Truck Topics
Understanding Your Lease Agreement
There are those times in life when it becomes necessary to venture into the unknown and, with the stroke of a pen, commit yourself to that legal document known as a "contract".
You sign on the dotted line to purchase a home, a car, you name it. It means that you're entering into a "a binding agreement between two or more persons or parties."
For the expedited trucking owner-operator that contract comes in the form of a lease agreement with an expedited freight carrier.
And, while the lease agreement you will sign with a carrier isn't quite as involved or complex as the contract to buy a house, it can be a confusing and worrisome proposition, that can leave you wondering just what you might have gotten into and what it all means.
Examining the lease agreement carefully before signing can help reduce those nasty surprises that pop up on the first settlement check.
Many trucking owner-operators have discovered to their dismay what they consider to be "hidden charges" or company policies hidden in the legal language of a lease agreement. With a little bit of research, they would have been aware of these and possibly, that would have affected their decision to sign on with that company.
Most professional drivers have a working knowledge of a variety of topics, but there are probably very few that have more than a passing acquaintance with legal terminology or contract law as it relates to the lease agreement.
The owner-operator who is considering leasing on with a company would be well served in obtaining a copy of the lease agreement and spending a modest sum for the services of an attorney specializing in contract law (and preferably, knowledge of the trucking industry) to analyze the document. This first step could save you grief (and money) later on.
Fortunately, the owner-operator does enjoy protection under laws covered in the Code of Federal Regulations. Presented in layman's terms, the Written Lease Requirements touch on areas of which many O/O's may be unaware, such as:
*A carrier is prohibited from requiring an owner-operator to purchase anything from the carrier.
*A carrier must pay for loads within 15 days after the receipt of load documents.
*A carrier must state in the lease what it will deduct from the owner-operator's pay.
*A carrier must return any escrow money to the owner-operator within 45 days of a lease termination.
*The lease must clearly state how pay is calculated.
* A carrier must give the owner-operator a copy of the freight bill (make it available for viewing) at the time of settlement if the driver is paid on a percentage basis.
"Any type of legal contract, including a lease agreement, must be examined in great detail," says Lawrence Feinberg, an attorney (now retired) whose practice involved transportation legal issues.
"I represented many people who didn't even really look over what they were signing; in some cases they did ask about certain sections of the document but were told the usual 'it's just a standard contract' and didn't question it further."
"Unfortunately, a few of those people became trapped within the terms of those agreements, and it cost them substantially more to re-negotiate than if they had consulted with an attorney first."
Feinberg says that some key points to check in a lease would be:
*Overall Scope and Coverage of the Lease
*Termination Policies
*Settlements and Compensation
*Extra pay for hazardous materials shipments
*Extra stop(s) pay
*Detention pay
*Inside deliveries
*Non-Compete Clauses
*Fuel Tax Responsibility
*Insurance
*Deductions
*Escrow Policies
The lease agreement may also contain:
*Policies about having pets in the truck.
*Procedures for loading and unloading.
*Penalties for late arrivals at the pickup point and for late deliveries
*Procedures to follow in the event of an accident.
Feinberg says, "It's important to remember that the document you're signing is written for the carrier's benefit and protection. Once again, it's up to the individual to know what he's signing because in the event of a dispute, a court will usually back the terms of the lease, unless some of the terms are in violation of the law."
Feinberg lists these other key points:
Be wary of vaguely worded provisions, exclusions or limitations that could later pose a problem.
- Request that confusing or ambiguous statements be either deleted or clarified to your satisfaction.
- Don't be pressured into signing a contract before you're ready. Be sure you understand all the terms and conditions.
- Keep a copy of the signed agreement. Your copy of the document is the only proof you have of the conditions of the agreement.
- Make sure that all oral promises are included in the contract. Keep in mind that oral promises are not always legally binding.
- All parts of the agreement should be completed before you sign. Never sign a blank contract.
If possible, have your contract reviewed by a legal counsel before signing.
Adam Hodgeman is a member assistance representative in the Compliance department of the Owner Operator Independent Drivers Association (O.O.I.D.A.) One of his duties is to assist members of the association by interpreting contractual agreements, i.e. lease agreements between an owner-operator and a carrier.
He says, "This is a service that we offer to O.O.I.D.A. members. We read thoroughly every lease that members send in to ensure its compliance with the Code of Federal Regulations as it pertains to leasing."
"Depending on the complexity of the lease, we can examine it and have it on its way back to the member within two to three days," he adds.
A little bit of time spent on the lease now, can save a whole load of problems later.
Although the terminology and legalese of a contract or agreement can be daunting, there is assistance available to the owner-operator and it can be time and money well spent.