By: Nancy E. Joerg, Esq.
Many trucking companies decide to have escrow funds as part of their independent contractor relationships with their owner-operators. Let us look at 10 common questions that trucking companies typically ask when setting up escrow programs for their independent contractor owner-operators:
1. Question: Is it legal for a trucking company to have an escrow program under which the trucking company takes a certain amount of money out of each independent contractor owner-operator's paycheck?
2. Question: Why do trucking companies like to have escrow funds?
Answer: If, for example, an independent contractor owner-operator causes damage and the trucking company has to pay for that damage caused by the independent contractor owner-operator, the trucking company can reimburse itself from the owner-operator's escrow fund for the cost incurred.
3. Question: Are escrow funds controlled by Federal law?
Answer: Yes, the Federal written lease requirements pertaining to escrow funds are found in Title 49 of the Code of Federal Regulations (CFR), Part 376.12. Carriers who use independent contractor owner-operators should be sure to familiarize themselves with the very strict Federal written lease requirements which dictate many of the detailed terms in an independent contractor agreement.
4. Question: Are carriers required legally to have escrow funds?
Answer: No, having an escrow fund is purely voluntary on the part of the Carrier.
5. Question: Does a Carrier have to actually list in the independent contractor agreement all of those items which can be deducted from escrow by the Carrier?
Answer: Yes, this is strictly required by the Federal written lease requirements.
6. Question: Do the Federal written lease requirements control the interest rate pertaining to the escrow fund?
Answer: Yes, the Federal written lease requirements state that while the escrow fund is under the control of the Carrier, the Carrier shall (MUST!) pay interest on the escrow fund on at least a quarterly basis (and in a particular manner).
7. Question: What happens to Carriers who violate the Federal written lease requirements as to escrow?
Answer: Such Carriers face possible legal action against them. There are currently class action lawsuits against Carriers across the United States who have escrow funds but who have not been properly following the Federal written lease requirements as to the actual operation of these funds.
8. Question: Does the independent contractor agreement have to specify the exact amount of the escrow fund to be established with the owner-operator's money and what specific items and repairs it may be used for?
Answer: Yes, in detail.
9. Question: Can an independent contractor owner-operator demand of the Carrier an accounting of escrow transactions at any time during the independent contractor relationship?
Answer: Yes, per Federal law.
10. Question: How quickly does the Carrier have to return all the escrow funds to the independent contractor owner-operator after the termination of the lease between the parties?
Answer: After the termination of the lease, the Carrier has up to 45 days to return all escrow funds to the independent contractor owner-operator.
It is a very popular idea among trucking companies across the United States to establish and maintain an escrow fund to use with independent contractor owner-operators, but, as the reader can see, the area is fraught with legal peril. If a Carrier decides to have an escrow program, the Carrier should be sure that it carefully follows the very strict and detailed Federal written lease requirements as to escrow funds. There are unfortunately many ways for a trucking company to accidentally violate the many requirements of maintaining a proper escrow fund.
If any readers would like a free copy of the Federal written lease requirements including the section on escrow funds, please contact Wessels Sherman Legal Assistant Tammy Nelson at 630-377-1554 or via email at email@example.com.
Questions about this article or about your relationship with your independent contractor owner-operators? Call Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at firstname.lastname@example.org.