TORONTO, Ont. - As the trucking industry copes with the paradox of growth and a shortage of drivers to haul the increasing amount of cargo being trucked across the continent, the careers sections of i...
JUST SIGN HERE: A contract helps both fleets and owner/operators protect their best interests. But in trucking, contracts aren't considered negotiable.
TORONTO, Ont. – As the trucking industry copes with the paradox of growth and a shortage of drivers to haul the increasing amount of cargo being trucked across the continent, the careers sections of industry publications are chock-a-block these days with ads from carriers seeking owner/operators. But when it comes to signing on the bottom line so that everybody wins in the relationship, O/Os and carriers are coming up short with each other.
“Carriers are going to have a hard time keeping owner/operators if they don’t take on a more business-like attitude in negotiating. There has to be a win-win situation for both,” affirms Linda Gauthier, managing director of the Canadian Trucking Human Resources Council (CTHRC) in Ottawa.
And, she says, O/Os need to understand that they’re independent business people, not employees. “I think some of the owner/operators don’t realize themselves that to be an owner/operator and a business person, they can’t expect certain things from the companies.”
Carriers place splashy ads highlighting their offerings, which can include “no paint code required,” “most weekends home,” or “tolls and lumpers paid.”
“There’s really not that much that’s negotiable. We tell them what we do, where we go, where we don’t go, what we pay, what the loads are. They can either do it, or they can’t,” says Don English, co-owner of West Coast Transportation in London, Ont.
West Coast is a small fleet with 15 trucks, but English believes most other carriers operate the same way he does with a take-it-or-leave-it contract for owner/operators.
When asked about situations where a prospective O/O may like some terms of the contract but not others, English says that’s simply not an issue. “It doesn’t become an issue because they’re settled before you start and if you don’t like it, you don’t start.”
Gauthier believes this is a “mindset” across the industry that carriers are going to have to break out of. “Some carriers are doing it and that’s evident, and I think other carriers are going to have to come on line in that sense. The environment is changing, and carriers and owner/operators are going to have to change with that environment.”
Mike Smith, an O/O and the communications director for the Owner-Operator’s Business Association of Canada (OBAC), says most carriers and O/Os today are still caught up in a “master/servant” contract mentality.
“Their (carriers) position is that they are ‘hiring’ owner/operators, who they consider to be merely employees who own their own tractors…The average owner/operator still thinks of himself as an employee despite the status that ownership of the tractor confers. They undervalue their services. The carriers know this and take advantage accordingly,” he says.
But Bob Halfyard, manager of driver relations and training at Challenger Motor Freight in Cambridge, Ont., believes having a good working relationship with your O/Os is more important than having a contract that’s negotiable.
“We’ve never adopted the philosophy that we’re here to make money off the backs of our owner/operators. We’ve always tried to work with them. We say ‘es we have to make money and you have to make money. If you’re successful, we’re successful.'”
Challenger has 300 O/Os, and some of them have been with the carrier for as long as 20 years, notes Halfyard.
A contract is a necessity so that both the fleet and the O/O know exactly what they’re responsible for. Contracts help both parties look out for their best interests – if you don’t sign a contract and the relationship goes sour, somebody’s going to lose without recourse.
“Any good and workable contract has to address the concerns of both parties. There have to be clearly defined responsibilities and liabilities spelled out, complete with penalties for service failures on both sides,”says Smith.
“It’s your job to ensure that your company’s best interests are protected in the negotiation process. It’s important that both companies be compatible and work together if this partnership is going to be successful. Therefore, if the company isn’t willing to negotiate, treat this is a ‘red flag’ warning of possible trouble up ahead and reconsider,” says Peter Turner, a former O/O now forging a new business as a lobbyist and consultant for O/Os, running The Truckers Voice Web site in Stittsville, Ont.
Before signing on with a carrier, O/Os should first ask themselves three questions, Turner says: What kind of work you want, what your costs and profit margin are, and how many miles you want to drive a week.
Other points of consideration, he says, include:
Getting a copy of the carrier’s contract in advance so you can read it and make amendments
Payment structure, whether it’s per-mile, or on a percentage basis
Who pays for what, and when
Sliding scale for the fuel surcharge
Insurance policies and deductibles
A reasonable time frame to resolve disputes
Halfyard says it’s important to have a standard contract with “not really negotiable points” to ensure everyone is treated the same. “We have a simple contract. We don’t try to hide anything. It’s all up front. I think you have to be honest and open.”
Although Challenger’s standard contract is generally non-negotiable, Halfyard points out that the company does on a case-by-case basis work with O/Os to work out problems in “extenuating circumstances.”
If an O/O has a compensation issue caused by a customs paperwork or delay problem or a “customer issue,” he says for example, then Challenger works with the O/O to try to make sure “we can get him a little extra.” This is part of having a good working relationship, Halfyard says.
He adds that for a long time, Challenger didn’t even have a contract, but developed one when the company started growing. The company recently rewrote its contract, he explains, to give its existing O/Os more options to meet their “own personal situation.” “It enabled them to maybe have a higher base rate and opt out of certain areas,” he says.
OBAC has developed some extensive contract guidelines designed to help both O/Os and fleets write and negotiate contracts that keep both trucks and relations rolling smoothly.
They cover everything from making sure the contract is written in plain language so that both parties understand their responsibilities, to spelling out equipment requirements, to forms of compensation and how fuel surcharges are paid. The guidelines are available on OBAC’s Web site (obac.ca).
OBAC also recently launched a Contract Advisory Service for O/Os that provides an unbiased review of any for-hire or private-carrier contract. OBAC charges a $75 fee to members and $100 to nonmembers for the service. O/Os can fax or mail a copy of their contract to OBAC, and the association will review it and provide a report within two business days.
The generally adversarial system that exists between O/Os and fleets when it comes to contracts, can in the end hurt instead of benefiting both sides.
“The carrier’s going to look out to cover his costs. That’s what the owner/operator is going to do, too. If the owner/operator goes out of business, the carrier’s going to be in trouble,” says Gauthier of the CTHRC.
Both parties could also find themselves in hot water with Canada Customs and Revenue Agency (CCRA). If an O/O has registered his company as a business, then he’s a supplier to the carrier.
As an independent contractor, he’s entitled to certain deductions, but must be able to prove to CCRA that he is an independent contractor and not an employee.
A carrier/operator contract that paints the O/O more as an employee who owns a truck than as a supplier of services means that, in an audit, the O/O could lose a lot of deductions and also end up owing the tax man money.
“The company also gets dinged in that sense, too. They should be doing certain things and they may get hit for it,” says Gauthier. “It’s a fine line between the person becoming an owner/operator and becoming an employee.”
But the key to fleets and O/Os benefiting from a contract agreement, says Gauthier, is first changing the way they think abo
ut each other.
“If owner/operators are better educated about how to be better business people, that may force carriers into dealing with them like business people.”