I wrote recently about the unethical practice of double brokering. Today, I will write about the unethical practice of cutting owner-operator rates. Back in February of this year, I was informed by followers on Instagram that certain Chicago-based companies are notorious for this practice. What exactly does cutting an owner-operator’s rate mean? Well, first, let’s talk about what an owner-operator is. Owner-operators are truck drivers who own their tractor and trailer or are on a lease-to-own plan. Most of these drivers don’t want to open their own operating authority – insurance is costly when starting out, and you’re dealing with many problems. Therefore, they drive for a company that provides them with better insurance rates and dispatch for a fee. Typically, this fee in the Chicagoland area is 10% of what they gross. However, some companies go up to 25%.
In exchange for this fee, drivers receive an assigned dispatcher who finds loads and deals with ongoing issues (such as an appointment rescheduling, detention charges, etc.). For example, if the fee is 10% and the load pays $1,000, the driver pays $100 to the company to run under its authority and have an assigned dispatcher – a fair deal for both parties involved. Now, we can tell you more about what cutting owner-operator rates mean.
Cutting owner-operator rates is the unethical practice of lying to the driver about how much the load actually pays. For example, a broker offers a dispatcher $1,300 on a load. The dispatcher informs the driver the load only pays $1,000. The trucking company pockets the $300, plus the fee the owner-operator already has to pay. Instead of paying $100, the driver, in reality, is paying $400 to run under the authority of the trucking company. The companies that use this unethical practice incentivize their dispatchers by paying them a percentage of the amount they cut – usually 30% to 50% of the amount they deducted from the driver. Therefore, dispatchers and trucking company owners profit more than they should from the work of an owner-operator.
Here are a couple of screenshots from dispatchers on Instagram messaging me about their experiences:
The dispatchers often ask the freight broker not to discuss any rates with their drivers. Therefore, I made a meme about it:
Unethical trucking companies lure drivers by offering low dispatch fees or a “great” offer on a lease-to-own truck. Truck drivers who do not yet own their equipment see advertisements online for these lease-to-own trucking plans offered by trucking companies. Lured in by a great offer to lease a truck and eventually own it, drivers sign a long-term agreement with the trucking company. After signing the agreement, the driver now pays for the monthly trucking and dispatch fees. Typically, the deal requires the driver to drive for the trucking company for a set period. Drivers believe they just received a great deal, but that may be far from the truth.
Below, you can find another screenshot from a DM I received on Instagram of what happens to some drivers after they sign a lease-to-own agreement. Another video on Instagram circulated at the beginning of this year of two owner-operators screaming at the trucking company owner in Serbian after finding out about the rate cutting. The practice is rampant – particularly in Chicago. Therefore, if you are an owner-operator for a Chicagoland-based company, do your due diligence about the company you are considering driving for. Many great companies in the Chicago area don’t do this. However, if a company offers you a great deal – one that is “too good to be true” – it typically is too good to be true.
To listen to me talk more about the topic, click here.
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