How to legally cheat your drivers (modified "for the children")

[BigRed32771]

How to cheat your independent contractor owner/operators in two easy steps:

Step 1:
Create a freight brokerage company separate from your freight transportation operations.

Step 2:
Take all orders for shipments through your brokerage company, charging as much as you can get; ship all freight through your transportation company, paying as low a price as you can get away with.

Example:
FedUps creates a new company called FedUps Freight Services as a brokerage operation to handle call-in requests for transportation services. Those transportation services are actually provided by independent contractor O/O's. Let's say that these O/O's have a contract which calls for them to receive 60% of the price charged to the customer.

Customers calling to place orders don't care or possibly don't even know which division or operating company they are talking to when they call in an order as long as that friendly voice answers the phone with a cheerful, "FedUps!" The brokerage order taker accepts the order for service, trying to find that price point just shy of, "That's too much!" Just for grins let's say that the price is $1000.

Upon accepting the order, the brokerage agent contacts the transportation operating company (TOC) and requests a truck. Looking at the available units in the area, the TOC offers the load out at a price based on the lowest rate being accepted by any of the available trucks. Keep offering the load at as low a price as possible until a truck accepts it. Again, let's say that the accepted price to the truck was $450. Immediately the TOC knows that if the truck is going to receive $450, then the "price charged to the customer" must be $750 according to the 60/40 contract agreement.

The O/O has just been cheated out of $150. And the really cool thing is that it's legal. Because the TOC is not dealing with the shipper, the "price charged to the customer" becomes whatever they can get away with and they bill the brokerage company for that price. They can plead poverty with the O/O's because their freight rates "aren't keeping up, either," while the new brokerage operation pockets a big chunk of change for the parent company bottom line.

To make it clear, let's follow the money. If the shipper is paying $1000, and is the "customer" of the TOC, then the 60/40 contract would have the O/O receive $600 while the TOC gets $400. By inserting an intermediate customer (or "middleman") into the equation, though, the brokerage operation got $250, the TOC got $300, for a total of $550 or 55% of the charge to the shipper into the company till (just split into two different accounts) and the driver got $450 or 45% of the charge to the shipper. And like I said, it's all legal, since the TOC paid the O/O exactly what the contract says.

 

[greg334]

So you been cheated?

 

[jbolton]

Vote for John McCain & Sarah Palin!!! They will take care of this

 

[davekc]

While you may think you have been wronged by the Fed, this is a industry practice. There are roughly 200 third party logistic providers. Some are carrier owned and some are not.
If you feel you are wronged by the Fed, obtain your own freight and deal with the shippers or brokers directly.
They aren't ripping you off. You are choosing to operate within those confines.
On a side note, I do think there should be some transparency with regards to the rates charged for a run. Some carriers provide it on request (which is the law) but some really try to keep it a secret.

 

[arkjarhead]

I understand why a carrier would want a brokerage side of their business. Look at it like this. If a carrier gets a call with a load they can't handle they can broker it out. The customer still sees it as YeeHaw Trucking took care of them on the deal even though YeeHaw brokered it out to HeeHaw. Therefore, you have a better chance of getting a call back with more freight to move than if you would have said "Sorry can't help ya" and hung up the phone. I've worked for a couple smaller carriers that had both motor carrier and broker authorities.

 

[BigRed32771]

While you may think you have been wronged by the Fed, this is a industry practice. There are roughly 200 third party logistic providers. Some are carrier owned and some are not.
If you feel you are wronged by the Fed, obtain your own freight and deal with the shippers or brokers directly.
They aren't ripping you off. You are choosing to operate within those confines.
On a side note, I do think there should be some transparency with regards to the rates charged for a run. Some carriers provide it on request (which is the law) but some really try to keep it a secret.

We've been expediting for nearly 4 years, and I resisted the idea that the companies would "cheat" drivers, since I thought their lawyers would shoot down anything which blatently violated the terms of the contract we have with them. I finally accepted it as a possibility when another driver explained this general idea of the brokerage operation to me. Is it common practice? If you say so. Is it legal? Clearly so. Is it morally right? I think not, but it is what is.

I don't so much feel wronged as much as justified in turning down loads which don't pay as much as I feel I need or deserve to operate. My contract is with my TOC, not with their brokerage, and if I can get my percentage of what the shipper is paying, leaving nothing for the brokerage I don't feel the least bit sorry for them. They created the playing field and the rules. I just try to maximize my return and benefit from the game.

That said, however, I will take issue with drivers routinely accepting low rates because that does harm me by setting a low price the TOC can get away with. There are easier ways to go broke than expediting, and if I can't make a profit while running effeciently and "smart" then I'll pack it in before I run at a loss and try to "make it up on volume."

And just for the record, I wrote the above not as a complaint but as an exercise in enlightenment, seeking to share with others what had been explained to me in a way that could be seen as entertaining and informative at the same time. Believe me, if I have a beef with my carrier, I take it to them, not this forum. Nothing personal, but nobody here has the ability to "fix" anything that's broken with the system.

 

[davekc]

A exercise in enlightenment is fine for the benefit of the new. My interpretation was you felt wronged by the Fed when your "adult" version was very descriptive of how you viewed their practices.

 

[nightcreacher]

u have to much time on your hands

 

[nightcreacher]

I dont vare if you drive for Joe Blow or a big organized company.When you offerd a load,it either pays you enough to do the work or it doesnt.If at the end of the month and your able to stay in the black,the why worry if your being cheted.In the early 80's when I was running produce and air freight,when yhe brokers would pay yiou as soon as you brought in the bills you knew thwy were not paying off the top,but as long as the bottom ine wass right it didnt matter.Same with today,if what I get paid,pays my bills and tsakes care of business,tthen im happy
pardon any missed spelled words,just had cateract remove and im typin by brail lol

 

[cheri1122]

u have to much time on your hands

If that's true, I for one think he's spending it productively.
Steve, have you ever heard the quote by Simon Weisenthal: "For evil to flourish, it is only necessary that good men do nothing"?
IMO, greed and deception are evil. I don't understand the "So what?" attitude displayed by some, because if the greedy can get away with a little, they're going to escalate their 'share' until forced to pay attention to the protests . When you don't care, it just encourages the greedheads to continue taking advantage.

 

[greg334]

But Cheri, I don't see the greed. He has a contract with the carrier, not the parent company or a broker within or anyone else, just the carrier. Each has to handle some part of the load and each has to justify it's existence within the company, not give away things for free.

AND if he is talking about FedEx (which is only an assumption) and he is pointing to the great FedEx freight all inclusive service they offer, this is something that many here and FedEx say does not happen but does and it is so messed up that CC people don't even know when they get a freight load.

 

[iceroadtrucker]

But Cheri, I don't see the greed. He has a contract with the carrier, not the parent company or a broker within or anyone else, just the carrier. Each has to handle some part of the load and each has to justify it's existence within the company, not give away things for free.

AND if he is talking about FedEx (which is only an assumption) and he is pointing to the great FedEx freight all inclusive service they offer, this is something that many here and FedEx say does not happen but does and it is so messed up that CC people don't even know when they get a freight load.

Wrong answer I took a freight load all the way to out west. How do I know Well all the Fregiht was stamped FedEX Freight at the shipper and I did it over Labor Day.
It paid Very VEry Well. Course you know no one wanted to work on labor day weekend but I did.

 

[RLENT]

The real problem with this type of situation, is, as has been pointed out, transparency.

It is one thing for someone to say "This is all we are willing to pay you for this particular service" (ie a load) - it is quite another to say "If you work for us, we will pay you "X" percentage of what the customer pays ....." ...... and then not actually do that.

If a recruiter, while attempting to sign you up, tells you "Well, we pay X percentage of the amount billed to the customer", they know good and well (unless they are complete dolts and morons) that an owner-operator - particularly a new or inexperienced one - would reasonably understand "the customer" to mean the party which had the need to move the freight and was ultimately the one paying the total amount of all the monies paid to move that freight - not some hidden 3rd party, such as an in-house brokerage ........ whose only purpose for being involved in the transaction is to skim money off the top.

Any dispatch personnel that would lie and tell you that "that's all we have in the load" - when in reality it isn't, is treading very dangerous waters indeed .....

The above are, for all practical purposes, committing fraud - which, beyond being a violation of civil law (ie a tort), is also a crime.

The definition of criminal fraud is basically "deliberate deception of another in order to damage them for material gain."

Some of the acts which may constitute criminal fraud are:

Bait and Switch

False Advertising

False Billing

Forgery of Documents

Embezzlement (the taking of money which is under your control but is not yours)

Civil fraud consists of "the act of intentionally making a false representation of a material fact, with the intent to deceive, which is reasonably relied upon by another person to that person's detriment." It can take a number of different forms, among them:

A false statement of fact, known to be false at the time it was made;

A statement of fact with no reasonable basis to make that statement;

A promise of future performance made with an intent, at the time the promise was made, not to perform as promised;

A statement of opinion based on a false statement of fact;

A statement of opinion that the maker knows to be false;

Any company which has to rely on deceptive practices in order to enrich their bottomline is at best highly unethical, and at worst a criminal enterprise.

And the people running such a company, and those participating such activities, are really no better than common criminals - say, an armed robber - other than the fact that they probably wear nice clothes, work in snazzy offices, brush their teeth regularly, and go to dinner parties with the "best folks"

 

[nightcreacher]

Hers a thought,if you feel your company is cheating you,maybe you should change companies.Asfar as i know,most of these companies advertize an open door poicy.If you cant talk to management about your thoughts,then maybe you are being cheated

 

[FIS53]

This certainly isn't a new practice as many companies have found ways to skim some little extra off the top. A compnay I used to haul for on certain calls (they billed direct to customer) they charged one price but us brokers were told a lower price and paid based on the lower amount.

Many courier and other small operators have done similar even though the brokers are supposed to have access to the billing for audit purposes. What some did was to have other charges added in which were not shared with the broker and of course the addon charges of waiting time etc which are split.

For those of us who can we should perform audits on our calls performed and the charges by the company to see if they are being honest. I know one broker whose wife used to go i and check the billings and she regularly found a slew of small charges that should have been split and were not or things that should have been charged out and were not. Result was he got more money as the company improved their methods for checking billing and the other drivers benefitted as well.
Rob

 

[davekc]

It all comes down to the Reagan quote, "Trust but verify"

 

[LDB]

If the company is holding a gun to your head and forcing you to run a load for $xxx after it's gone through three levels of their corporate chain and you are getting xx% of the third cut they are potentially cheating you. If the company offers to pay you $xxx to run the load and that amount is at or above your required business plan threshold and you accept they aren't cheating you. I understand the point being made and I agree at times it's valid and accurate. I believe if you have the choice of accepting or not and if the pay offered meets your requirement then the amount the company makes is irrelevant.

 

[davekc]

This is a place that I have to disagree on.
Just for illastration purposes, lets say you get 60 percent of a given load. Lets say a load becomes available for $3.00 a mile.
You would expect a 1.80 from this load. Should one take it and find it acceptable if the carrier offers 1.50 per mile?
If you can profitably run your truck for the 1.50 rate, should you still get the additional .30 cents per mile?
I think you should.

Let me provide another example. I pay our drivers on a 60/40 (100 % FSC), yesterday we did a load that had a .70 per mile FSC.
I know that the truck can do the run at .40 or so cents per mile FSC.
Should I be entitled to keep a additional .30 per mile FSC because I know on that run they won't use all of it?
I think not.
It is the agreed contract, not whether one can or can't make a profit on it.

 

[LDB]

If Acme brokerage is your carrier and they get the load at $3 and offer it direct to you then you should get $1.80 if you are on a 60% contract. Less would be cheating you. If Acme Megalith gets the load and sends it to Acme Conglomerate who sends it to Acme Consolidated who then sends it to Acme brokerage while it can be argued that's unethical etc. that's how they do business. My point was that if it gets to Acme brokerage at $3 and pays me $1.80 and my requirement is a minimum of $1.50 then it's an acceptable load. The fact that Acme Megalith booked it at $27.32 a mile is irrelevant. They are following a legal business plan and so am I. I may not like it but it's legal and I'm making the money I require to move my truck.

I always passed the home run fsc to my teams. That's the agreement. Those helped make up for the 23cpm times on other runs.

 

[davekc]

That was kinda my point. Legal way of operating....yes.
Ethical.........no not really.
The earlier point was, say Acme booking a load and running it through their own brokerage to have it ran for less.
The argument that "if it pays enough" it should be ok.
One could use that rational in both settings whether we are talking about a high/low paying load or a high/low FSC scenerio.