- Company Driver?
- Independent Contractor?
- Lease Operator?
- Lease Purchase Operator?
- Owner Operator?
- Motor Carrier?
What do you call yourself? What do you call your peers? Why?
Anyone who is a part of the trucking industry for any significant length of time will inevitably be touched by the ranking game. It seems that truckers as a community are all too eager to distinguish themselves from their peers, by establishing a pecking order. Often, truckers tend to refer to themselves & each other, using terms that they don’t fully understand. Some truckers call themselves Owner Operators only after they have paid off their truck, when they have been Owner Operators all along. Some truckers use meaningless terms, such as “Lease Operator”, to further add to the misunderstanding. Some truckers have no idea what the definition of a Motor Carrier is, and still others refuse to even use the term. Some feel that one has to get an Operating Authority to be considered an Independent Contractor, or even an Owner Operator. A bit of research into the different industry roles would help, but lots of truckers are not willing to take the time for that. Those truckers seem to prefer applying the labels that fit their ideals, stroke their egos, or disparage others.
There are three distinct roles in the trucking industry:
- Company Driver
- Owner Operator
- Motor Carrier
All other terms are derivatives of the above. Some are recently invented terms that have no meaning, except to those who created them.
In order to transport freight in Interstate Commerce, someone who is involved in the process must hold an active interstate Operating Authority.
A person or company who has an active interstate Operating Authority is a Motor Carrier. A Motor Carrier is assigned a MC (Motor Carrier) number by the FMCSA. Only Motor Carriers are authorized to transport freight.
- Mega Carriers (Schneider, Swift, Werner) are Motor Carriers
- Small companies who operate under their own authority are Motor Carriers
- Owner Operators who operate 1 truck under their own authority are Motor Carriers
A Motor Carrier can negotiate freight transportation directly with shippers, receivers, brokers, and other Motor Carriers. It does not matter where a Motor Carrier gets their freight from. It has been incorrectly stated that Motor Carriers get their freight directly from shippers & don’t deal with brokers. That’s not true. Having an active interstate Operating Authority makes one a Motor Carrier, and gives them the choice of how to obtain freight movement assignments.
A person or company can operate under their own authority as a Motor Carrier, or they can operate under the authority of an existing Motor Carrier.
A Motor Carrier can operate as an Owner Operator, and/or allow other Owner Operators to operate as Independent Contractors under their authority, and/or employ Company Drivers.
A person or company can operate under the authority of an existing Motor Carrier as a Company Driver (employee), or as an Owner Operator (self-employed Independent Contractor). There are no other classifications.
A Company Driver is an employee of a Motor Carrier. A Company Driver operates equipment that is owned & maintained by the Motor Carrier, and is only responsible for driving. Company drivers bear no financial risk or responsibility. They do not own, finance, lease, or have any financial interest in the truck that they drive. They don’t pay for fuel, maintenance, repairs, nor anything else to operate the truck. Company drivers drive & get paid a rate (per mile, per hour, or per day) for their services. They operate at the direction of the Motor Carrier who employs them.
An Owner Operator is one who owns & operates a business. In trucking, a person or company who acquires a truck, pays all costs to operate said truck, and transports freight under proper authority with said truck, is an Owner Operator. How a truck is obtained (purchase, finance, or lease) has no bearing on the classification of Owner Operator.
A lot of confusion arises from the term “Owner Operator”. In recent years, with the proliferation of Lease Purchase agreements, a number of people tend to think that an Owner Operator must pay the last payment & hold the title to their truck, in order to earn the “Owner” part of that role. Oddly, a lot of truckers seem to only feel that way toward those who are in Lease Purchase agreements, but not necessarily finance contracts. A newer term, “Lease Purchase Operator”, has even arisen as a result of Lease Purchase agreements becoming so popular. In actuality, the term Lease Purchase Operator is a meaningless term in the industry, as the distinction between Company Driver and Owner Operator lies in whether or not the driver furnishes and maintains the truck, not in whether the truck is owned, financed, or leased by the driver. Calling oneself a Lease Operator, or Lease Purchase Operator only serves to unnecessarily broadcast your financial affairs. Ideally, no one would know how an Owner Operator obtained his or her truck, and no one would have a reason for the misclassifications
An Owner Operator owns & operates their truck, but there seems to be confusion about what constitutes ownership. The term “Owner Operator” has been around much longer than Lease Purchase agreements, and it has been historically used to distinguish whether a driver drove a truck that was owned & maintained by the company he/she worked for as an employee, or if that driver brought their own truck onboard & leased on to that company as a self-employed Independent Contractor. If the driver furnished & maintained their own truck, they were classified as an Owner Operator. How the driver obtained & paid for the truck was irrelevant. That all still applies today, but a misinformed group of truckers has remodeled the definition of “Owner Operator” into another one that has everything to do with the financial arrangement between the driver & their financier, and nothing to do with the business agreement between the driver & the Motor Carrier they are associated with.
Very simply, if you drive a company owned & maintained truck, you are Company Driver. If you bring the truck to the table (no matter how you acquire it) and pay all costs to operate it, you are an Owner Operator. The industry has never assigned levels to Owner Operators, based on the level of vested interest one has in the truck being supplied. Instead, it is the Owner Operators themselves who try to distinguish themselves from their peers when they finally have the title to their truck in hand.
According to the IRS and industry definitions, a driver owns their truck (and receives the tax benefits thereof) whether they hold the title, or are making payments on it. The bottom line is that, an Owner Operator owns and operates their truck, versus a Company Driver who has no ownership interest in, nor responsibility for the truck that they drive.
Lease Operator and Lease Purchase Operator are meaningless terms. No matter how much some want this fact to be different, one who leases a truck is as much an Owner Operator as one who finances, or purchases the truck outright. You operate a truck. You operate a business. You DON’T operate a Lease Purchase agreement. Thus, there is no such classification or job title as a Lease Purchase Operator.
- If you lease or Lease Purchase a truck & then lease the truck on to a carrier (operate under their authority), you are an Owner Operator who is leasing your truck.
- If you finance your truck through a dealership or other source & then lease the truck on to a carrier (operate under their authority), you are an Owner Operator who is financing your truck.
- If you own your truck outright (have the title) & lease the truck on to a carrier (operate under their authority), you are an Owner Operator who has paid for your truck.
- If you lease or Lease Purchase a truck & operate under your own authority, you are a Motor Carrier, who is also an Owner Operator, who is leasing your truck.
- If you finance your truck through a dealership or other source & operate under your own authority, you are a Motor Carrier, who is also an Owner Operator, who is financing your truck.
- If you own your truck outright (have the title) & operate under your own authority, you are a Motor Carrier, who is also an Owner Operator, who has paid for your truck.
In no other industry does one’s choice of asset acquisition determine their job title/classification. Trucking is no different.
The choice of authority to operate under has no bearing on the classification of Owner Operator. An Owner Operator can choose to operate under their own authority as a Motor Carrier, or they can operate under the authority of an existing Motor Carrier. An Owner Operator who is not a Motor Carrier cannot negotiate freight movement directly with shippers, receivers, and other Motor Carriers. They must transport freight under the authority of a Motor Carrier. If an Owner Operator obtains an interstate Operating Authority, then they can operate as a Motor Carrier.
An Owner Operator who operates their truck under the authority of a Motor Carrier is said to lease to the Motor Carrier.
Leasing TO a Motor Carrier is different terminology than leasing a truck FROM a Motor Carrier.
It is possible for an Owner Operator to lease a truck FROM a Motor Carrier AND lease it TO the same Motor Carrier.
Leasing a truck FROM a Motor Carrier is self-explanatory. This is done via a Lease or Lease Purchase agreement, and it is a method of acquiring and paying for the use and/or eventual ownership of the truck.
An Owner Operator who leases TO a Motor Carrier, leases their truck to the Motor Carrier, in exchange for an agreement to perform services under the Motor Carrier’s authority. Leasing the truck to the Motor Carrier effectively makes the truck a part of the fleet of the Motor Carrier. The Owner Operator retains ownership, but leasing the truck to the Motor Carrier gives them the right to do things that are necessary for FMCSA and Company Policy compliance (door decals, Qualcomm, etc.).
An Independent Contractor is simply a self-employed person or company. Independent Contractor is not a term that is specific to trucking, or any industry. It is not a job title. It is an IRS classification for a self-employed person, versus an employee. According to the IRS, one is either an employee, or an Independent Contractor. ALL Motor Carriers and Owner Operators are Independent Contractors, because they are self-employed. The word “Independent”, in this particular context, has NOTHING to do with whether one is a Motor Carrier and/or Owner Operator, whether one owns their equipment, or whether one operates under their own authority or that of a Motor Carrier. It has nothing to do with whether one gets their freight from brokers, or a dispatcher. It ONLY means that a person or company is self-employed, and not necessarily in the trucking industry.
A Motor Carrier is a person or company who holds an active interstate Operating Authority.
An Owner Operator is one who owns and operates a business.
Lease Operator and Lease Purchase Operator are meaningless terms.
An Independent Contractor is a self-employed person or company.
A Motor Carrier who owns & operates their truck is also an Owner Operator, but Motor Carriers who refer to themselves as simply Owner Operators do themselves a disservice, as they are so much more. When one obtains their own Operating Authority, they become a Motor Carrier (hence the MC, or Motor Carrier number). At that point, they are peers with all of the other large & small Motor Carriers. It is inherent that a Motor Carrier owns at least one truck (they must own, lease, or finance a truck, in order to carry the required liability & cargo insurance to become a Motor Carrier), so by definition, a Motor Carrier who operates their own truck is also an Owner Operator. But a Motor Carrier who owns & operates their truck is so much more than simply an Owner Operator. A Motor Carrier is a trucking company, independently recognized by the FMCSA and DOT. Motor Carriers can operate one or more trucks that they own, hire Company Drivers, and/or allow Owner Operators to operate as Independent Contractors under their authority. A Motor Carrier who refers to themselves as an “Owner Operator who has their own authority” minimizes their role in the industry. Large carriers like Schneider, Swift, and Werner are Motor Carriers. They don’t refer to themselves as Owner Operators any more than any other Motor Carrier (large or small) should.
A Motor Carrier
is also an Independent Contractor
and may or may not be an Owner Operator
An Owner Operator
is also an Independent Contractor
and may or may not be a Motor Carrier
It would be great if we could put the egos aside & stop playing the ranking game, and get on the same page regarding terminology.