Owner-Operators: Endangered Species?

The recession was tough on owner-operators. Add to that increasing regulations and more expensive equipment, and it’s no wonder some in the industry are saying the owner-operator is dead.

However, I spent the first eight years of my career writing for a magazine for owner-operators, and I believe owner-operators are more resilient than that. Yes, some turned in their keys due to financial hardship. Others are hanging up their hats because they don’t like the government telling them what to do.

Yet we still live in a country where the American entrepreneurial dream of being your own boss is alive and well.

One way fleets can help drivers become owner-operators is through a lease-purchase program. The Owner-Operator Independent Drivers Association says EPA emissions regulations over the past decade have added at least $30,000 to the price of a new truck, along with causing some higher repair costs and reduced reliability.

Twenty years ago, Spencer says, OOIDA surveys showed almost half of owner-operators were buying their trucks new. Its most recent survey shows only about 20% are purchasing new equipment when it comes time to replace their trucks.

So it’s not surprising OOIDA says it’s seeing an increase in the number of lease-purchase programs offered by carriers. It views this increase as alarming, but it doesn’t have to be, if the lease-purchase programs are done right.

As Equipment Editor Jim Park, a former owner-operator, reports in this month’s issue, there are programs out there that seem designed to wring as much money out of the contractor as possible before repossessing the truck and leasing it to someone else. This kind of approach has given lease-purchase plans a bad name.

There’s also a tightrope to walk regarding the classification of drivers as independent contractors vs. employees, which Jim also covers. As he reports, a third-party company to handle the leasing and financing is recommended to keep that arm’s-length relationship the government is looking for.

Here are a few additional tips I’d like to add:

• Be open and honest about your plan’s details. If a potential contractor wants to let a lawyer review the contract, let him do so. Pressuring the driver to sign on the dotted line without taking time to do his or her homework makes it look like you’ve got something to hide.
• Just because someone has a CDL does not mean he or she is a good candidate to be an owner-operator. Some programs put drivers into their own truck when they’ve had their CDL for only a few months. I have to believe that is not an ideal situation. There’s enough to learn about driving and regulations before you pile on top of that all you need to learn about owning your own business.
• The most successful owner-operator companies help their owner-operators by sharing volume discounts and education. Landstar, for instance, named the Best Fleet to Drive For for Owner-Operators by the Truckload Carriers Association this year, has a mandatory business and safety course at orientation and every three years. However, as Jim Park explains, you need to be careful about how much of a helping hand you offer, lest the IRS or a state agency swoop in and declare your owner-operators to be employees.

The misclassification issue is arising in more and more state legislatures. At press time, the New York Motor Truck Association reported it had been successful in negotiating a compromise bill that it believes will protect independent contractor status in the state. The previous bill, the association contended, would have all but ended the use of owner-operators in New York.

If you use owner-operators or believe you may someday want to, make sure you get involved in your state association to help defeat similar efforts and protect a valued trucking industry practice. If you don’t, the owner-operator may be in more danger of extinction from such legislation than it is from the economy, equipment prices and federal safety regulations put together.