Trucking: Settlements, formal contract, factoring company

Question
Are there laws or regulations governing how or when an owner-operator who is leased to a company gets paid?  We've been told that we don't get paid till the load pays. That could be months.  Is that leagal?  Where can I find the answer?  Also, Do the laws very from state to state?

Answer
Hi Julie....  Thank you for the question.

As far as I know, there are no specific federal laws governing the time limit for the motor carrier to be paid their settlement.  There may be some state statutes that address certain issues if it is a leased owner-operator.  Those would deal with employer-employee pay issues, however I'm not familiar with any specific ones.

Routinely the time of payment is based on the individual contract terms between the shipper and the motor carrier.  This is often dependent on particular situation such as how often you haul for a specific shipper.  As an example, you may have a contract transporting an defined or unspecified number of loads per month.  In that scenario, frequently the agreement will be for payment of all previous month's earnings to be paid at 30 days net after the end of the month.  However, the point is that it is dependent on your agreement and contract with each shipper.  I strongly recommend that you have a formal contract for each load and that contract should include the payment terms, whether it is COD or payment within a specified period of time.

When dealing through brokers, one of the suggestions is to check the record and rating of each.  Many, if not most load boards include ratings for each broker.  Those ratings can give you an indication of the payment record of a broker.  If they have a weak or suspect payment pattern or history, you may want to steer clear of those loads.  At a minimum, have the payment terms specified in your contract terms.

An alternative method for payment is to use a factoring company.  Many companies provide this service for a fee.  Essentially, The concept behind factor trucking is very simple. You deliver the load and submit copies of the documents to the factoring company.  The actual numbers may vary with each company, but as an example, the factor company advances you 90% of the freight bill in 24-48 hours (the remaining 10% is used to cover billing disputes). You get money almost immediately.  Once the factor company is paid by the client, the remaining 10% (less a small fee) is rebated to you. So you get immediate funding while the factoring company waits to get paid. You get quick payment for your slow paying freight bills.  Factor trucking is very common in the trucking industry.

As you can see, there is a fee charged for the service and it does reduce your profit margin on a particular load.  However, it is sometimes beneficial in other ways.  In the situation, it allows you to take shipments for clients that pay in 30 to 90 days that you might otherwise not want to do.  It certainly isn't a cure all and may not be an option for everyone, but I throw it in just for your consideration.

I'm sure this isn't exactly what you would have preferred to hear andI wish I could give you more definitive answers and cite specific laws that would afford you some leverage for faster payment.  Since I'm not a transportation attorney and I know of no specific laws that apply to the situation you describe, this is about the best I can do.  Hopefully it will help some.  Unfortunately, slow payment is an all too common complaint by independent truckers.  A well prepared contract detailing YOUR payment terms is one of the better ways to reduce the frequency of late paying.

Thanks again and I wish you the best.  If I can help with any other questions please feel free to ask.

...Don