New Federal Regulations Mandate Leases for Motor Carriers of Passengers

Federal law has long required that a for-hire motor carrier transporting property in a commercial motor vehicle (CMV) it does not own must enter into a written lease for that vehicle, providing expressly that the lessee motor carrier has control of and is responsible for operating that vehicle in compliance with USDOT safety regulations. 49 U.S.C. § 14102; 49 C.F.R. §376.12.

Recently, the Federal Motor Carrier Safety Administration (FMCSA) adopted regulations which, for the first time, will expand this leasing requirement to the field of motor carriers of passengers. See 80 Fed. Reg. 30164 (May 27, 2015). The new regulations are intended to "ensure that unsafe passenger carriers cannot evade FMCSA oversight and enforcement by entering into a questionable lease arrangement to operate under the authority of another carrier that exercises no actual control over those operations."

The lease must identify the lessee motor carrier that is responsible for compliance with the Federal Motor Carrier Safety Regulations, and specify that a lessor motor carrier surrenders control of the CMV for the full term of the lease. A copy of the lease is to be kept on board the leased vehicle. The leased vehicle itself must display a placard, sign, or other permanent or removable device on the right (curb) side on or near the front passenger door, showing the name and USDOT number of the carrier operating the vehicle, preceded by the words ''operated by.''

There are a number of exceptions. Leases are not required when passenger vehicles are exchanged between or among commonly owned and controlled motor carriers, although each driver in a group of commonly owned and controlled motor carriers must carry a summary document listing all members of the corporate family, along with their USDOT numbers, business addresses, and contact telephone numbers. The new regulations also provide that operations under revenue pooling agreements approved by the Surface Transportation Board are exempt from the lease requirements, but each vehicle must have available, either in hard copy or electronically, the number and date of the STB decision approving the pool and the names of the pool members. When mechanical failures unexpectedly strand passengers, the operating carrier and the lessor providing an emergency replacement vehicle have up to 48 hours after the lessee takes possession to put in writing the terms of their lease agreement.

The effective date of the new leasing regulations is July 27, 2015. Motor carriers of passengers operating CMVs under a lease or interchange agreement will be subject to the new rules on or after the compliance date of January 1, 2017. The new regulations themselves provide that, if the use of a passenger-carrying CMV requires a lease, but the motor carriers fail to make the lease or fail to meet all other applicable requirements, both the lessee and lessor motor carriers are subject to a civil penalty. All motor carriers of passengers, and their attorneys, should familiarize themselves with the new mandates and take steps to prepare the records which will now be required.