OOIDA INFORMATION SERVICES
A couple of years ago, Land Line did a series of articles on the federal truth-in-leasing regulations, and although we refer to them quite often, questions from owner-operators who want to know their rights in various situations involving their motor carriers come across my desk on a regular basis.
I can’t say often enough how important it is for leased owner-operators to have the tools to be able to recognize illegal motor carrier leasing practices, hence the refresher course prompted by the following e-mail I received recently:
Question: I just bought a truck from a gentleman who recently retired after 30-plus years of trucking. After he gave me the keys, I asked him if he had any advice to go along with them. He didn’t even blink an eye before telling me to join OOIDA, and as you know, I called the next day.
However, he also said that I should “know part 376 backward and frontward.” When I asked him what he meant, he said I should go to you for the information, so here’s my question: What’s the 4-1-1 on part 376?
Answer: First, I’d like to welcome you to OOIDA, and let me just add that the guy who sold you the truck obviously knows what he’s talking about. Not only did he give you the key to your truck, he also gave you the key to obtaining the knowledge you’ll need to protect your rights as a leased owner-operator, and in turn, to gain the confidence it will take to be a successful business owner.
Part 376 of the Federal Motor Carrier Safety Regulations (FMCSRs) should be on the recommended reading list of any owner-operator who is currently leased, or even thinking about leasing, to an authorized motor carrier. You can obtain a copy of the leasing regulations by calling OOIDA toll-free at 1-800-444-5791, or send your request via e-mail to email@example.com.
Once you have obtained your copy of the written leasing regulations, you should read it carefully, paying particular attention to some key elements. Keep in mind that as the party granting the use of the equipment, you are identified in the lease as the lessor. The motor carrier that is acquiring the use of the equipment is identified as the lessee.
Part 376 specifies that the lease be made between the authorized carrier and the owner of the equipment.
This means that the carrier doesn’t get to call all the shots. As a party to the lease, you have the right to negotiate for terms that are agreeable to you as well as the carrier, although typically, carriers have adopted practices that preclude owner-operators from having a say. However, as the availability of freight increases, and companies scramble for good drivers to move it, an owner-operator’s power to negotiate contract terms will grow stronger.
In addition, once both parties have settled upon the terms and signed the lease, you and your carrier must agree in writing when any future changes or addendums are made to the lease. In other words, it should be a two-way street, where all the terms are specified in a mutual or shared manner.
I receive a lot of questions about compensation issues, and you may be interested to know that Part 376 addresses these concerns specifically.
Whether you are to be paid as a percentage of the gross revenue, a flat rate per mile or by any other mutually agreed upon method of compensation, the terms should be specified within the lease or in an attached addendum and delivered to you before you move any freight for the carrier.
In addition, terms of your lease must state that you will be paid within 15 calendar days of the time you turn in the required paperwork. You don’t have to wait until your carrier is paid for the load, and you should still be paid even if damages or shortages are noted on a bill of lading.
Other key features to note regarding compensation are your right under Part 376 to a copy of the freight bill when your payment is based on a percentage of the gross revenue, as well as your right to know who is responsible for such things as loading/unloading, detention and accessorial services, empty mileage, permits, tolls, fuel, fuel taxes, base plates and licenses. These responsibilities should all be specified within the lease as required by the regulations.
Part 376 requires that all items that are charged back to your settlements be clearly specified within the lease and also gives you the right to obtain any documentation that confirms the validity of the charge-backs.
Although there are a few motor carriers that would lead you to believe you must purchase products, equipment and services from or through them, Part 376 clearly states that this practice is prohibited. You must have the option of obtaining necessary equipment or services from an outside source.
FMCSRs require the authorized motor carrier to maintain liability insurance for the protection of the public (primary liability) on all of its owned and/or operated equipment. If the carrier requires its leased owner-operators to carry other coverages such as bobtail or occupational accident insurance, it must be specified within the lease. However, the carrier may not require that the coverages be purchased through them. If you decide to obtain coverage through the carrier, it must provide you with an insurance policy upon request according to Part 376.
The handling of escrow funds is also addressed in Part 376.
If the motor carrier requires an escrow fund, the lease must specify the amount, the items to which the fund can be applied, and an accounting to the lessor of any transactions involving the fund. The carrier must also pay interest on escrow funds unless the lessor has received advances that are greater than the amount in the escrow account. If the carrier or you terminate the lease for any reason, the escrow fund must be returned no later than 45 days from the date of termination.
As a leased owner-operator, you must be aware of your rights so you can recognize when a motor carrier is taking advantage of you. Part 376 is the key to obtaining the knowledge that will enable you to protect yourself. However, keep in mind that while these rights are granted under Part 376, no benefit will be achieved unless you demand compliance.
If you have questions about doing business as an owner-operator and/or an independent driver, please e-mail them to firstname.lastname@example.org or send them to PO Box 1000, Grain Valley, MO 64029. We can’t publish all of your questions in Land Line, but you will receive a response, even if your letter is not published.