Are you working for a Driver Inc. carrier? If so, you’re being set up 

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Driver Inc. is an emotional issue in our industry – and for good reason. The non-compliant behavior based on tax evasion and manipulation of the Labour Code is destroying the competitive landscape of the trucking industry and distorting the supply chain in ways we have never seen.

Driver Inc. is not a ‘new’ entrepreneurial strategy to get a competitive edge in trucking. Without a shred of doubt, it’s a systemic scheme based on profiting from skirting legal obligations, including – but not limited to – corporate and personal tax evasion, labor misclassification, misrepresentation of fleet registrations, insurance irregularities, underreporting of vehicle use and fuel consumption and, in some cases, forced labor through various abuses of immigration programs.  

CTA Driver Inc. message
(Image: CTA)

Carriers who abide by the law and refuse to participate in Driver Inc. are what the trucking industry needs; it’s what this economy needs, and, frankly, what our society needs if we want to be able to adequately fund our medical and education systems, infrastructure and the social institutions we have come to expect as Canadians.

Compliant carriers form the backbone of the supply chain – they are the true entrepreneurs who survive despite having all the cards stacked against them. They should be applauded and supported for their commitment to trucking the right way and supporting Canada’s social fabric.

Instead of being dismissed as out-of-touch or not entrepreneurial, they should be celebrated and emulated for their sustained success as legal, responsible corporate citizens.  

It’s an undisputable fact that Driver Inc. is illegal under every standard we have on the books. Let’s explore that without any of the red herrings that have been floated out there recently. Here are the facts:

This column will focus on the tax side of the scheme, but it’s important not to forget that the concept of a Personal Services Business (PSB) does not exist from a labor perspective. The Canada Labour Code only has two classifications: 1) employee; and 2) independent contractor. If you’re not a legitimate small business and do not own a truck or make equipment payments, you are an employee – end of story. 

Think being incorporated changes things? It doesn’t and ESDC is clear in its ruling on this matter:

“Of note is that whether or not a worker is incorporated does not factor heavily in a determination of employer-employee status. As such, Personal Service Businesses would not have special status….in this case we find that an employer-employee relationship exists and that the Code applies.” 

CRA

So how does Canada Revenue Agency (CRA) see things? Like ESDC, CRA recognizes employees and independent contractors, but also has another category called Personal Service Businesses (PSB). Like in the Labour Code, Driver Inc. drivers do not qualify as independent contractors for essentially the same reasons (does not pass the independence test). Therefore, if the worker insists on being an incorporated worker, they become a PSB. 

So, what is a PSB? CRA describes PSBs as an entity that provides services to a business that a regular employee usually performs. The person is labelled as an ‘incorporated employee’ and not a contractor or self-employed individual. So, if you don’t want to be an employee and you don’t qualify as a true independent contractor what does this mean for your taxes now that your company has made you a PSB?  

The combined federal and provincial tax rate applicable to PSBs in Ontario is 44.5%, which in nearly all cases will be higher than the effective tax rate payable by the driver on employment income.

In addition, you are also not eligible for many business deductions available to true independent contractors. Finally, it comes with many added business, legal and tax expenses a normal employee would not have, like special corporate tax filings. 

Combine these facts with all the compensation benefits a PSB loses as a non-employee, and the truck driver who becomes a PSB will see their total compensation package shrink considerably when compared to a truck driver who files taxes and receives compensation as an employee. 

What does that mean? It means there are zero – and I mean zero – tax and compensation reasons why you, as a truck driver, would want to be a PSB. Unless, that is, it’s your – or your company’s – plan that you will not pay your taxes, or to take deductions that are not legally available to PSBs. Don’t believe me? Fine. Read CRA’s memo on the matter. 

T4A

Before 2011, it was mandatory for all businesses to issue a T4A to their contractors to show payments made. In 2011, an enforcement moratorium was put in place.

Since then, CRA has been trying to resolve some issues in the business community – mostly not pertaining to trucking – around the issuance of T4As. The Canadian Trucking Alliance’s position is to bring back the T4A system, or something similar, just for trucking. Those who would object to this likely do so for nefarious reasons. 

Under a mandatory system with the enforcement moratorium lifted, under a CRA audit, if a carrier does not issue a T4A to a contractor, and CRA cannot track down the contractor, the carrier is on the hook for those contractor’s taxes.

The CRA will get what’s owed one way or the other. Why is this important to the Driver Inc. matter? Well, it means carriers can no longer wash their hands of tax obligations and if they start issuing T4As, you can be sure some of their drivers will walk to the next Driver Inc. carrier. I understand that is the legal conundrum of T4As and Driver Inc. But to that I say – well, welcome to the club of trying to operate and manage a legal business. 

CRA and the corporate veil

Some say the T4A is the key to escaping corporate responsibility as the CRA will not pierce the corporate veil between two separate businesses.

This is an important point of law that CTA supports. However, CTA also supports the application of law when a criminal conspiracy exists to circumvent the law by arranging a corporate system explicitly designed to create labor misclassification and tax evasion (not tax avoidance).

This is an interesting scenario for some in the Driver Inc. community, if CRA decides there is enough evidence where the corporate veil protection no longer applies. Interestingly, if accountants or other similar professionals (within a company or not) are found to be aiding or organizing this activity, they can personally be held responsible. 

Enforcement

When the CRA visits and they find problems, they are like guests who won’t leave. The penalties depend on a variety of factors (if you are not paying at all; or just improperly claiming deductions, and how long you have been doing this) but it’s safe to say this will hurt if you are caught. Whether it’s the company itself, a tax or legal professional who convinced you to do this, or you – as the driver – someone will eventually take the fall. And if people are telling you that this is OK – or that there’s some ‘grey area’ and you won’t get caught’ – well, chances are you’re looking at the ‘fall guy’ in the mirror. 

While each situation may be different, these are the potential consequences according to CRA:

  • Late filing/Failure to file penalties.​
  • Repeated failure to file penalties​.
  • False statements or omissions (gross negligence) penalties.​
  • Interest (interest on overdue amounts).
  • Potential for additional gross negligence penalty as well on the interest.​
  • There is no limit to how far the CRA can go back when an error or omission is discovered that is attributable to carelessness or neglect. In the case of possible PSB corporations, the normal reassessment period is three years from the date of the initial notice of assessment.​

Driver Inc. decoded

So, if a Driver Inc. company is trying to convince you to incorporate or become a PSB, this is what they’re really saying in plain language: 

‘Welcome to my fleet. I want you to become a corporation known as a PSB, take on the legal responsibility of a corporation and pay more taxes than you would as an employee. Also, all the protections and compensation benefits afforded to you under the Canada Labour Code – overtime pay, vacation pay, paid sick days, Canada Pension, Unemployment Insurance, work protections, etc. – are also gone once you sign on to the PSB program. With that, welcome to the underground economy. If the feds don’t catch you, you’re golden; if they do, you’re on your own and good luck facing tens of thousands of dollars in fines and/or back pay and perhaps even jail time for gross violations.’  

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Stephen Laskowski is president of the Ontario Trucking Association and Canadian Trucking Alliance.


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  • Interesting article on the understanding of the laws. Missing from all these descriptions is the criteria to qualify as a “contractor”.
    I believe CRA still has seven factors to determine one to be a contractor. A list of these things would be extremely helpful for drivers who still think that they can operate as a contractor and not pay taxes and buy the new pick up with all the extra money or they’re working for little They can’t afford to pay taxes.
    We have had a number of interviews with drivers from various countries that have immigrated to Canada and don’t fully understand and din’t want to understand what the cost is.
    All they know is that they are “contractor “they don’t have to pay tax but they don’t see the end when CRA come knocking on their door

  • Keep pushing everyone ! We need to take our legal companies to our next level ! Goodbye drivers inc !!

  • Well written article but remember this is Canada lots of laws on Taxes and Labor but like everything else regarding trucking “ZERO” enforcement. There is a huge lobbing group in Brampton that controls what the government does. Seamus O’Regan the Minister of Labor is in their pocket many pictures of him with this group smiling very happy to be with them.

    This group told Doug Ford they wanted MP from their riding of Brampton to become Minister of Transport. Done right away welcome Prabmeet Sarkaria. Truck crashes will increase what a joke.

  • This is an excellent article and tells it exactly as it is. Anyone considering the Driver Inc. Idea should be reading this. Thanks Stephen!!

    • Look at what happened in the U K when this law was enforced over 10% of the truck drivers quit the gov had to bring in the army to drive trucks. A excellent article but put some carrots by giving payroll truck drivers overtime and legal and medical help if things go wrong. Look at the A B5 law and bring some parts of it . Limit driver Inc to foreign drivers here on 8 month contract from April to Nov that do not vross the U S Canada borders. Form a group with a driver lease group and a payroll truck driver and Healthcare provider this problem could much reduced in 6 months in my opinion

  • Great article Stephen. If it’s not legal in Canada and they don’t pay taxes then the CRA shoukd charge them period. Everyone in Canada needs to play by the same rules period.

  • Stiil painting the issues with a single, wide brush, I see. The ‘undisputable fact that Driver Inc. is illegal under any standard’ is actually a very disputable fact. Myself, and many others in my position will periodically indulge in private contractor services, and none of us are, as you state, ‘skirting our legal obligations’, nor are we ‘being set up’. Those of us who work seasonally, with our own incorporated business, will on occasion work for someone else; a day here or there, nothing firmly scheduled, no commitment beyond a single day, sometimes only a couple days per year. In this case, as it’s invoiced through our company, taxes ARE paid, and all legal obligations met. What is saved is for the end user not to be required to file numerous reports to numerous agencies, for the sake of an extremely brief period of employment. We, as the service provider, do that ourselves. Your own members (‘those who should be celebrated….as legally responsible corporate citizens’)indulge in this practice regularly. Is there a carrier in existence that doesn’t utilize staff from a temp agency? Doubtful. Yet many temp agencies not only employ ‘Driver Inc.’ drivers (not paying appropriate taxes and deductions), they strongly encourage it. In essence, your members are fully supportive of a business model that they also loudly condemn. The hypocrisy is astounding.

    • The first srep is ro do away when any driver services s to any company with 3 or more than 3 employees or a office
      This includes walmart and any member of a trucking association also require all labour’s services to have proof o monthly payroll report and proof they are not on ont works or living in gov paid for hotels.

  • I agree Drivers Inc has to go. Companies offer ‘lease to own” deals. The company pays for all licenses, fuel, maintenance etc and deducts from the pay statement. How can these people be self employed truckers? This is going on everywhere. These drivers don’t find there own loads either but yet it’s allowed.

  • The lease operator model is the same situation. It does not say in the CRA code if you own a truck you are good.
    4 simple tests. You must comply with all 4 all the time no exceptions.
    Risk of loss
    Risk of profit
    Ownership of tools
    Control of work.

    A lease operator that is licensed, insured and runs under the carriers safety program is not a contractor.

    You don’t have control of work you have control of the work they decide to give you. They the carrier has the control no way out of that one.. Lease ops are just a great way to get trucks cheap with low risk and zero capex. Can’t go after driver inc without dealing with this as well.

    Want to see slow steady, controlled growth in trucking? Force them all to own everything and pay their employees by the code. That will halt our problems in a hurry. It will create new ones but that can be dealt with then.

  • Stephen
    What a great article. We do not use the driver Inc. model if that’s the correct term. We are a mix of unionized and owner operators. We are required to keep a minimum number of union employees. Going back 15 years ago, we would use temp agencies and hired from that pool to fill union spots. We have had numerous situations over the past 5 years where we offer a union spot to the temp and they say I want to get paid as a Driver Inc. If we insist they have to they leave, they will. The agency will place them elsewhere. We know for certainty their hourly rate is less than the union rate we would pay them, they would not only get OT at 40 hours a week, they get OT after 8 hours a day. If they worked one day for 15 hours they would get 18.5 hours pay. There are health and dental benefits that cost the company over 400 per month for a family rate. There is graduated vacation up to 6 weeks among other benefits. And they say no.
    I believe these people are brain washed into thinking the government is screwing them.

    Keep up the great work on this.