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On-road: Editor Contract tips for owner/operators

Owner/operators are a highly prized commodity and many carriers have recently sweetened their pay packages. More flexibility and choices are also appearing. Challenger Motor Freight of Cambridge, Ont....




Owner/operators are a highly prized commodity and many carriers have recently sweetened their pay packages. More flexibility and choices are also appearing. Challenger Motor Freight of Cambridge, Ont. now offers two contracts to owner/operators. One is more suitable to single truck owners and includes full benefits, while the other caters to multiple truck owners who choose to opt out of portions of the benefit plan.

In general, owner/operators are paid either on a mileage or load percentage basis. And the contract they sign with a carrier usually follows a standard industry template with a few variations. Including the surcharge at today’s pump price, most of them are running down the road for anywhere from $1.21 to $1.29 per mile. But there appears to be a growing awareness that owner/operators wield some power in the process, too. Rather than simply signing on the dotted line, they can ask for adjustments and insertions to the contract that will insure their business relationship with the carrier is equitable and fair.

“Contracts haven’t been written with the view that the owner/operator is an equal partner,” says Joanne Ritchie, executive director of the Owner-Operators’ Business Association of Canada (OBAC). “We encourage the owner/operator to use the contract as a business tool – it should speak to the business needs of both parties.”

Ritchie has reviewed dozens of OBAC members’ contracts and she’s as concerned about what some of them don’t say as what they do.

“Some contracts are silent on a lot of things. They don’t have an end date on them, no clause that speaks to a time or an interview to review,” she says. “And many of them don’t have a fuel surcharge.”

Fuel rebates and surcharges are a huge issue for owner/operators.

“At the very minimum the contract should be very clear on how it’s going to collect the fuel charge and pass it down,” says Ritchie.

The way your fuel tax is collected should also be addressed in the contract, according to Chris Bennett, general manager of Transport Financial Services in Waterloo, Ont. Owner/ops want to make sure their credit is not blended or averaged with the other contractors in the fleet.

“Carriers need to provide more disclosure on the way fuel tax is collected,” he says. “An owner/operator who is operating efficiently and buying fuel at the best price should see a full tax credit.”

Holdbacks are another niggling issue for contractors. Typically a carrier will hold back from $2,000-$4,000 per broker as security, sometimes as much as $7,500.

These funds are being held in trust and Bennett thinks they should at least be paying some interest. Better still, he suggests that the contractor go to the bank and post a performance bond either through a line of credit or a letter from the bank manager.

“A performance bond is a way of avoiding getting dinged for unwarranted deductions when a carrier and owner/operator part company,” says Bennett. Rather than the carrier taking money directly from the hold back, the carrier would have to supply proper accounting and that would be applied directly against the performance bond or line of credit.

Most jobs will occasionally require the operator to go out of hours and hopefully the carrier will pay for any violations that could result. However Bennett thinks this should stipulated clearly in the agreement.

“But you rarely see this in a standard contract,” he says. “It should be though. Hours of service are a reality of moving freight.”

Further, he strongly advises drivers not to falsify their logbooks (a much more serious violation than running over hours). “The tendency is to falsify the log book to get the job done. Don’t! Record your hours accurately and deal with the fine.”

Leo Van Tuyl of the Truckers Business Consultant Group of Kitchener, Ont. has a few more items for that should be addressed in every contract.

Both parties’ responsibilities should be clearly spelled out. “You don’t want to find out your liable for $800 per month for something you didn’t know about,” he says.

Secondly, the contract should be clear on the insurance details. “Ask, who is insuring the truck? What’s the name of the insurer, the policy number and what is the deductible?”

A carrier may tell you that you have a deductible of $5,000, when in fact the deductible is $100,000. “They could walk away from your truck if you crash it,” says Van Tuyl. “Or they may not have the money to pay the claim.”

Lastly, says Van Tuyl, both parties should be allowed time to have the contract assessed by a lawyer.


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