Regardless if you decide to allow us to assist you with the start of your freight broker career as a freight broker agent, or you choose another, pay attention to the freight broker agent contract.
When you contract to an existing freight brokerage as an agent, as the word implies, you will sign a contract. This contract creates the contractor relationship between you and the freight brokerage company. As a contractor you are your own business, responsible for your own overhead (internet, phone, staff…), and you will receive a 1099 at the end of the year from the freight broker, for your taxes.
This contact also spells out the relationship between you and the freight broker and the terms that you both agree. Most of these contracts are for one year and auto renew at the end of that contracted year. They also include the termination procedure, which is simple. Most will ask for some type of a notice from one party to the other notifying them of the termination. Just like you would give an employer.
Even though freight broker agent contracts are pretty standard, sometimes a broker includes items in the contract that you should NOT agree to. If the broker won’t negotiate on these items, don’t sign. Find another broker.
When we check a freight broker agent contract for our clients, be it brokers or agents, there are three things that will immediately bring up a red flag.
- The contact is way below the industry standard commission to its agents. The standard is 60% of the loads net. Some broker companies pay a little more or even a little less, but should be at or near that 60% benchmark. If your contract states a 40% commission, that is a good sign that you are NOT contracting to a broker, but one of that brokers agents.
- Non-Compete Clause. Any type of a non-compete in a freight broker agent contract should be a deal breaker for an agent. Even if, and we’ve heard this, the broker says they don’t enforce it. A non-compete basically means that when you leave that brokerage, you can’t work as a freight broker for X amount of time. Often a non-compete will be worded where you can’t work any job where it could be determined that the new job somehow competes with the freight broker. Again, even if a freight broker says they don’t enforce it, have them remove it!
- There should be no wording in the contract that would limit your ability to work your own customers, should you ever leave that freight broker for any reason. You prospected, have worked, and have built the relationship with that customer. You should be allowed to work your customer no matter what. With that said, understand that it’s ok for the broker to continue working with that customer as well. If you’ve done your job, the customer is loyal to you.
In our experience, we’ve found that reputable brokers have good agent contracts. It’s also been our experience that when looking over a contract, there were items included that didn’t cut the mustard. When brought to the brokers attention they immediately had them removed, as they didn’t know those items were in their contract. Often a broker will use an attorney to create their contracts and the attorney will use a template or create one that is very one-sided to their client, the broker. Once the broker is made aware of the problem, it’s quickly rectified.
Obviously, we hope that you choose TALTOA as our consulting includes looking over a contract for you. we’re not attorneys and don’t give legal advice, but we’ve seen thousands of broker agent contracts over the years. Either way, check your contract before you sign.
Thanks and have a great day!