Driver Inc. challenges triggered by complaints, audits, and questionnaires

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Fleets that misclassify truck drivers as independent contractors rather than employees face a growing number of court cases when the business relationships come to an end — and transportation lawyer Carole McAfee Wallace doesn’t expect the challenges to end there.

“At any point in time I have at least three cases in which I’m dealing with a dispute over whether a worker is an independent contractor or an employee,” the Gardiner Roberts partner said Wednesday in a presentation about “Driver Inc.” business models.

When courts decide the truck drivers are in fact employees, fleets can be forced to hand over things like vacation pay, holiday pay, and overtime pay. The businesses can also be forced to re-pay deductions that can’t be taken from an employee’s wages without written authorization.

independent contractor agreement
(Photo: iStock)

Other costs can include administrative monetary penalties applied to Canada Labour Code violations. Although Just on Time Freight Systems of Brampton, Ont., is so far the only fleet that has been publicly named after receiving one of the penalties.

That $3,000 cost was paid in December 2022 after the fleet was found to be “treating an employee as if they were not their employee, in order to avoid obligations under Part 3 of the Canada Labour Code or to deprive the employee of their rights under Part 3 of the Canada Labour Code.”

Filling out ESDC questionnaires

Investigations are also being triggered by more than employee complaints alone.

McAfee Wallace, for example, referred to one case that involved a fleet which engaged an owner-operator who then hired truck drivers. It’s a common business model. But when one of those drivers was injured in a vehicle fire, Employment and Social Development Canada (ESDC) investigators determined that the driver was actually a fleet employee because of the name on the side of the truck.

It didn’t matter what the contract said.

It’s one of the reasons the lawyer stressed the need to take special care when filling out extensive ESDC questionnaires that ask workers and companies about control over work, tools and equipment, the chance of profit, risk of loss, and integrations.

“You have to fill out the questionnaire – but you also have the opportunity to make your case in a written submission that goes along with the questionnaire,” she said.

WSIB audits of Driver Inc.

Ontario Workplace Safety and Insurance Board (WSIB) audits, meanwhile, will raise questions after looking at a Commercial Vehicle Operator’s Registration (CVOR) that shows someone has 70 trucks and just two employees, she said. An abstract that identifies collisions without any corresponding claims will raise other questions still.

Unless the independent contractor owns or leases the truck they’re driving, the lawyer thinks fleets will have a hard time proving the people behind the wheel are truly independent contractors.

“Tools of the trade are one of the four factors [to determine whether someone is an employee]. I don’t know how you can disregard case law,” McAfee Wallace said, when asked about a Canadian Truck Operators Association (CTOA) lawyer who defended the Driver Inc. employment model.

But Gardiner Roberts partner Rui Fernandes alluded to grey areas that still exist.

“There are other industries where it’s allowed,” he said, referring to examples such as cable and internet installers. “They’re using a truck that has Bell or Rogers or Telus … They’re only working really for one company.”

Define relationships in contracts

While the model continues to be debated, lawyers at the seminar emphasized the need to take particular care with contracts that define relationships between fleets and contracted truck drivers.

Contract language that says someone is an independent contractor is not enough, McAfee Wallace said. Even the fact they pay sales taxes will not be enough.

“The Labour Board folks don’t really care about the tax implications,” she said, responding to a question from the crowd. “They just look at the worker and his or her rights.”

Regulators will be looking at factors such as whether the driver works exclusively for the employer, if they control the nature of work, own tools, have a direct stake in business success or failure, and whether they are integrated into the employer’s business.

It’s why she says it’s “imperative” to ensure written contracts will hold up to scrutiny.

“Vacation, those concepts that are similar to what employees are entitled to, take them out of your contracts,” McAfee Wallace said, noting that any language which suggests a specific level of control or an exclusive business relationship could be problematic.

Owner-operators and dependent contractors

The focus on contract language even needs to extend to traditional owner-operators who own or lease their own equipment. Their contracts should enshrine the rights to work for others – even if that would be difficult when they run under a carrier’s insurance and operating authority, she said.

“Companies may want to consider implementing policies wherein owner-operators are encouraged to provide transportation services to at least one other transportation company every six months to lessen the economic dependency that an operator may have on one company.”

Waters are further muddied by “dependent contractor” business models when someone relies on a single fleet for most of their revenue.

“Unlike independent contractors, a dependent contractor is entitled to reasonable notice of termination – just like an employee would be,” said Gardiner Roberts associate Saisha Mahil. In these cases, courts will look at whether the work was exclusively for one employer, the nature of work that was controlled, and whether the individual owned tools, took on risk, or was integrated into an employer’s business.

“A dependent contractor is entitled to reasonable notice of termination — just like an employee.”

– Saisha Mahil, Gardiner Roberts

It’s a matter of determining how economically dependent the contractor is on that organization, she said.

One Ontario Court of Appeal case ruled that “near exclusivity” would involve more than 50% of the revenue, but a separate case involving Westport Telephone suggested the share was closer to 80%.

“This number continues to be refined,” Mahil said. And courts are awarding up to 24 months of notice after contracts are terminated, considering factors such as the worker’s age and the availability of more work in the industry.

McAfee Wallace admits that the muddled business models are putting fleets in a difficult spot.

“They feel almost trapped – that if they don’t hire a Driver Inc. driver, they’re not going to have enough drivers,” she said. “They can’t get the drivers to understand that it really isn’t the great regime they think it is.”

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John G. Smith is Newcom Media's vice-president - editorial, and the editorial director of its trucking publications -- including Today's Trucking,, and Transport Routier. The award-winning journalist has covered the trucking industry since 1995.

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  • as far as I see the situation if the company owns the tractor the trailer ans also the insurance policy and they paying the fuel in the truck the company is paying for all that the driver is a employe and not a contractor , he should be pay as an company employe with all the benifits that’s come with,
    for the court case if the contractor is not paying for all that it is simple to prove the evidence of him being simple employe

  • Sounds like maybe the simplest solution is to take a step back in time to the good-old-days when we had driver pool companies and trip leases. Pretty much checks off all the boxes.

  • Drivers Inc is like opening a can of worms

    We live in a country that pays taxes to provide many different things, and as usual we still all complain it’s not enough! well, rephrase some!
    The single individual has a problem understanding how to manage money on a daily basis and get it right.
    So correct me if I’m wrong
    These taxes are paid to provide to all of us and before you get the negativity out about how it’s being spent I get it !!!!!!!! Nothing is perfect or this would be easy.

    The government is a non-profit run on Budget etc and all other. And yes overspending too, and you as individuals do it as well !! we are capable of this spending more than we have.

    When I look at the big picture of the feat to process Canada Pension plan old age security and all others it’s actually remarkable I must say. Some people can’t manage their day to day money affairs and keep it straight.
    Believe me, again nothing is perfect, me you, or them.

    So this Driver Inc will be detrimental to all of us regarding how much taxes are being collected, how much this individual understands, and how he may not benefit from it. The profitability goes to the one offering it., is the winner of fewer taxes and Liability to pay. Win-win. So beware Driver Inc old saying to good to be true !!!
    So do you get to the point?

    And if we allow this there could be Office Inc, plumper Inc, electrical Inc mother Inc, etc.
    The government will have to hire more people to chase these people to pay their portion due to creating higher taxes due to wages. The big mighty Snowball begins and you get mowed down first in line because you didn’t understand.
    So these Inc People could lose their homes cars etc. something they worked so hard for and for what a lesson in taxes? Liability
    Then the ultimate sacrifice will be for all
    We all will suffer with less coverage of health care higher and higher taxes no benefits to draw from no CPP no Old age no Lights no Streets no nurses doctors police anything depleted for nontaxes being paid.
    So there is a line and it needs to be maintained and needs to be upheld

    This won’t be Canada anymore
    Some may think it’s not now…so why are you still here?
    I love my country, let’s quit ripping it apart…..
    bit by bit

  • It looks like James, Shari and CTOA are the only ones that seem to think this is ok. This is especially concerning as she is a practicing labour lawyer and obviously has a tenuous grasp of the law and her client’s motivations.

  • This is the topic that keeps on giving. In my experience as an employer, and from over 40 years owning trucks and being in the trucking business in Canada, I have seen very very few drivers just break even, much less be successful operating under the Driver Inc model. As evidenced by the popularity of this relationship, drivers still think more gross income equals more net income. I have seen this to be the case only when drivers do not pay the appropriate monies to CRA, CPP, Worksafe, (here in BC) etc. Contract drivers do not get paid (as a rule) holiday pay, stat holidays, or any other remuneration received by an employee vs a contractor, which makes it obvious why companies push this arrangement. The self-discipline necessary to have any advantage at all under Driver Inc is rarely if ever applied by the people using this model. Instead there is tax avoidance and quite often personal bankruptcy as a consequence of receiving big cheques and not keeping money aside or remitting to CRA, etc. This is not a new thing but there seems to be a lot of interest in it due to the number of people in the trucking industry who will use any tool to lower costs so as to compete with lower rates or wring the last cent of profitability out of their trucking business. I hope there is maximum enforcement against this corrosive and self-defeating practice.

  • I’m glad there is going to be a crackdown on Drivers Inc. I’m an owner operator because the insurance companies made it so expensive buy insurance and the governments made plates so expensive it cheaper to lease onto a company. If I don’t like the rate or dispatch I take my truck and go somewhere else. The problem is owner operators who hire drivers to drive there trucks and do not pay into the system. And the majority of the problems are the lease to own bye the large fleets who won’t let the drives leave with there truck. Aka lease to own and never never plans.

    • So many Drivers Inc the Grocery delivery for loblaws and all

      and all those tax savings and still high Groceries lol!

      The driver pools even use the Driver inc
      look deep you will hear and ask you see the numbers and