Watch Out for Contract Killers

| December 12, 2008

You’d think the only thing truckers love more than coming home after a long trip is changing carriers. A measure of the madness: Among truckload carriers, turnover hit a record 136 percent by late last year, according to the American Trucking Associations.

Overdrive readers are relatively stable; half have worked for the same carrier for at least five years. But those owner-operators who do partake in the turnover frenzy face the challenge of evaluating a new lease contract. Failure to fully understand its terms could mean you’re agreeing to things that could easily wash out your gains in home time or a few pennies per mile.

Attorney Paul Cullen Jr. of The Cullen Law Firm in Washington, D.C., stresses comparing your lease terms with the Federal Motor Carrier Safety Regulations. Here are a few important topics to check:

FORCED PURCHASES. It’s illegal to force an owner-operator to buy products or services from the carrier. “There’s no shortage of instances of that these days,” says Cullen, whose firm represents the Owner-Operator Independent Drivers Association in resolving such problems. Typical violations involve insurance, parts or service.

BASIC COMPENSATION. “The leasing rules require that the lease state what the driver’s compensation will be, in clear terms,” Cullen says. Likewise, deductions must be clearly explained. For example, a fuel card program should be fully explained, including related service fees. “For any amount deducted from a driver’s compensation, the driver has the right to request copies of the paperwork that demonstrate the proper amount,” he says.

FUEL SURCHARGE. “This should be a major concern now,” says Washington attorney Kenneth Siegel of Strasburger & Price, which represents carriers. A carrier’s surcharge program might be explained in a document separate from the lease. Either way, an owner-operator needs to understand how much it is and how it’s calculated.

HEALTH INSURANCE. No carrier can pay your way, but some carriers make it possible for you to buy into their policy, notes Siegel. Just be sure the program does not jeopardize your standing as an independent contractor, thereby throwing you into tax hell.

Also check the rates and the terms of coverage to see how good the deal is.

ESCROW FUNDS. The nature and size of any fund and the amount of deductions for it must be spelled out. “The courts have held that a carrier may not keep the escrow funds, for example, in the early termination of a lease,” Cullen says. “The carrier is required to return the escrow plus interest within 45 days.”

If you’ve checked a lease against the federal regs and still have questions, consider a review by an attorney who knows trucking. Be prepared to spend a few hundred dollars or more, depending on the complexity of the lease.


CHECKING THE RULES
You might find a paperback copy of the Federal Motor Carrier Safety Regulations at a truck stop, but check the contents before plunking down your money. Some do not contain the leasing regs, 376.12.

That section is available by searching for 376.12 at the U.S. Department of Transportation website, www.dot.gov, or at the Owner-Operator Independent Drivers Association website, www.ooida.com. Also, leasing contract terms and related issues are covered in “Interviewing the Interviewer” at www.ooida.com.

COUNTING THE MONEY
Want to compare pay packages among carriers? A free interactive spreadsheet from Overdrive lets you plug in all the numbers that count. Visit this site.

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