Business owners strive to be successful and they work hard to make an honest profit. Trucking owner-operators are no exception. Sometimes, however, despite their best efforts to protect their business and make a living, problems arise with the lease with their carrier. The most common problems experienced by owner-operators are receiving properly calculated payments on time and/or improper charge-backs. The Federal Motor Carrier Safety Administration Truth in Leasing law (49 CFR Part 376, Lease and Interchange of Vehicles) specifically addresses leasing requirements and the individual responsibilities of owner-operators and carriers. Knowing your rights can save countless hours, frustration, and money.
Truth in Leasing addresses two areas vital to successfully managing commercial truck leases. The first, 49 CFR Part 376.11, deals with the general conditions of a commercial truck lease. In all cases, a written lease detailing the use of the equipment, specific identification of the equipment and the length of time, with start and end dates, that the lease covers must be given to the owner. Additionally, the owner must be given a receipt listing the equipment with the date and time that the lease was activated. A second receipt must be provided to the owner at the end of the lease.
The second area is compensation. The law states that carriers must pay the owner-operator of the leased commercial truck within 15 days after the logbooks required by the Department of Transportation and documentation the carrier needs in order to be paid are submitted. Payment for hauling is based only on what is in the lease regardless of what other verbal promises are made by carrier representatives, company recruiters, or other owner-operators. If compensation is based on freight bills, then the carrier must provide a copy to the owner. The carrier cannot withhold payment for non-receipt of additional document that the carrier requests, even if they are listed as required documents. The law makes it clear that the 15-day countdown begins when the required documents are submitted, not when the carrier receives payment and may not be withheld by the carrier for documents other than those previously identified, including a bill of lading that has not been.
Part 376.12 also discusses what the lease must include in clearly presented language. The lease must state who is responsible, the owner-operator or the carrier, for charges such as “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.” Additionally, the responsibility for loading and unloading the cargo, any compensation that may come from that decision, and who pays for overweight fines must be specified. Carriers are allowed to charge for purchasing insurance and there is nothing prohibiting the carrier from charging additional fees often called administration fees, onto the premiums but they are required to state those costs clearly in the lease.
The most important thing for an owner-operator to do to protect themselves and their business is to always get a copy of the signed lease and make sure that they understand the document completely. If the carrier asks for any changes to the lease, make sure that both parties sign these changes and that a copy of the new lease is on hand. Although commonly used in standard lease language, terms like “at cost” for items such as fuel should not be used in the lease. Since there are a number of ways that “at cost” can be calculated, such as the pump price, the carrier’s cost, various discounted costs, etc. the term is too vague and may end up being a point of conflict. The same is true of charge-back items such as insurance. Excessive charge-backs for insurance premiums by carriers are often cited as the cause for filing a legal complaint. By making sure that all the details regarding responsibilities, costs, compensation, and the duration of the lease are stated in clear language, the probability of disputes between the carrier and the owner-operator are greatly reduced.
For additional information about the Truth in Leasing law (49 CFR Part 376), the Owner-Operator Independent Drivers Association (OOIDA) is an excellent resource. As with all legal documents, if you are unsure of the document you are signing or a conflict develops, seek the advice of an attorney who specializes in cases like yours.
Resources: http://www.thetruckersreport.com/leasing-article/; https://ecf.utd.uscourts.gov/cgi-bin/show_public_doc?2002cv0950-395; http://bigriggigs.net/; http://www.todaystrucking.com/news.cfm?intDocID=17088