Feds Threaten Misclassified Truck Drivers

The federal government's Labour Program is starting to look for fleets that misclassify truck drivers as an incorporated business rather than an employee, blowing the Driver Inc. business model.

Parliament Building and Canadian Flag (Jason Hafso/Unsplash)

Labour Canada has notified many carriers of future inspections, administrative fees, and fines if a corporation willfully misclassifies personnel in order to evade employment-related obligations. The threat of fines and the ability to publicly name employers who fail to meet Canada Labour Code obligations went into effect last year.

Pay records, contract details, and workplaces will be inspected as part of the carrier inspection, with a focus on health and safety legislation and regulations under the Canada Labour Code.

"They've written a number of carriers that have been flagged", says Stephen Laskowski, president of the Canadian Trucking Alliance (CTA).

Offending fleets will also be required to pay employee debts and correlated workplace inspections.

Audits By the WSIB

Recent audits by the Ontario Workplace Safety Insurance Board (WSIB) have raised serious concerns about the Driver Inc. business model to date. WSIB public affairs manager Christine Arnott says, "In 2019, we committed to the trucking industry that our risk model would generate focused audits on businesses, including trucking firms, using data-driven approaches to identify non-compliance."

According to WSIB data, between April 1 and December 31, 2020, these operations collectively paid $933,468 in premium adjustments related to factors such as reported contractor earnings, adjusted earnings relating to T4 summaries, and adjusted executive officer earnings. Thirty-four trucking companies were audited, and 21 were required to pay net adjustments.

While the majority of upward adjustments varied between $305 and $21,784, four companies mounted for about 90% of the totals paid ranging between $100,000 and $300,000.

Upholding the Approach

Fleets do not eliminate source deductions from payments to independent contractors, such as Canada Pension Plan contributions, Employment Insurance premiums, or income tax. Contractors are responsible for reporting income and employees are ineligible to access most tax breaks given to firms.

A variety of particular factors define the distinction between workers and independent contractors, including the degree of control the fleet has over the driver, if the driver supplies tools and equipment, whether the driver can reject, subcontract, or hire assistance, and the level of financial risk or profit potential.

When the previous Minister of Employment and Workforce Development stated that the federal government sought to eradicate employee misclassification, Trillium Roadways acted as a backdrop. Since then, the fleet has seen one of the most significant WSIB premium changes due to reported earnings. The Canada Revenue Agency (CRA) on the other hand, is anticipated to be the next agency to join.

Given more than half of the businesses on the WSIB list that were charged with classification errors were on the CEWS list, a good question is if Drivers Inc. fleets have earned Canada Emergency Wage Subsidy (CEWS) payments for truck drivers who are ostensibly independent contractors.

An Inequitable Ascendancy

Driver Inc. is viewed as an extension of the underground economy by the nation's largest trucking association, offering carriers that use the business model an unfair edge in lowering costs. However, Driver Inc.'s payroll expenses may be 35% less than those paid by rule-abiding fleets, and they are using the difference to undercut prices, according to CTA head Jean-Claude Fortin.

"When you've got the competitive advantage of Driver Inc., it's not that these carriers are getting rich at the same rates we have to charge - but they're the ones getting the contracts from the shippers," says Wendell Erb, chairman of the Ontario Trucking Association (OTA).

As stated by CTA, shippers may be exaggerating bids to compete as a bargaining technique, but counterparts are undoubtedly undercutting prices and meanwhile, drivers wrongly believe they are earning more money per mile, in fact, they are likely facing significant fines and back taxes.

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