Whenever 2 parties enter into a leasing contract, potential problems may arise. Unfortunately, the trucking industry is no exception. When owner-operators lease their trucks to motor carriers they are often bombarded with a variety of liability concerns, compensation claims, and maintenance problems. If you are an owner-operator that is leasing your truck, there are several regulations the federal government has enacted to protect your rights-mainly the truth in leasing law (49 CFR section 376).
The truth in leasing law provides regulation and establishes rules that govern the relationship between you (the owner-operator) and the motor carrier. It is often difficult to tell if your motor carrier is treating you fairly and honestly, so before you enter into any agreement with them, it is wise to contact an attorney. Your attorney will be responsible for making sure that the leasing contract is legal and does not violate any terms of 49 CFR section 376. Specifically, the lease should meet these requirements:
1. The lease must specify the amount of escrow fund to be established with the owner-operators money and what specific items and repairs it may be used for.
2. Motor carriers must give a clear description of each escrow transaction monthly.
3. An owner-operator may demand an accounting of escrow transactions at any time during the lease
4. The motor carrier must pay interest on all escrow funds in the amount at least equal to the yield on a 91 day-13 week U.S. Treasury bill.
5. After the termination of the lease, the carrier has 45 days to return all escrow funds. There are no exceptions to this rule.
If you are an owner-operator, remember that the escrow funds are yours and not the motor carriers. The motor carrier is simply acting as a trustee for your funds and therefore, should act appropriately.
Occasionally, a motor carrier will attempt to place clauses in the lease that directly violate federal laws. Be leery of any contract that specifies that the escrow funds may be used for “other obligations”. Clauses that designate that the motor carrier has the right to deduct any amount of money owed to them from the escrow fund is also in direct violation of federal regulation 49 CFR section 376,11-12. Escrow funds may only be used for the specific items and repairs named in the lease at the time of signing. A qualified attorney can help you spot these violations immediately and help prevent any unnecessary complications.
The lease should also specify that the motor carrier assume full direction, control and liability for the vehicle. At the turn of the twentieth century, motor carriers attempted to improve their profits by hiring less than qualified drivers and naming them “independent contractors”. These drivers were often uninsured and irresponsible, putting the general public at risk. To prevent this, the government stepped in. These regulations state that the motor carrier is responsible for all injuries incurred by their drivers, as long as they occurred while the driver was acting in the scope of his employment.
Whenever you lease your truck to a motor carrier, you will need to determine exactly what compensation you will be receiving. The lease should state clearly the compensation received and exactly what merchandise is being leased. In many cases, the amount to be paid can either be a percentage of revenue, flat rate per mile or variable rate. If both parties agree upon a different form of compensation, it should be spelled out clearly on the lease or as an attached addendum. In general, the payment is to be made within 15 days after the delivery of the necessary delivery documentation. Both parties should obtain a receipt for all transfers and the lease should clearly specify which party is responsible for fuel, taxes, mileage, permits etc.
Whenever you lease your truck to a motor carrier, you should have a qualified attorney review the documents. Many owner-operators find themselves in bitter disputes with motor carriers over money, liability, and leasing arrangements. Luckily, the federal law has stepped in to protect owner-operators from being taken advantage of and from assuming unnecessary risks. If you believe that your rights have been violated or that a lease you are entering into is a direct violation of federal codes and regulations, contact a qualified attorney immediately. Your attorney will make sure that your lease is clear and precise and compliant with all federal regulations. By knowing your rights, you have a better chance of protecting yourself and your assets