”

It’s one reason OOIDA didn’t support deregulation. “All we had to do was look at the already unregulated segment of the industry,” exempt hauling, to see where the rest of the industry would go if deregulated, Spencer says.

All the same, as competition soared throughout the ’80s, the owner-operator’s role was being established. Efficient single-truck businesses became more attractive to carriers. All-owner-operator “non-asset-based” fleets multiplied.

In the intervening years, the rise of computing and communications technology eased accounting and registration procedures. Load information became available online by the end of the century. By the early ’90s, nearly every state was a part of both the International Registration Plan and the International Fuel Tax Agreement, eliminating much paperwork. Prior to IFTA, Margeson says, “we had to send in a quarterly report for each state we ran. If we ran 32 states in a quarter, we had to make out 32 quarterly reports.”

As the industry changed, so, too, did Overdrive. When Parkhurst sold the magazine in the mid-’80s to Randall Publishing Co., the company refocused the content toward helping readers refine their business practices.


2000 – Present: The ‘enforcement industry’ arises

When historians look back on the first decade of the 21st century in trucking, no doubt the fuel-price shocks and the 2008 economic meltdown will play large. But some owner-operators and leasing carriers were prepared for both, having experienced variations on those themes for years.

What might figure more largely is an “industry,” as Spencer calls it, surrounding safety enforcement. Since the Motor Carrier Safety Assistance Program emerged in the early ’80s, throwing trucking enforcement money at states – “well over $300 million a year right now,” he says – intrusions into owner-operators’ businesses in the name of safety have increased.

That extends to truckers’ day-to-day relationships with law enforcement. In spite of the long-held outlaw image of the independent trucker of the ’60s and ’70s, Spencer says, “at night, the best friends a cop could have were the truck drivers. The truckers would be the first people to stop and help” in an emergency.

Margeson says the relationship “went sour from about 1985 on up to the present date. About the only thing you could get stopped for back in the day was speeding. If you got stopped for that, they might ask you for a log book. Other than that, your DOT checks – then called ICC checks – came in the fall of the year,” and again in the spring. Today, Margeson adds, it’s not unusual to get checked two or three times on a short run. “They do it in the name of safety, but now it’s more of a money deal for the states.”

Safety ratings based on compliance reviews became the norm for carriers when the SafeStat program emerged with the new Federal Motor Carrier Safety Administration in 2000. The events of 9/11 increased scrutiny of all drivers, whether hauling sensitive freight or applying for a general-freight lease. SafeStat’s successor, the recently instituted Compliance, Safety, Accountability program, takes safety rating to an unprecedented level, providing monthly updates to a carrier’s safety rankings based on inspection and crash data.

If the FMCSA gets its way, individual drivers, too, will come under a similar public ranking system in the future. True independents could receive dual numerical rankings as both carrier and driver.

The current decade could bring more of what the last one did. Challenges abound, both regulatory and otherwise: hours-of-service revision, onboard recorder mandates, tighter health restrictions for CDL holders, increasing congestion, long wait times at shippers and receivers, fraud among fly-by-night brokerages.

Partly for some of those reasons Marion, Ind.-based owner-operator Mike Long traded his independent business model for the safety net of leasing to a carrier, he says. In 2008, he leased to Landstar.

Long echoes many operators when he says he wouldn’t trade a business he calls “his life” for anything. “My dad made money in his day,” he says. “But you can still make money today, taking everything into consideration. There’s no way I’d want to run a single-rear-axle gas-engine truck on springs, no power steering, no A/C on U.S. 40” across the country.

“Certainly trucking can be a hard life,” says Spencer, “but some of the most wonderful people in the world are attracted to this business – it attracts people who want to work hard” and succeed. For that, the owner-operator career remains a prime example of the nation’s opportunities for self-employment.


Perfecting the all-owner-operator fleet model

Though owner-operators did not fare well immediately after trucking’s deregulation in 1980, that changed as all-owner-operator fleets proved to be a formidable business model.

One good example is Landstar System, says Charles Myers, former district supervisor with the Interstate Commerce Commission and with a long subsequent career in private industry. Landstar formed from mostly owner-operator carriers in the IU Truckload Group.

From the start, Landstar offered excellent opportunities for what the company calls “business capacity owners,” says Pat O’Malley, Landstar’s vice president and chief commercial and marketing officer. Prior to the company’s formation, O’Malley was with Independent Freightways, which became part of Landstar.

An owner-operator’s destiny in the Landstar network is largely self-determined, he says. The contractor is paid as a percentage of gross revenue, self-dispatched, and works through a network of independent agents and/or an in-company load board for freight.

“We decentralized the decision-making process,” says CEO Henry Gerkens. “The best person to make a decision in terms of how to operate the business is the guy sitting behind the wheel.”

The system has worked out well for the company and its owner-operators. Their net income is among the highest in the industry, according to client averages of ATBS, which provides accounting services to thousands of owner-operators. Landstar is the largest owner-operator-only fleet in the nation, representing 7,711 businesses that control 8,231 trucks, as of July 22.

Some other carriers who lease owner-operators have moved toward Landstar’s self-dispatch, percentage-pay model. At Schneider National, the nation’s largest privately held truckload carrier, “percentage is creeping back in,” says Mike Bethea, director of independent contractors. The company has also made strides in offering more operational latitude to its owner-operators since 2008.

“The technology that’s out there today — the ability for a person to get on the Internet and select their freight — is a game changer,” Bethea says. “You don’t have to have it, but if you do it’s a real benefit for the contractor.”

HISTORICAL TIMELINE

1935

Agricultural interests secure exemption for farm products from Interstate Commerce Commission regulation in first Motor Carrier Act.

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1956


“For the first time in history, a simple thing such as a magazine brought owner-operators together from every aspect of trucking with common interests and common goals which could be heard and shared with other truckers from coast to coast. In the days before computers and Internet services, this was a connection unheard of.” – David A. Margeson, with his 1985 Mack Superliner

Supreme Court holds that poultry, frozen fruits and vegetables are also exempt from ICC regulation.

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1961

Owner-operator Mike Parkhurst launches Overdrive.

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1962

Parkhurst starts the Independent Truckers Association. He also rides across the country on horseback to protest outdated roads.

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1964

Teamsters’ first National Master Freight Agreement inked in Chicago, marking a high point of union power in the industry.

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1966

Overdrive creates Roadmasters organization for independent truckers.

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1967

The federal Department of Transportation is formed.

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1967

Overdrive opened the Los Angeles Roadmansion, a fringe benefit for members of Overdrive’s Independent Truckers Association.

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1970

Abolition of the Interstate Commerce Commission is proposed.

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1971

Laws requiring truck drivers to be 21 and to pass a road test before licensing take effect.

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1972

The first Mid-America Trucking Show is held in Louisville, Ky.


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1973

55-mph national speed limit instituted as fuel-saving measure. Owner-Operator Independent Drivers Association forms.|

1974

Truckers shut down for nearly 11 days. The impact included a man shot and killed in Delaware and thousands of temporary layoffs.

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1975

Antilock brakes become mandatory. Teamsters leader Jimmy Hoffa is reported missing.

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1976

Bills to partially deregulate trucking introduced in Congress. None pass.

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1977

Nationwide detention-time payment rule instituted by ICC. “Smokey and the Bandit” premieres.

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1978

Truckers demonstrate in Washington. ABS mandate suspended. “Convoy” premieres.

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1979

Truth in Leasing regulations codified by the ICC. Nationwide independent trucker strikes sparked by fuel prices boil over; Sen. Edward Kennedy introduces radical deregulatory legislation.

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1980

Motor Carrier Act deregulates the industry.

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1982

President Ronald Reagan signs legislation putting a moratorium on cross-border trucking with Mexico and creating the Motor Carrier Safety Assistance Program.

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1983

Independent truckers shut down to protest hike in fuel tax and other fees. ICC ruling kills detention time payments.

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1984

Motor Carrier Safety Act signed by President Reagan.

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1986

Randall Publishing Co. buys Overdrive from Parkhurst.

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1987

The speed limit increases to 65 mph on rural interstates.

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1990

First Overdrive Pride & Polish truck beauty competition held.

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1992

Commercial driver’s license goes into effect.

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1993

Independent truckers shut down to protest fuel prices. North American Free Trade Agreement signed into law.

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1994

Radar detectors banned in commercial trucks.

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1995

Antilock brakes mandated for 1997.

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1999

Great American Trucking Show debuts in Dallas.

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2000

Massive hours of service revision tabled after industry protests as the Federal Motor Carrier Safety Administration is established as a federal agency.

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2001

Attacks on World Trade Center and Pentagon bring a heightened level of security measures to trucking. XM Satellite Radio launches, followed in 2002 by Sirius Satellite Radio.

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2003

Major hours-of-service revision takes effect.

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2007

First cross-border long-haul trucking pilot program begins.

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2008

U.S. descends into largest recession since the 1930s. Owner-operator population declines.

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2010

FMCSA proposes a complicated hours of service revision. The CSA program begins.







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