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Lease-purchase
I-376: the road to better treatment from your motor carrier
This is the first in a series of exclusive articles describing how owner-operators can spot illegal motor carrier leasing practices

by Paul D. Cullen Jr.
The Cullen Law Firm, PLLC, Washington, DC

Do you know how to tell if you are getting a decent deal or being scammed by your motor carrier? Are you being paid what the recruiter promised? Is your motor carrier making deductions from your compensation that you just did not see coming? Are you being told you have to purchase insurance from your motor carrier? Are you required to use the carrier’s fuel card? Do you get refunds of your fuel-tax credits, or is the motor carrier keeping them? The last time you left a motor carrier, did they refund your escrow account to you with interest within 45 days? What can a motor carrier legally do, and what are your rights?

The first place to look for answers to these questions is Part 376 of Title 49 in the Code of Federal Regulations. Part 376 contains the federal truth-in-leasing regulations — your rights to better treatment from motor carriers. When complied with, Part 376 gives you, the owner-operator, more control over your business.

Even if your lease complies with the regulations on its face, however, some motor carriers have devised ingenious ways to put up illegal tolls, write unjustified tickets and send you down unsafe roads on which they try to steer your compensation into their own pockets. The most powerful tool you have to protect yourself as an owner-operator is the knowledge of the federal truth-in-leasing regulations and the ability to recognize common motor carrier scams.

With this knowledge you can do three things: First, you can avoid signing on with a bad motor carrier. No action is more simple, cheap and powerful than refusing to sign a bad lease. This action can help you avoid financial loss, headache and coercion — keeping you in a bad lease.

Second, you can recognize when a motor carrier is taking advantage of you and either fix or terminate that relationship. You can demand that your rights be respected. If the carrier does not respond, you may want to break your current lease and find a better carrier before your current carrier runs your business into the ground.

Finally, you may use your right under federal law to sue the carrier for violations of the leasing regulations. Should you win, the court can order the carrier to stop its unlawful practices, force the carrier to return any money owed to you and make the carrier pay your legal fees.

Reading your lease
The most important advice is to read your lease. This tried and true advice has never been more important. If you do not read and understand your lease before signing it, you are at risk for handing over the financial direction of your business to the motor carrier. The first challenge, however, may be getting the opportunity to read it.

Many owner-operators have reported to OOIDA they were given no time to read their lease and were told to take it or leave it. At the 2001 Mid-America Trucking Show, not a single motor carrier recruiter had a copy of the carrier’s lease for review. These practices beg the question: What are carriers trying to hide about their lease?

When you sign that lease, every single promise made by the recruiter not mentioned in the lease goes out the window. If a recruiter’s promises of decent compensation or weekends off attract you to that carrier, make sure those promises are written into the lease. If the lease doesn’t say it, you cannot count on getting it.

You should walk away from any motor carrier who tries to force you to sign a lease without reading it. In those situations, you not only have to wonder what it is in the lease they do not want you to know, but also whether this demand is an example of how the carrier treats its owner-operators after they sign a lease.

The bottom line — the law assumes you have read your lease and will hold you to it. There is one big exception: you cannot sign away your rights under the truth-in-leasing regulations. The law will not force you to comply with the illegal provisions of a lease or let the motor carrier off the hook for its responsibilities that should have been specified in the lease.

For example, it is a violation of the leasing regulations for a carrier to require you to buy insurance from the carrier. If the carrier requires you to buy insurance from it or its hand-picked insurance company, your rights have been violated and you have a remedy in federal court.

Another example involves compensation. The regulations require the lease to state that the carrier will pay you within 15 days after you turn in the required paperwork on a particular load. Even if you sign a lease in which the motor carrier promises to pay you after 20 days or longer, the motor carrier is still required by law to pay you within 15 days. You cannot agree (under coercion or indifference) to waive this requirement.

When you read a lease you should look carefully to be sure it contains all of the provisions required by the leasing regulations and contains no provisions that violate the regulations.

The basic elements of the
truth-in-leasing regulations

Motor carriers cannot use owner-operators unless there is a lease agreement that complies with the regulations. The Part 376 truth-in-leasing regulations contain the specific provisions that must be written into the lease and followed by the carrier. The following is a brief description of several provisions that are frequently the subject of conflict between owner-operators and carriers. Parts of the rules are reproduced here verbatim so that you can compare their exact requirements to your lease and carrier’s practices.

Section 376.12 begins:

(a) Parties. The lease shall be made between the authorized carrier and the owner of the equipment. The lease shall be signed by these parties or by their authorized representatives.

Although it may seem obvious that both parties must sign the lease, it is important to know both parties also must agree to and sign any changes to the lease after the initial signing. This means, for example, if the motor carrier wants to change your compensation or give you additional responsibility, both you and the carrier have to agree to the change and sign it before it becomes a part of the lease. If you don’t like the change, you don’t have to sign it. If you refuse to sign it, you and the carrier may decide to continue under the original lease or terminate your lease. Either way, just because you signed a lease once, does not mean you have to accept any change the motor carrier wants to make in the future.

Subsection 376.12 (d) is important because it deals with compensation:

(d) Compensation to be specified. The amount to be paid by the authorized carrier for equipment and driver’s services shall be clearly stated on the face of the lease or in an addendum which is attached to the lease... The amount to be paid may be expressed as a percentage of gross revenue, a flat rate per mile, a variable rate depending on the direction traveled or the type of commodity transported, or by any other method of compensation mutually agreed upon by the parties to the lease...

Your compensation is based on what the lease says — period. It is not based on the promises in a recruitment advertisement, the promises of the carrier’s smooth talking recruiter, or what another driver for the same motor carrier says he gets. You can only count on the compensation offered in the lease.

Subsection 376.12 (e) requires the lease to specify which party has responsibility for several important details of a trucking operation. These include: “...the cost of fuel, fuel taxes, empty mileage, permits of all types, tolls, ferries, detention and accessorial services, base plates and licenses, and any unused portions of such items.” The recitation of who has responsibility for these items is important so that you know ahead of time what your financial obligation will be during the lease. Subsection (e) also discusses the responsibility for loading and unloading, and overweight fines:

“The lease shall clearly specify who is responsible for loading and unloading the property onto and from the motor vehicle, and the compensation, if any, to be paid for this service. Except when the violation results from the acts or omissions of the lessor, the authorized carrier lessee shall assume the risks and costs of fines for overweight and oversize trailers when the trailers are pre-loaded, sealed, or the load is containerized, or when the trailer or lading is otherwise outside of the lessor’s control, and for improperly permitted overdimension and overweight loads and shall reimburse the lessor for any fines paid by the lessor...”

Subsection 376.12 (f) requires the lease to state that you shall be paid within 15 days after submission of the appropriate paperwork:

(f) Payment period. The lease shall specify that payment to the lessor shall be made within 15 days after submission of the necessary delivery documents and other paperwork concerning a trip in the service of the authorized carrier. The paperwork required before the lessor can receive payment is limited to log books required by the Department of Transportation and those documents necessary for the authorized carrier to secure payment from the shipper... The authorized carrier may require the submission of additional documents by the lessor but not as a prerequisite to payment. Payment to the lessor shall not be made contingent upon submission of a bill of lading to which no exceptions have been taken. The authorized carrier shall not set time limits for the submission by the lessor of required delivery documents and other paperwork.

Note that if you have turned in the required paperwork they have to pay you within 15 days. It does not matter whether the carrier has been paid yet or not; you must be paid promptly.

Subsection 376.12 (g) also helps owner-operators monitor the proper payment of their compensation. If your compensation is based on the amount of the freight bill, you have a right to see that freight bill.

(g) Copies of freight bill or other form of freight documentation. When a lessor’s revenue is based on a percentage of the gross revenue for a shipment, the lease must specify that the authorized carrier will give the lessor, before or at the time of settlement, a copy of the rated freight bill or a computer-generated document containing the same information, or, in the case of contract carriers, any other form of documentation actually used for a shipment containing the same information that would appear on a rated freight bill...

If a carrier refuses or is slow to let you see the freight bill on which your compensation is calculated, you may legitimately wonder whether or not they are paying you the correct compensation specified in your lease.

Finally, in subsection 376.12 (l) the owner-operator must be given a copy of the lease. All owner-operators should read and become familiar with their lease, even after signing it. If you do not have your lease, or do not understand it, then it is much easier for the carrier to ignore the lease and take control of your business. n

 

IN NEXT ISSUE

The next installment of “I-376” will discuss the requirements a motor carrier must meet before it can make deductions or charge-backs from your compensation. This article also will cover the prohibition on a motor carrier from requiring an owner-operator to purchase any product, equipment or services from the motor carrier as a condition of signing the lease.

Questions about your lease or your carrier’s practices?
Editor’s note: If you have any questions about these regulations, about the legality of your lease, or the legality of your motor carrier’s practices, send your question, a copy of your lease and a copy of any other pertinent documents to: Donna Ryun, OOIDA, P.O. Box 1000, Grain Valley, MO 64029. E-mail: dryun@ooida.com. All communications will be held in the strictest confidence. The most frequently asked questions will be published (no names mentioned) in future issues of Land Line, along with answers.

Carriers cannot violate the truth-in-leasing regulations with impunity. The leasing regulations specifically forbid a carrier from providing regulated transportation services in equipment it does not own unless that equipment is covered by a lease that complies with these regulations. Federal courts have the authority to enjoin carrier operations (i.e. stop them cold) until valid leases are executed. OOIDA has obtained one such injunction and is eager to seek injunctions against additional carriers in order to put an end to bad leases

Future topics in this series
This article covered the first half and most simple requirements of the leasing regulations. There are many other important issues raised by the leasing regulations that owner-operators should know. Can a carrier make any deductions it wants to from your compensation if it has the paperwork to back it up? Can a carrier require you to purchase extra insurance? What are a carrier’s obligations when you use its fuel card? If you are in the household goods industry, is the parent motor carrier or their local agent liable for violations of the leasing regulations? When can motor carriers refuse to give back your escrow? These topics will be discussed in the next several I-376 articles to be featured in Land Line.

July Digital Edition