Good-bye sole proprietors. Hello incorporated businesses.
As of September 1st, the Muir’s Cartage division of Calyx Transportation Group Inc. will refuse to assign a load to owner/operators running their businesses as sole proprietors. The company called a short-notice, attendance-mandatory meeting for August 9, where officials told the approximately 90-100 assembled owner operators that if they wish to continue doing business with Muir’s they must incorporate their businesses.
The dictum was issued at the same time Muir’s announced another change to its business practices. The company is dispensing with its outside payroll services, which had been provided by Behind the Wheel Services Inc. (BTW) in Mississauga, Ont., and is bringing that function back to Muir’s.
“The way it was structured was that all owner/operators were with Muir’s Cartage through an agency that was acting as a payroll administrator for them. What we are doing is we are bringing all owner/operators inside to Muir’s and we will be administering everything in house,” explained Eugenia Churilov, fleet safety and compliance manager for Calyx, during an exclusive interview with Truck News.
“It is absolutely a positive change and beneficial to all our owner/operators. We are all very excited to proceed with that and get it all in place. Owner/operators themselves brought those concerns to us—specifically to me—that they would like to see some changes and we’ve worked them all out. That’s what I presented to them in our meeting. That’s what’s we’re going through. The owner operators themselves are very excited. It is all being taken positively.”
Changing the way owner/operators are compensated, however, means more than just new people processing the paperwork. It also means significant changes to how owner/operators will have to handle their disability coverage. Until now, owner/operators weren’t responsible for their Workplace Safety and Insurance Board (WSIB) fees. Now they will be.
“BTW was covering them under their own WSIB account. Now that BTW is going to be out of the picture, they have to have their own coverage. The exciting part of it is National Truck League came with a very good package that is absolutely beneficial to all owner/operators if they choose to go it and not with WSIB,” said Churilov.
Muir’s invited National Truck League to the owners/operators meeting and presented the company and its services as an alternative to the WSIB. Muir’s also brought in an accountant.
“If they don’t have anyone, we are willing to provide them help by giving them contact information of an accountant who can assist them with incorporating. If they don’t have any of their own accountants—which they should if they are running their own businesses, but some of them don’t have people who are able to help them out with incorporation—that’s what we’re providing. I think this is really a nice gesture from the company to try to assist them with any thing we can.”
As with the disability insurance, owner/operators will be responsible for paying the recommended accountant (should they choose to employ his services) out of their own pockets.
According to Churilov, all of the company’s proposed changes were well accepted by the owner/operators.
“Most of them were excited about the changes. At the meeting there were standing ovations when we announced they will be with Muir’s now and there will be some changes internally about how everything will be processed. They were very happy about that,” she said adding that even the prospect of having to pay for their own WSIB premiums were taken positively.
“Yes, they understand this is all part of the business. You have to take on those expenses. As in any business, even us, sometimes customers come back saying, ‘This is changing. You are now going to be picking up in Oakville instead of Burlington, and that’s an extra so many kilometres for you to travel, so you just adjust your business.’ That’s it. This is just the business.”
As for incorporating, Churilov said it’s just the way things are going in the business world, and that Muir’s is trying to help the drivers become better managers and owners.
“As they are owner/operators, they are handling their own businesses. [Incorporation] is how a business is handled in the trucking industry. If they’ve been running a business, incorporating wouldn’t really change their business structure. All they have to do is run the business properly because, unfortunately, not every owner/operator has a great knowledge of how the business should be run. That’s what we’re trying to do. We are trying to help them out and guide them in the proper way of how businesses are supposed to run.
“A lot of industries right now are looking more and more into dealing with contractors and subcontractors, but they have to be incorporated—not only in trucking, but in different industries as well. I know for a fact a lot of cabling companies like Rogers and Telus are bringing all the subcontractors in as incorporated entities to make sure that the businesses are handled properly. This is something all industries are going for.”
Although Truck News wasn’t in attendance at the meeting, one owner/operator who was told a different story about how well the news was received. He asked that his name not be used in this article, as he was still on the fence about whether he would be willing to change his business structure and incorporate, just so he could continue driving for Muir’s.
“The room was a little stunned,” he said. “There was no real explanation. All they said was this is what we are going to do from now on and anybody who does not comply will not be dispatched after August 31. That was said numerous times. But in terms of an explanation as to why they went this way, I don’t recall one. “
He said he believes the majority of driver will likely comply, but speculates that many will do so because they come from cultures outside of Canada and may not be completely comfortable standing up to an employer, questioning authority or having to look for new business and companies.
He also said at least one driver stood up and questioned the Muir’s executives about how much all of these changes are going to cost owner/operators. He said a question was posed in the lines of “‘We are losing $2,400 worth of Workman’s Comp. We have to pay $1,300 to cover ourselves. Then we have to pay $400 for incorporation. That’s approximately $4,100 you’re asking us to take out of our pocket, what are you offering us?’
“Ted Brown [executive vice-president of Muir's Cartage and Indis] stood up and said, ‘I believe I’ll be looking at a raise, probably in April of next year.’ Which needless to say didn’t go down well.”
While the owner/operator is currently less than happy with the situation as it was presented, he says Muir’s has—at least until now—has been a fair company, and described its treatment of owner/operators as very good.
“They haven’t, in the past, taken a high-handed approach. They’ve taken a negotiated approach. Although after Calyx bought Muir’s all kinds of changes happened. When I started with Muir’s we could park our trucks there. They had a mechanical division that could repair our trucks. All that has gone by the wayside. They don’t provide us parking anymore. There are no mechanical services anymore, but overall it has been a pretty good company.”
From a business standpoint, Marvin Huberman a Toronto-based lawyer and mediator who works with transportation and supply chain clients, said Calyx, could be demanding incorporation due to liability issues.
“It’s really for the protection of the employer. The issue really pertains to vicarious liability of the company that is—loosely we’ll call it—‘employing’ these people,” he said, adding in case of an accident resulting in a lawsuit by a victim, it would be harder to attach liability to the trucking company if there is a clear indication that the owner/operator driving is not a company employee. Having the owner/operator incorporate helps delineate the difference between and employee and an independent contractor.
“Many times with these transportation companies, you’d have a contract that says ‘the relationship is one of independent contractor, and there is no fiduciary relationship and there is no employment relationship.’ But then the question is, despite what you say, in substance, what is the relationship? All kinds of legal relationships could be engaged despite the way the parties themselves characterize it.
“Then you get into the question of ‘does the incorporation of this entity that is driving change the relationship?’ The Canadian Federal Court of Appeal fairly recently, came out with a decision saying that you can incorporate, and the incorporation makes it easier to characterize the relationship not of employer-employee if it’s a corporation. When and in what circumstances is it valid and determining if it will hold when trying to defeat a claim for vicarious liability is contextual. It depends on the circumstances and the reality of the relationship, despite the way the parties set it up, although that is a factor.”
Regular Truck News columnist Scott Taylor, who is vice-president of operations at TFS Group in Waterloo, Ont., which provides accounting and bookkeeping services for transportation companies, said he normally recommends owner/operators incorporate.
“As an overall statement, it’s my opinion that most, although not by a big margin, owner/operators are incorporated—about 60% of them are. But that still means 40% aren’t,” he said.
“If I were going to be an owner/operator, I would be incorporated. I’ve said that for years. I understand why people don’t choose it: everybody has their own pros and cons and value list, but if I were one, I would be incorporated.”
According to Taylor, those who don’t incorporate usually say the process is too expensive and too complicated, but he said while there is a bit more to do in terms of paperwork it’s not too hard to manage. As for the advantages, he explained there could be tax savings, it could help protect personal assets, and it may even kick-start a real strategy for managing and growing the business.
So for owner/operators who want to continue working for Muir’s but who still have concerns about incorporating, they shouldn’t worry.
“It’s certainly not a horrible thing. Muir’s isn’t forcing them down a drowning path, but something has happened. Muir’s is doing this to save a cost or create more separation between them and their owner/operators. They feel that dealing with Smith’s Family Trucking Inc. versus John Smith is better for them for some reason.”
As for the September 1 deadline, Taylor said everything can be done before then.
“It’s just reasonable. Given the fact they have to go through the shock-and-awe stage and sit back and think about it, it seems pretty tight. Realistically, if somebody decided tomorrow morning they wanted to be incorporated, they could be incorporated (once they found somebody to help them) within a couple of days. But then you’ve got to go to a bank and get an account set up, then you have to supply that information to Muir’s so the pay can start going to the new business account. There is a lot of updating that has to get done.
“In that sense, the timeline seems pretty tight when you have to factor in that people just have to get their brains around it and react and get information and figure out what the heck to do. But if somebody had a running start, sure you could do it all in a week, but when you are hit over the head with it, it seems kind of tight to me.”