Manitoba Trucking Association

 Over the past number of years, much has been written about the Driver Inc. model in the trucking industry. This increased awareness has resulted in positive progress: companies understand what it is (the intentional misclassification of drivers to avoid financial and legal obligations), and governments are monitoring it.

We have seen a crackdown on Driver Inc. continue at both the federal and provincial levels. Whether it was the Workers Compensation Board (WCB), Employment and Social Development Canada (ESDC), or other agencies, the spotlight is on those companies in the trucking industry who intentionally misclassify drivers to avoid their financial and legal responsibilities.

The ‘Driver Inc.’ model is an attempt by some trucking companies to treat ordinary employees as if they were private contractors. There are many factors considered by the Canada Revenue Agency (CRA) when determining if someone is an employee or self-employed. In the trucking industry, the biggest question is who owns/makes payments on the truck. If you own the truck (or make the payments on it) and operate as an owner-operator paying your remittances based on your T4A, then you are not engaged in Driver Inc. The biggest red flag in Driver Inc. schemes is ‘self-employed’ individuals who don’t provide their own equipment. This is an intentional misclassification to avoid paying required remittances.

How Does Driver Inc. Impact the Industry?

There are serious consequences associated with Driver Inc. Very often, WCB remittances are not made, either by the carrier or driver using this scheme. Do you want someone without WCB coverage working on your property? If these drivers are injured, they very often do not have their own coverage.

If something like WCB isn’t being paid, what other shortcuts are being taken regarding driver safety? What shape is their equipment in? Do they have proper insurance coverage for the freight being moved? How else are they shortchanging not only their drivers but also their customers in order to move freight at a reduced rate? Furthermore, how is the general public’s safety being put at risk? What do their logbooks look like, and are they operating under the hours-of-service regulations? If you are a shipper, receiver, or another trucking company using a third-party carrier, these are very real concerns you should consider before supporting Driver Inc. carriers.

Legitimate carriers are impacted by Driver Inc. as well. Driver Inc. carriers can offer lower rates by misclassifying employees as independent contractors to save on payroll costs. This means that your company will have to review rates in order to be competitive. It has been estimated that payroll costs for Driver Inc. companies may be as much as 35% lower than they are for law-abiding fleets – how would that impact the rates you are able to offer and how you are able to compete? In an industry that already runs on tight margins, can we afford to tighten them further to compete with carriers operating outside of their legal obligations?

Finally, Driver Inc. is estimated to cost the Canadian government as much as $1 billion annually. This is money deprived of all Canadians that would have been returned to us in forms such as health care. Supporting Driver Inc. carriers to make a buck because they have a cheaper rate from Winnipeg to Vancouver is a short-sighted way to participate in the Canadian way of life, one where we all contribute our share.

 Looking Ahead

So, What Can Be Done about Driver Inc.?

To ensure that companies and their truck drivers do not unknowingly engage in Driver Inc., business owners and managers should pay close attention to the contracts they create between their business and their employees and with any self-employed contractors.

Companies should have well-written contracts for employees and self-employed contractors that make it clear who is paying for what, including employment insurance, Canada Pension Plan, WCB, and income taxes. If there is doubt, the company should engage the services of a professional accountant to ensure that their employment agreements and payroll deductions are properly established. Companies may also wish to consult with a lawyer for the wording in their employment agreements.

Provincial trucking associations and the Canadian Trucking Alliance have been working with various governments to alert them to this underground economic activity. In Manitoba, we have taken the opportunity to discuss this issue with our local ESDC office, WCB Manitoba, MPI, and Manitoba Motor Carrier Enforcement. All departments are aware that Driver Inc. is operating in Manitoba and are concerned.

 What Can Industry Do to Prevent Driver Inc.?

If you are aware of a company operating under this scheme, reporting mechanisms have been put in place with the CRA, ESDC, and Temporary Foreign Worker Program. If you are a shipper, receiver, or carrier, avoid doing business with them.

If you are a carrier who employs self-employed individuals, owner-operators, or independent contractors and you aren’t taking source deductions, you must issue T4As to those contractors, just like you issue T4s to employees. The T4A will include all amounts paid to the self-employed individual, who can then use this slip to file their taxes and submit required remittances. 

Finally, if you are a driver who was unaware of the illegality of this hiring scheme, know your rights. True owner-operators are legitimate business owners. Those engaged in Driver Inc. are trying to get the benefits of being a business owner while dodging their financial obligations, all to engage in predatory pricing. Such drivers can remain incorporated but as dependant contractors and may be considered a Personal Service Business (PSB) by CRA, also known as an incorporated employee. If categorized by the CRA as a PSB, you are required to pay taxes under a different taxation regimen than as a business owner. You will likely require a T4A slip, and you may need to complete a T2 Corporate Income Tax Return as well as a T1 Personal Income Tax and Benefit Return. Please consult with a professional accountant or the CRA to determine your requirements, as regulations are subject to change.

If the carrier you work for is unwilling to provide a T4A, then you need to consider your next steps. Will you move on to a carrier that operates above board and pays their drivers AND their remittances properly, or will you continue working for a company that knowingly cuts corners? How long are you willing to push your luck?