Is Dispatching Illegal?
Are Dispatching Companies operating illegally?
The short answer: It depends.
In the transportation industry there are 3 main parties: Carriers, Brokers & Shippers. They coexist & operate in unison to ensure the delivery of goods across the U.S. However, a new group of participants have recently entered the equation: Dispatchers. Truck dispatching services are requested by Carriers to assist with Broker negotiations & load paperwork. Dispatchers are not required to be licensed, insured or certified; therefore many people assume dispatch services are operating illegally because they avoid federal regulation. Even while in high demand, this speculation causes some Dispatch businesses to question their legal validity. Professions such as Dispatch Agents, Independent Contractors & Freight Dispatchers are defined by the work they perform, not what they decide to call themselves.
Broker/Dispatch Lines of Separation
Currently the Federal Motor Carrier Safety Administration (FMCSA) regulates Brokers & Carriers that operate in transportation to protect the best interests of Shippers. The FMCSA defines a Broker as “a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.â€ (b) Bona fide agents are persons who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others.” Title 49
Simply put, Brokers are compensated for arranging freight between Carriers & Shippers. Brokers collect loads from Shippers, organize market data & offer them to Carriers often to bid on. They’re required per the FMCSA to hold an active MC number & surety bond as a form of collateral insurance. Brokers perform a majority of the backend paperwork as a “bona-fide agent” of Carriers.
On the other hand, freight Dispatchers are not regulated by the FMCSA. Truck Dispatchers, whether an individual or organization, work for Carriers, not Shippers. They invest their time & energy into the best interests of assigned carriers. More specifically, Dispatchers filter through unprofitable freight to negotiate, book & secured locked in loads with established Brokers. Dispatchers often share insurance information, complete carrier packets & communicate with each party involved. Dispatchers are paid last, Truck Drivers compensate Dispatchers after they’ve been paid for successful deliveries. Qualified Carriers & Brokers are insured & licensed. Since Dispatchers are not required to be licensed or insured, it’s unclear of who is qualified to Dispatch and who isn’t.
The difference between the two? One prioritizes Shipper interests and the other focuses on Carriers. Brokers may offer dispatching services, but often they’re limited to the Broker’s network – a specific region, equipment or commodity type. Brokers concentrate on fulfilling current Shipping orders & maintaining those strong relations – no matter who moves their freight. Dispatchers perform similar duties, but with the success of their Carrier(s) in mind, not the Shipper.
Bona fide agents are persons who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and othersTitle 49
Yes! Illegal Dispatch Companies
Dispatch Businesses that Broker freight are illegal. For example, If a Dispatcher signs a Carrier onto their services, and gains access to Brokered loads, they are operating illegally if they book those loads with a Carrier other than the one they signed & found them with. Additionally, if a Dispatcher has 2 of the same type of Carrier, and exchanges loads between the two, they’re operating illegally. Each commercial freight load must be booked & performed with the same Carrier that qualified for it. When Dispatchers begin to middleman brokered loads to uncontracted or unqualified Carriers, they’re operating unethically. If Dispatchers are “bona-fide agents” of Carriers, they can not ethically service competing Carriers because it would not be within the Carrier’s best interest (fiduciary duty). Illegal Dispatchers don’t have an MC number, meaning they’re not partnered with an authorized Carrier. Dispatchers aren’t required to have an MC#, however the Carrier’s they represent must have an active MC OR USDOT number. Illegal Dispatchers don’t work for the interests of their Carriers. If you don’t have a Carrier, you’re not a Dispatcher.
NO! Legal Dispatch Companies
Legal Dispatch Companies perform their due diligence. Honest & reliable Dispatchers work solely for the accomplishments of their Carrier. These companies exist & scale by acting as a “bona-fide agent” with the best interests for qualified Carriers in mind. As Title 49 states, Dispatchers must have a ‘preexisting agreement that precludes the agent from acting at their own discretion”: meaning Dispatchers must hold a Carrier agreement that prevents the Dispatcher from acting selflessly prior to looking for any load. With a detailed Carrier Agreement, Dispatchers can sign with multiple Carriers & perform with ALL of their best interests in mind. Let’s break it down further.
For instance, let’s say a Dispatcher works for 3 Carriers. Prior to signing any contracts, the Dispatcher asks “What are your operational goals & how can I improve increase your profitability?”
Driver 1 responds: “Im a Non-CDL driver so I cant carry anything over 7K lbs with my current Box Truck. I only operate locally in Atlanta and don’t accept anything less than $2.00 USD a mile.”
Driver 2 responds: “I’ve been driving for years but I need help finding high rates. My Semi trucks can hold up to 45K lbs and run across the Southeast from Tx to FL. My truck is air ride & ready to go.”
Driver 3 responds: “I’m an owner operator so really I can run all 48 states. I have a 48 ft step deck so I can pull any commodity with my CDL, however I don’t want anything less than $3.00 a mile and I refuse to drive on Sundays.
All 3 of these Drivers have extremely specific criteria; therefore a Dispatcher can only search & book loads that fit the parameters of each Carriers’ needs. Dispatchers can not offer loads to Carriers that were not previously agreed upon. Carriers hire Dispatchers & expect them to offer loads from Brokers. Legal Dispatchers are “bona-fide agents” of Carriers in a specific region, industry or form. Therefore, there is no competition among the Carriers a Dispatcher works for. A Box truck can not compete with a Semi truck: these Carriers can’t physically carry the same weight or length. Legally, the judiciary commitment of Title 49 is satisfied when Dispatchers work with no conflict of interest or competition among their clients. Ethical Dispatchers work FOR Carriers, and they know it. They’re paid only after Drivers receive compensation & book freight with their Carriers’ best interest in mind.
In order to be a â€œbona fide agent,â€ the â€œagentâ€ must be an exclusive agent for just one type of carrier. Debate arises when an intermediary calling itself a â€œdispatch serviceâ€ services multiple carriers of the same type instead of a â€œbrokerâ€. This connotation is what proves the legality of Dispatching services: A business CAN act as “bona-fide agent” exclusively for more than 1 type of Carrier. Realistically, Dispatchers can not normally handle more than 5 Carriers. The odds of all 5 Carriers operating the same equipment, in the same city, for the same commodity, with the same profit margin is diminishable. Therefore, Legal Dispatch companies exist: They cover liabilities with detailed Carrier Agreements, work with their Drivers’ best interest in mind & scale by accepting new types of equipment & opposing commodities.