Waynes World - April 2006

PREDATORY TRIAL LAWYER PROFITS BY UNDERMINING
THE RULE OF LAW, AND...

TWO OPTIONS FOR USING
OWNER OPERATORS
By Wayne Schooling

THE PROPER USE OF OWNER OPERATORS
People are always asking me about the proper use of owner operators. A man from Florida recently told me that his company was considering using owner operators in their business, but weren’t sure how to do it correctly. Owner operators are a valuable resource used by many motor carriers, either in addition to or instead of, company drivers. Many motor carriers are often left wondering who is responsible for owner operators’ DOT safety compliance. The answer is not so simple – it depends. You will need to define your particular situation.

If your owner operators have and use their own MC number (federal authority) and USDOT number, then they are acting as a for-hire carrier. A carrier that utilizes an owner operator in this capacity becomes the shipper. In this first scenario, the owner operator is responsible for giving the shipper a bill of lading to haul goods on their behalf. Note: many shippers supply the bill of lading, even though it is technically the motor carrier’s responsibility in the regulations.

The shipper only needs six items to use the owner operator: 1) a copy of his/her authority; 2) a copy of his/her Certificate of Insurance; 3) a Certificate of Qualification (391.65); 4) a drug program verification; 5) a copy of his/her Federal ID number; and 6) a properly completed W-9. A carrier that uses owner operators in this capacity has no other recordkeeping responsibilities under the Federal Motor Carrier Safety Regulations (FMCSR) in this kind of agreement. Responsibility falls squarely on the shoulders of the owner operator, who is defined as the motor carrier. Needless to say, if you are going to use owner operators, in my opinion, this is the best situation.

The owner operators would have to maintain their Driver Qualification Files and retain their own logbooks, driver daily vehicle inspection reports, vehicle maintenance records and the annual inspection report while in your service. Further, if the owner operator is operating a commercial motor vehicle as defined in 382.107, he/she is subject to the DOT drug and alcohol testing requirements. As a single driver, he/she would have to be placed in a consortium. You should request a “Program Verification” from the owner operator’s consortium every six months.

The advantage to having an arrangement like this with an owner operator is that he/she is able to operate a vehicle sooner than other options – without the complications of qualifying a driver beforehand or the storage of records afterwards. On the other hand, such an agreement keeps safety compliance out of your hands. Will your goods make it safely to their destination? Even though it’s the carrier’s insurance claim, it could be your company’s reputation.

The second scenario puts the owner operator as a lessor. In this situation, you have an agreement to contract/lease owner operators onto your motor carrier (they will work under your operating authority). They will provide transportation services using their own equipment, remaining independent contractors, meaning they are not considered employees of the company for benefit and pay purposes. However, they are included in the definition of “employee” when it comes to compliance with the federal regulations. This definition of “employee” is located in 390.5 of the FMCSR. Owner operators who own their own equipment and are leased onto a motor carrier through the use of a lease agreement are governed by the FMCSRs in Part 376. Owner operators who are in the process of buying their equipment from the carrier enter into a contract called a “lease-purchase” agreement.

Essentially, these owner-operators (working under your authority) will be included in your safety compliance efforts for drivers of a commercial motor vehicle as defined in 390.5 and 382.107. This means: 1) the driver must have a Driver Qualification File created under the carrier; 2) you must retain hours of service records on this driver; 3) you must retain inspection and maintenance records on the vehicle; and 4) the driver must be placed in your DOT substance abuse testing program, if applicable, for so long as there is an expectation of utilizing him/her. If the owner operator is working under multiple operating authorities, you could look into the multiple employer exception in 391.63 – which is an abbreviated recordkeeping for Driver Qualification Files. No such recordkeeping break exists for DOT drug and alcohol information under 40.25. The motor carrier must ensure that all regulations are adhered to by all drivers, not just company drivers. Most carriers are ultimately responsible for the actions of the owner operators that are leased onto them.

FROM THE TID-BIT TRIVIA FILE
A Canadian judge awarded a Windsor, Ontario hair stylist $340,000 for emotional damage he allegedly suffered when he spotted a dead fly in a container of bottled water he was putting on his shop’s water cooler. The stylist claimed “nervous shock, emotional distress and resulting anxiety, depression and physical and psychological conditions.” He lost his sense of humor, could no longer drink water, and could only shower wearing a bathing suit. A psychiatrist hired by the bottled water company examined the man for ten minutes and deemed his claims totally bogus, an assertion the judge obviously rejected. Give me a break!!!

~ The NTA would like to welcome the City of Pasadena to its Nationally Accredited Drug Testing Program. If Pasadena can trust the NTA, so can you! For more information about the association, call (800) 805-0040 or visit www.ntassoc.com today. Until next month, “Drive Safe – Drive Smart!”