More inspections, fines coming to Driver Inc. fleets

Canada’s Labour Program is beginning to crack down on fleets that misclassify truck drivers as incorporated businesses rather than employees – delivering another blow to the business model referred to as Driver Inc.

Labour Canada has already informed several carriers about plans to inspect pay records, contract details, and workplaces. And a related letter, reviewed by Today’s Trucking, warns of administrative fees and fines if a company knowingly misclassifies employees to avoid employment-related obligations.

Trillium Roadways served as a backdrop when former Minister of Employment, Workforce Development and Labor Patty Hajdu (right) said the federal government wanted to bring the misclassification of employees to an end. Since then, the fleet has seen one of the largest WSIB premium adjustments associated with reported earnings. (File photo)

The threat of fines, and the ability to publicly name employers that don’t comply with Canada Labour Code obligations, came into force on Jan. 1.

“Any employer who knowingly misclassifies an employee in order to avoid their obligations is contravening the (Labour) Code,” an Employment and Social Development Canada (ESDC) spokesperson said, responding to questions from Today’s Trucking. “Employers may be subject to various enforcement measures, including compliance orders, prosecution, or most recently administrative monetary penalties.”

The administrative monetary penalties relating to misclassified employees can range from $1,000 to $12,000, depending on the number of employees and the federally regulated fleet’s gross annual revenue.

“The naming of employers will act as an additional incentive to comply with the Code and related violations. It will also make current and potential employees aware of employers that have violated the Code,” the ESDC spokesperson said. That information would be published for “serious violations” once all reviews and appeals are exhausted.

Offending fleets will also be required to pay money owed to employees, the letter to fleets adds. Related workplace inspections will focus on health and safety legislation and regulations under the Canada Labour Code.

“They’ve written a number of carriers that have been flagged as to having potential issues,” says Stephen Laskowski, president of the Canadian Trucking Alliance (CTA).

WSIB audits

Those flags include recent audits by the Ontario Workplace Safety and Insurance Board (WSIB), which to date has led the biggest crackdown on the Driver Inc. business model.

“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,” says WSIB public affairs manager Christine Arnott.

Between April 1 and Dec. 31, 2020, these trucking operations collectively paid $933,468 in premium adjustments linked to factors including reported contractor earnings, adjusted earnings relating to T4 summaries, and adjusted executive officer earnings, figures supplied by WSIB show.

Thirty-four trucking businesses were audited, and 21 had to pay net adjustments.

While most upward adjustments ranged between $305 and $21,784, four businesses accounted for about 90% of the totals that were paid:

  • 2067485 Ontario Inc. (doing business as Trillium Roadways) — $310,692.78 for adjusted executive officer earnings, adjusted total earnings per T4 summary, and adjusted reported contractor earnings
  • 2264236 Ontario Inc. (doing business as Ameri-Can Systems) — $206,854.05 for adjusted total earnings per T4 summary, adjusted other earnings not on T4 summary, and contractor earnings not reported
  • Just on Time Freight Systems Inc. — $188,810.69 for adjusted total earnings per T4 summary, and contractor earnings not reported
  • Hassan Habib Transport Ltd. — $141,990.09 for contractor earnings not reported, and adjusted reported contractor earnings

Defending the practice

“That was a trend for many, many years,” Just on Time Freight Systems owner Kulwinder Nijjar told Today’s Trucking, defending his fleet’s past practice of classifying its truck drivers as independent contractors. The problem, he says, is that these drivers were not paying all the taxes they owed.

Fleets do not withhold source deductions such as Canada Pension Plan contributions, Employment Insurance premiums, or income tax from payments to independent contractors. But the contractors are responsible for reporting income. And employees are not eligible to claim many of the tax deductions available to businesses.

The difference between employees and independent contractors is also determined by a series of specific measures, including the level of control the fleet has over the driver; whether the driver provides tools and equipment; whether the driver can decline or subcontract work or hire assistance; and the degree of financial risk or opportunity for profit.

Nijjar confirms that Just on Time Freight Systems is among the carriers notified about Labour Canada’s pending inspections. “We got the letter a couple of weeks ago,” he says.

But Nijjar says he is confident his business will pass the current review because the fleet has changed its business practices.

Ameri-Can Systems, Trillium Roadways, and Hassan Habib Transport did not respond to multiple requests for comments.

In one twist of fate, Trillium Roadways’ offices actually served as a backdrop when then-Minister of Employment, Workforce Development and Labour Patty Hajdu pledged to crack down on businesses that misclassified employees.

At the time, fleet president Jaspreet Samra openly admitted to incorporating about half the fleet’s 96 drivers, saying it was the drivers themselves who requested the payment structure.

 “The whole industry is like that,” he said during the event in late 2018. “We offered both.”

The list of businesses that faced WSIB adjustments has been provided to Labour Canada.

“It will form a strong contingent of those who will be visited,” Laskowski says, referring to the WSIB list. “We would expect the next agency to come in is the CRA [Canada Revenue Agency].”

Laskowski also questions whether any Driver Inc. fleets have collected Canada Emergency Wage Subsidy (CEWS) payments for the truck drivers who are supposedly independent contractors.

“More than half of the companies on the WSIB list that were charged with classification issues are on the CEWS list,” he says.

The alliance also continues to lobby for further sanctions in other provinces.

An unfair advantage

The nation’s largest trucking organization sees Driver Inc. as an extension of the underground economy, giving carriers that apply the business model an unfair advantage when it comes to reducing costs.

Driver Inc. payroll costs might be 35% cheaper than those paid by rule-abiding fleets, and they’re using the gap to undercut rates, says CTA chairman Jean-Claude Fortin. Drivers, meanwhile, are left with the mistaken impression that they’re making more money per mile, he adds.

“They don’t pay taxes, no income taxes, and I think right now it’s just getting worse,” Fortin says. And he warns drivers: “You’re going to get caught at the end of the year.”

“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 shippers,” says Wendell Erb, chairman of the Ontario Trucking Association (OTA). At times he’s been told that some of Erb Transport’s bids are as much as 50% higher than winning bids.

“They don’t pay taxes, no income taxes, and I think right now it’s just getting worse.”

Jean-Claude Fortin, CTA chairman

Shippers might be inflating references to competing offers as a negotiating strategy, he concedes, but competitors are clearly undercutting rates.

“Every change that comes with ESDC [Employment and Social Development Canada] is always something that adds more onerous things for us as a carrier, some other benefits that we need to provide,” Erb says, noting that some fleets are avoiding such payments by registering employees as independent contractors.

 “That’s continually frustrating,” he says. “The unfortunate part of it is the driver is the one who is probably going to get the big penalties here, the back taxes.”

Erb is confident that the WSIB enforcement has already curbed the “explosive growth” that was seen among Ontario fleets adopting the Driver Inc. model. But he stresses the practice still remains.

The true number of Driver Inc. fleets is difficult to calculate, but it wasn’t uncommon for the truck drivers attending recent job fairs to show up at a booth and ask recruiters if the fleet will hire a numbered company, Erb says.

They simply walked away after learning the business model wasn’t offered.

An evolving underground economy

Laskowski notes that many driver recruiting ads have dropped references to saving GST and HST, recognizing that the promises would run afoul of taxation rules.

“They’re less flamboyant about it,” he says, referring to the way recruiters are no longer promoting the issue as a new way of doing business.

Still, Erb admits the fight needs to evolve, as fleets look for other ways to skirt the rules.

“The architects of these schemes are very complex, and I’m sure that as a sea change is coming along, they’re working on the next way to stay ahead of the curve,” he says.

“The Driver Inc. companies are having to adapt,” Laskowski adds. “They were brazen before.”

  • This article has been updated to include comments from ESDC.

John G. Smith is the editorial director of Newcom Media's trucking and supply chain publications -- including Today's Trucking, trucknews.com, TruckTech, Transport Routier, Inside Logistics, Solid Waste & Recycling, and Road Today. The award-winning journalist has covered the trucking industry since 1995.

Have your say

We won't publish or share your data

*

  • This practice is a scourge. The companies that are doing this know fare well it’s not in the best interest of the weak and uneducated truck driver. Jobs are being lost to this practice and families being torn up. Time to come down hard on these companies that are doing this.

    • Oh it’s better to pay taxes like the middle class rather than like the rich, you should try it Corp tax 8percent Alberta, just got my pay check as employee made 7000 in two weeks government took 3000. I’ve been on both sides and 8 percent is better than 30plus.

      • Huh… if you make $7,000 in 2 weeks that’s 43% tax rate. That amounts to $182,000 per year. I want to know where you work getting paid $3500 per week, so I can get a job there!

  • Long haul Cross border driver here:
    My previous employer has still not provided me with a ROE or a T4
    It’s messed up my EI payments.
    I’m out of $$ and will soon be out of a house if I can’t get another job.

    • If you were getting paid as Driver Inc., your not an employee. You’re not entitled to an ROE or a T4, nor were you entitled to unemployment benefits.
      If you were being paid as an employee, then you would be well advised to submit your claim for employment benefits and let Employment Canada deal with the offending employer.

    • Hi Rebecca were you actually paid as an Employee with CPP, EI and Tax Deductions listed on your pay advice slips? Companies have only until Feb 28 each year to issue T4 slips to employees and file them with CRA. If not… then you were possibly paid as an owner-operator contractor and are responsible for your own taxes, CPP & EI. See my comment made on June 7 above.

  • I’m a New Brunswick driver who a few years ago was considering a job with an Ontario based trucking company. I went to my lawyer and an accountant to ask questions about incorporating as a driver. Both of their first statements were “oh so your buying your own truck,good for you.” I explained no I’m just driving. They asked are you buying fuel?, responsible for maintenance? I said no, they asked then why are you incorporating? I never did go for that company, but was picking away at why it was such a popular practice in Ontario and didn’t seem to be done as much (if at all) in other province’s.

  • I for one welcome this initiative by all levels of enforcement. I visit many trucking companies in my employment and have been voicing warnings to them for years. They say that drivers ask for this, but many are also forced into it in order to get work. Companies are now looking at false lease models to lease a company owned truck to a driver to qualify him/her as independent. A new twist to deal with and also full of legal implications. I’ll be glad when all the loopholes are closed.

  • Just bring trucking into a trade make all company drivers and owner ops for O T R get $$27.00 or more cd on payroll. Local truck drivers with 5000 hours experience at least $23.23 on payroll. New truck drivers at least $19.00 per hour on payroll for the first 5000 hours. A much better solution.

  • The truckers get no benefits rn, no sick leave, vacation, health benefits nothing at all. They should be in payroll and getting the benefits all employees everywhere do. All truckers should form a union and talk to companies for their rights and stuff.

    • You are right the Ford gov and the trucking companies are going to protect truck drivers. A large trucking company is paying foreign exchange students only $17.50 on payroll that are doing city work in the G T A through a driver service. Many students are taking the option of $21.50 to a corporate account instead of very low wage from a large trucking company that self insured.

    • Nor should they get any of those benefits if they are being paid under Driver’s Inc. In those cases the driver is a corporation. Corporations pay their own employees those benefits, they don’t pay it to other corporations’ employees.

  • It is about time these fraudulent companies were shut down. They have been knowingly doing this for years. My only hope is they get to my competitors in Alberta soon.

  • Just to make something clear to all driver’s that operate under their own “Incorporated Company” AND the Corporation owns the truck and any other equipment or assets that are required to do the job as a contractor for another company or person: Corporations are accountable to the Canada Revenue Agency (CRA) and are responsible for filing a “Corporate Tax Return” (which can be very costly with an inexperienced bookkeeper or accountant). The contractor Corporation is also required to pay the owner-operator or other drivers under a CRA Registered Payroll Account. CPP, EI and Income tax must be deducted from the driver’s pay AND the contractor Corporation must also pay an additional Company portion of CPP and EI. Corporation must match the CPP deduction at a rate of x 2. If CPP driver Deduction from pay is $100 – the Corporation must pay CRA $200. If EI driver Deduction is $100 – the Corporation must pay rate of x 2.4 = $240.

  • Hi their are many companies putting drivers on cooperation still cra and labour’s minister are doing nothing even with the truck driving school in Brampton and mississauga CAMBRIDGE on top of the list MTO HAS TO DO SOMETHING they are operating totally illegal WAY tell you that why we are having safety issues and going back to the cooperation it should be stop from CRa

  • Congratulations to WSIB on a good scratch to the Driver Inc issue. 34 audits of out how many possibilities, with 61% of the audits providing revenue. imagine how much more than $938K is available.
    Furthermore, imagine how much CRA revenue is available, hopefully their 45,000 employees could generate.
    Imagine even further if industry players are this non- compliant with these rules/laws/regulations how they treat safety.
    The laws exist the rules exist, the enforcement is challenged and the good compliant folks in the industry are tired of the unfair and illegal competition.

  • From what I have seen over the past decade, Canada rarely actually lays fines that would prevent or otherwise strongly discourage this type of “usurious” corporate behaviour. All drivers should be employees or they should have to prove why they *should not be* employees (as in the case of perhaps small owner operated fleets or single owner operators who do not work per se for any specific fleet). A fine of what? a few hundred thousand dollars when top fleet executives drive around in six figure luxury cars? What a joke – and please don’t tell me that these owners aren’t benefiting from a corporate loophole that’s putting big money in (their) pocket since the fleets are not withholding proper taxes (because of many drivers are being “misclassified” as contractors or worse the companies force the driver to be a contractor in order to get work). You should see some of the high end luxury vehicles parked in front of some of these fleet offices. The general public has pretty much lost confidence in provincial and federal governments enforcing a more level playing field among trucking fleets. Does anyone in this day and age really believe what government officials say they are going to do? Remember everyone – “It’s not what you preach, it’s what you tolerate” and Canada appears to tolerate pretty much everything and the working class gets screwed as usual. Right?