Whether you are a smaller owner/operator of a trucking outfit or a large motor carrier hiring owner/operators to haul freight for you, you need to be aware of a number of regulations that you have to follow when it comes to the final settlement of the owner/operator’s final payment. The Federal Highway Administration’s Truth-in-Leasing regulations, found at 49 C.F.R. § 376.12, mandate that leases between motor carriers and truck owner-operators contain certain provisions. The Truth-in-Leasing regulations further require that motor carriers adhere to and perform those mandatory provisions. Section 14704(a)(2) of the Truth-in Leasing regulations creates a right of action for owner/operators to recover damages for violation of the Truth-in-Leasing regulations.
If you are an owner/operator or motor carrier and you are about to enter into a contract, then it would be best to hire an attorney review the contract before you sign it to make sure it complies with the Truth-in-Leasing regulations. If you’re an owner/operator that has already entered into a contract and you feel like the motor carrier is failing to pay you at the proper rate or is making unexplained deductions from your final bill, you should hire an attorney to represent you against the motor carrier to make sure you are being paid what you are owed. Because the motor carrier is the party with all of the information and documents, they can sometimes take advantage of smaller trucking outfits by failing to provide the required documentation showing the proper rates and deductions for your loads. An attorney will be able to review the contract to make sure it follows the Truth-in-Leasing regulations or, if there is already a contract and you feel the motor carrier is not being transparent, an attorney can help you force the motor carrier to provide the proper documentation in order to determine whether or not the rates and deductions are correct. Hiring an attorney at the outset will help make sure the lease itself follows the rules and will likely save you litigation expenses down the road. If you think you’ve already lost money as a result of violations of the Truth-in-Leasing regulations, then you need to protect your rights and make sure the motor carrier you are working with has provided you with the information you need to make sure you’ve been properly paid.
Some of the most common violations of the Truth-in-Leasing regulations are found in § 376.12(f), (g), and (h). Each of those provisions are discussed below:
1. Section 376.12(f) – Failure of the Motor Carrier to pay the Owner/Operator within 15 days.
Section 376.12(f) requires that the lease specify that payment to the lessor shall be made within fifteen (15) days after the submission of the necessary delivery documents and other paperwork concerning a trip in the service of the authorized carrier. 49 C.F.R. § 376.12(f). The statute also requires that the carrier adhere to and perform each provision, meaning the carrier is required to make payments to the lessor within fifteen (15) days after the necessary paperwork is submitted.
Especially for smaller trucking outfits, waiting to get paid can cause serious problems with bookkeeping and even keeping the company afloat. If you’ve provided the bill of lading and freight information from the transportation of the load, you should be compensated within fifteen (15) days. Any contract that forces you to wait longer is in violation of Truth-in-Leasing regulations.
2. Section 376.12(g) – Failure of the Motor Carrier to provide copies of the Rated Freight Bill.
Section 376.12(g) requires that when “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 contained the same information that would appear on a rated freight bill.” 49 C.F.R. § 376.12(g). The statute continues, “Regardless of the method of compensation, the lease must permit lessor to examine copies of the carrier’s tariff or, in the case of contract carriers, other documents from which rates and charges are computed[.]”
This provision is crucial for an owner/operator because the owner/operator needs the rated freight bills in order to confirm that the rate it has been paid was correct. If you are working with a motor carrier that refuses to turn over complete rated freight bills or similar documents, then you are at a distinct disadvantage if you were to ever challenge the amount you were paid on a load. Do not delay on protecting your right to see the rated freight bills.
3. Section 376.12(h) – Failure of the Motor Carrier to provide documentation for deductions from the final settlement amount.
Section 376.12(h) provides: “The lease shall clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor’s 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.” 49 C.F.R. § 376.12(h). The “primary goal of this regulatory scheme is to prevent large carriers from taking advantage of individual owner-operators due to their weak bargaining position.” Owner-Operator Indep. Drivers Ass’n, Inc. v. Swift Transp. Co., Inc. (AZ), 632 F.3d 1111, 1115 (9th Cir. 2011). “One way to ensure carriers do not take advantage of lessors is to mandate that carriers disclose the full costs that lessors will be obligated to pay up front. This prevents carriers from hiding fees until the charges have already been incurred and allows lessors to make informed decisions about where to seek products and services.” Swift, 632 F.3d at 1115. Section 376.12(h) imposes two disclosure requirements on the use of charge-backs in a motor carrier’s leasing agreements. Landstar, 622 F.3d at 1320. First, the motor carrier shall “clearly specify” in the lease “all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor’s compensation at the time of payment or settlement, together with a recitation as to how the amount of each item is to be computed.” Id. Second, the motor carrier must also “afford [ ] copies of those documents [to the lessor] which are necessary to determine the validity of the charge.” Id.
Just like with rated freight bills, if you feel the motor carrier is not providing you with adequate information on the deductions they are taking from your payment, you need to protect your rights and force them to turn over those documents. As an owner/operator, you have a right to have those deductions and charges explained. Don’t let a motor carrier get away with overcharging you for deductions and charges.
4. Motor Carriers are liable to Owner/Operators for Attorney’s Fees if they are found to have violated the Truth-in-Leasing regulations.
Under 49 U.S.C. § 14704(e), prevailing plaintiffs in an action under 49 U.S.C. § 14704 are entitled to an award of attorney fees. This is also crucial for smaller owner/operators to know. No matter how small the mistake was, the motor carrier will be held liable for attorney’s fees if they failed to abide by the Truth-in-Leasing regulations. The drafters of the statute anticipated that smaller owner/operators might not have the resources to pay for an attorney collect on small amounts that might be improperly withheld or deducted from final settlement amount. This provision allows those attorney’s fees to be paid by the violating motor carrier.
In sum, there are a number of protections that owner/operators have under the Truth-in-Leasing regulations against a lazy, unorganized or greedy motor carrier. If you carried the load, you deserve to be fully compensated for that work. Protect your rights and get an expert on your side that knows the law. If you feel like you are working with a motor carrier that is violating the Truth-in-Leasing rules or if you are a motor carrier and you’re not sure if your contract complies with the Truth-in-Leasing regulations, contact me today for a free consultation.