This article is designed to answer the most frequently asked “can they do that ?” or “aren\u2019t they suppose to do this?” questions that owner-operators ask OOIDA and Land Line about their leases with motor carriers. Many owner-operators have never read the leasing regulations and assume that as long as they understand what is spelled out in their leases everything is fine.<\/p>\n
Is everything spelled out in your lease? Maybe not. If it is spelled out in your lease, is it legal? Maybe not. Are you getting everything you\u2019re entitled to? Maybe not. Whether you\u2019re looking for a carrier to lease on with, or you\u2019re already operating under a lease, you owe it to yourself not to let anyone take advantage of you. Your best line of defense is first knowing what your responsibilities are and what you\u2019re entitled to under the leasing regulations, then reading and thoroughly understanding your lease.<\/p>\n
The following is not a complete copy of the leasing regulations. The sections that seem to generate the most questions from owner-operators are presented here (in italics), along with explanations where necessary.<\/p>\n
To view the leasing regulations, click here. <\/a> Section 376.2) Definitions There are a few terms in this section that often create confusion. “(f) Lessor \u2013 In a lease, the party granting the use of equipment, with or without driver, to another.” This means you, the owner-operator. “(g) Lessee \u2013 In a lease, the party acquiring the use of equipment with or without driver, from another.” This means the carrier. Be very sure to keep these two terms straight when you\u2019re reading your lease agreement. “(i) Addendum \u2013 A supplement to an existing lease which is not effective until signed by the lessor and lessee.” This means that both you and your carrier must agree in writing for any change to your lease to take effect. “(l) Escrow fund \u2013 Money deposited by the lessor with either a third party or the lessee to guarantee performance, to repay advances, to cover repair expenses, to handle claims, to handle license and State permit costs, and for any other purposes mutually agreed upon by the lessor and lessee.” OOIDA gets dozens of calls every week from drivers with questions about escrow accounts. If your carrier deducts money from your settlement for any of the reasons listed above, it\u2019s an escrow account no matter what name it goes by. If your money is held by a third party, such a leasing company, it is still an escrow account. An escrow account contains your money, deducted from your settlements. The money does not belong to your carrier. Be sure to read more about escrow funds in 376.12 (k).<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n (Section 376.12) (d) Compensation to be specified “The amount to be paid by the authorized carrier for equipment and driver\u2019s services shall be clearly stated on the face of the lease or in an addendum which is attached to the lease. Such lease or addendum shall be delivered to the lessor prior to the commencement of any trip in the service of the authorized carrier. An authorized representative of the lessor may accept these documents. 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. The compensation stated on the lease or in the attached addendum may apply to equipment and driver\u2019s services either separately or as a combined amount.” Make certain you understand exactly how and what you\u2019ll be paid and that it is clearly stated in the lease. Don\u2019t accept a “what that means is” from the person holding out the pen. If you don\u2019t understand what it says in the lease, don\u2019t sign it.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (e) Items specified in lease “The lease shall clearly specify the responsibility of each party with respect to 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.” Be sure you\u2019re clear on what is your responsibility and what is the responsibility of your carrier. “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.” Notice this says “if any” compensation. The carrier is not obligated to pay for lumping, but some will. Just make sure it\u2019s spelled out in the lease, and not just something somebody said during the sign-on process. “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-load, sealed, or the load is containerized, or when the trailer or lading is otherwise outside of the lessor\u2019s control, and for improperly permitted overdimension and overweight loads and shall reimburse the lessor for any fines paid by the lessor.” This means if your carrier instructs you to pick up a preloaded trailer and you have no knowledge or control over how the trailer was loaded, your carrier is responsible for any overweight fines. However, if it is your carrier\u2019s policy to weigh preloaded trailers at the closest public scale (preferably certified), you should do so. If you don\u2019t, your omission could mean that you\u2019ll eat any overweight fines. And if the permit department screws up your oversize\/overweight permits, they must pay the fines. However, if the officer writes you another ticket (logbook, seatbelt, speeding, etc.) after he checks your permits and\/or weight, those fines are all yours. “If the authorized carrier is authorized to receive a refund or a credit for base plates purchased by the lessor from, and issued in the name of, the authorized carrier, or if the base plates are authorized to be sold by the authorized carrier to another lessor the authorized carrier shall refund to the initial lessor on whose behalf the base plate was first obtained a prorated share of the amount received.” This section refers to any plates your carrier charged you for. Laws differ from state to state, and turning in plates after six months might qualify for a refund in one state and not in another. If you do give your carrier back the plates before they expire, check the laws in that state to see if you\u2019re due a refund. It may be necessary to remind your carrier that you\u2019re due a refund. If your plate is from a state that does not give a refund, but allows the plate to be transferred to another vehicle, you are due a refund if the carrier transfers the plate to another vehicle. However, if the carrier tosses your plate in a drawer you are not entitled to a refund.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (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. In addition, the lease may provide that, upon termination of the lease agreement, as a condition precedent to payment, the lessor shall remove all identification devices of the authorized carrier and, except in the case of identification painted directly on equipment, return them to the carrier. If the identification device has been lost or stolen, a letter certifying its removal will satisfy this requirement. Until this requirement is complied with, the carrier may withhold final payment. 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.” You must be paid within 15 calendar days of the time you turn in your paperwork. Your carrier cannot legally make you wait for your money until they have been paid for the load. They must still pay you within 15 days of the day you turn in your paperwork. Of course, turning in your paperwork in a timely manner will help you maintain a good working relationship with your carrier as well as keep your cash flow healthy. Were you aware that if you have damage, shortages, or other exceptions noted on a bill of lading, your carrier cannot, under these regulations, hold up your pay for that load? For more information about claims see item three under “376.12(j) Insurance.” And although the regulations don\u2019t tell you to, keep copies of everything. It doesn\u2019t matter who loses paperwork \u2013 it\u2019s still lost and your paycheck may very well be late as a result. Most truckstops have copy machines, and taking the time to make copies can save you grief later.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Not just no, but HELL NO! See Sec. 376.12(f)<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (g) Copies of freight bill or other form of freight documentation “When a lessor\u2019s 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. When a computer-generated document is provided, the lease will permit lessor to view, during normal business hours, a copy of any actual document underlying the computer-generated document. Regardless of the method of compensation, the lease must permit lessor to examine copies of the carrier\u2019s tariff or, in the case of contract carriers, other documents from which rates and charges are computed, provided that where rates and charges are computed from a contract of a contract carrier, only those portions of the contract containing the same information that would appear on a rated freight bill need be disclosed. The authorized carrier may delete the names of shippers and consignees shown on the freight bill or other form of documentation.” This section is designed to keep carriers honest when it comes to paying their owner-operators. It entitles you to verify the rates your carrier charges its customers for the loads you haul.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (h) Charge-back items “The lease shall clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor\u2019s compensation at the time of payment or settlement, together with a recitation as to how the amount of each item is to be computed. The lessor shall be afforded copies of those documents which are necessary to determine the validity of the charge.” Yes, all charge-back items must be specifically listed in the lease and you are entitled to copies of the receipts that document the charges. It isn’t enough for them to lump it all in a single amount.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (i) Products, equipment or services from authorized carrier “The lease shall specify that the lessor is not required to purchase or rent any products, equipment, or services from the authorized carrier as a condition of entering into the lease arrangement. The lease shall specify the terms of any agreement in which the lessor is a party to an equipment purchase or rental contract which gives the authorized carrier the right to make deductions from the lessor\u2019s compensation for purchase or rental payments.” Your carrier can require you to have certain equipment necessary for their particular operation (for example: tarps, snow chains, loadlocks, satellite tracking systems, bulkheads, safety shoes or glasses, etc.). Your carrier may furnish you with this equipment free of charge, loan it to you, or sell it to you. What your carrier cannot do is require you to purchase or rent this equipment from them. Your carrier cannot require you to service your truck in their facilities, buy their fuel, or use their accountants. You must have the option of obtaining necessary equipment or services from an outside source. <\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (j) Insurance “(1) The lease shall clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public pursuant to FHWA regulations under 49 U.S.C 13906. The lease shall further specify who is responsible for providing any other insurance coverage for the operation of the leased equipment, such as bobtail insurance. If the authorized carrier will make a charge back to the lessor for any of this insurance, the lease shall specify the amount which will be charged-back to the lessor.” Your carrier is obligated under various regulations to carry public liability (sometimes called primary liability) insurance themselves. Which of you is responsible for other coverages should be spelled out in your lease. But under Section 376.12 (j) your carrier cannot require you to purchase your other insurance coverages through them. You must have the option to look elsewhere for the best deal.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n “(2) If the lessor purchases any insurance coverage for the operation of the leased equipment from or through the authorized carrier, the lease shall specify that the authorized carrier will provide the lessor with a copy of each policy upon the request of the lessor. Also, where the lessor purchases such insurance in this manner, the lease shall specify that the authorized carrier will provide the lessor with a certificate of insurance for each such policy. Each certificate of insurance shall include the name of the insurer, the policy number, the effective dates of the policy, the amounts and types of coverage, the cost to the lessor for each type of coverage, and the deductible amount for each type of coverage for which the lessor may be liable.” Yes, if you request the policy, they have to provide it to you. “(3) The lease shall clearly specify the conditions under which deductions for cargo or property damage may be made from the lessor\u2019s settlements. The lease shall further specify that the authorized carrier must provide the lessor with a written explanation and itemization of any deductions for cargo or property damage made from any compensation of money owed to the lessor. The written explanation and itemization must be delivered to the lessor before any deductions are made.” That last line deserves some attention. Presenting the owner-operator with the particulars of a claim before a charge is made against a settlement gives the owner-operator a chance to dispute any errors. Also the carrier must show that the claim was actually paid. <\/p>\r\n <\/div>\r\n <\/div><\/h6>\n Section 376.12 (k) Escrow funds “If escrow funds are required, the lease shall specify: (1) The amount of any escrow fund or performance bond required to be paid by the lessor to the authorized carrier or to a third party.” This third party can be bookkeeping service, accountant, leasing company, etc. (2) The specific items to which the escrow fund can be applied. Watch for terms that are too broad that could cause confusion at a later date. For instance, if your carrier requires a maintenance fund (as many lease-purchase programs do), ;general maintenance; is not specific enough. Will the money be used for tires, batteries, overhauls, or broken belts? Especially watch for the phrase but not limited to. (3) That while the escrow fund is under the control of the authorized carrier, the authorized carrier shall provide an accounting to the lessor of any transactions involving such fund. The carrier shall perform this accounting in one of the following ways: (i) By clearly indicating in individual settlement sheets the amount and description of any deduction or addition made to the escrow fund; or (ii) By providing a separate accounting to the lessor of any transactions involving the escrow fund. This separate accounting shall be done on a monthly basis. (4) The right of the lessor to demand to have an accounting for transactions involving the escrow fund at any time.” (5) That while the escrow fund is under the control of the carrier, the carrier shall pay interest on the escrow fund on at least a quarterly basis. For purposes of calculating the balance of the escrow fund on which interest must be paid, the carrier may deduct a sum equal to the average advance made to the individual lessor during the period of time for which interest is paid. The interest rate shall be established on the date the interest period begins and shall be at least equal to the average yield or equivalent coupon issue yield on 91-day, 13-week, Treasury bills as established in the weekly auction by the Department of Treasury.” Less than half of our May\/June 1996 “Your Voice” respondents reported that their carriers paid interest on escrow accounts. In some cases this may be because the average advance is greater that the amount in the escrow account, in which case the carrier does not have to pay you interest on that money. If you run on your own money and not the carrier\u2019s you should be paid interest. “(6) The conditions the lessor must fulfill in order to have the escrow fund returned. At the time of the return of the escrow fund, the authorized carrier may deduct monies for those obligations incurred by the lessor which have been previously specified in the lease, and shall provide a final accounting to the lessor of all such final deductions made to the escrow fund. The lease shall further specify that in no event shall the escrow fund be returned later than 45 days from the date of termination.” It does not matter who terminates the lease (you or your carrier), or why the lease was terminated, the balance of your escrow money must be returned to you within 45 days. <\/p>\r\n <\/div>\r\n <\/div><\/h6>\n If you are operating under lease to a motor carrier, these regulations were written to protect you. It does not matter what kind of freight you haul or where you haul it. If you operate under your own authority these regulations do not apply to you or the shippers and brokers you deal with, but they do apply to anyone who may lease on with you.<\/p>\r\n <\/div>\r\n <\/div><\/h6>\n
\nLeasing FAQs:<\/h2>\r\n \n