As clichd as the phrase may be, a verbal agreement isn't worth the paper on which it's written. When it comes to business relationships between fleets and owner-operators, written contracts should be...
As clichd as the phrase may be, a verbal agreement isn’t worth the paper on which it’s written. When it comes to business relationships between fleets and owner-operators, written contracts should be as detailed as possible to avoid misunderstandings that can lead to disagreements and costly legal challenges.
One of the first steps is to ensure that such contracts reference a term, notes the Ontario Trucking Association’s Professional Driver and Operator Forum. This can either be a fixed term that has a start and end date, or an indefinite term that merely references a start date. But each option needs to outline situations under which the agreement can be terminated, and the procedures that must be followed if that happens.
Obviously, a contract will need to outline details about how payments will be remitted, but it should also detail situations under which such payments might change, or documents that are required for revenue-sharing arrangements. A fuel surcharge may kick in if fuel prices suddenly rise, but at what point will they be paid? Who is responsible for “deadhead” miles without loads, or fees such as permits, tolls, and base plates?
So too should the document include requirements relating to an owner-operator’s equipment.
Laidlaw Carriers’ Van Division, for example, has a paint policy that applies once an owner-operator buys a truck other than the one they had when first joining the fleet, says Don Hussey, the carrier’s manager of driver services. Owner-operators who want to take advantage of deals involving trucks of a different color are offered a paint allowance of $800 toward the cost of changing the equipment to Laidlaw silver. “If they leave, all they have to do is remove our names and ICC numbers,” he adds.
Equally, contracts should note whether fees for such things as damaged equipment, tickets and freight claims can be withheld from payments, the notice that would be required, and the time in which disputes must be settled. There should be a clear explanation of the party responsible for insuring the equipment and its cargo, the amount of coverage required for property liability and property damage, and a note of who is responsible for deductibles.
Norm Shultz, the director of driver recruiting with TransX, an Ontario-based fleet, says it’s also important to outline interpretations of liability for the period after an owner/operator has left the carrier. Contracts tend to note that payment has to be settled in 90 days, but there can be liability relating to damage that doesn’t come to light in that time. “Aside from our $2,000 holdback, there’s nothing to go back on,” he says.
The reference to holdbacks should also note how the money will be managed, perhaps by holding the funds in trust, when any interest would be payable, and the situations that would require funds to be withheld.
Meanwhile, many shippers require some sort of insurance coverage for individuals serving their facilities, but owner-operators can opt out of traditional workers compensation packages. You will need to outline the coverage that your fleet requires.
Any contract with an independent owner/operator should clearly define the difference between contractors and employees, adds Shultz. “Anything that refers to them being employees, you have a whole different set of rules. Make sure that it is ‘contractor’ this and ‘contractor’ that.”
This will be enforced by ensuring that a contract doesn’t require an owner-operator to buy or rent specific equipment, insurance or other services. The document should also note that owner-operators are responsible for deductions including income tax, CPP, and medical and life insurance. And the owner-operator’s name needs to appear on any truck leases, or should be listed as the beneficial owner of the equipment.
Like any contract, an agreement with your owner/operators should be subjected to legal advice, Schultz adds, referring to the annual document reviews at TransX. “Our lawyers go over our contracts two or three times before we sign off.”
“There’s some companies that try to do it themselves,” Hussey adds. “But recruiters or driver-managers are not lawyers. Make sure you got your bases covered.”
The Canadian Trucking Human Resources Council (CTHRC) is an incorporated non-profit organization with a volunteer Board of Directors that is representative of stakeholders from the Canadian trucking industry. With the conviction that the best human resources skills and practices are essential to the attainment of excellence by the Canadian trucking industry, the mission of the Council is “to assist the Canadian trucking industry to recruit, train and retain the human resources needed to meet current and long-term requirements”
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