Fear and loathing in Canada

by John Curran

BEAUSEJOUR, Man. – Little 13-year-old Chelsea Barkman says her father always raised her and her brothers, Jordan and Brent, to be self-sufficient in life.

She’s worked hard cleaning and doing other odd jobs around the Lakeland 2000 office to pay for clothes, CDs or anything else she wanted that wasn’t an absolute necessity, and she knows she’s better for it, too.

Unfortunately, she has also learned a lot about the evils the Canada Customs and Revenue Agency (CCRA) is capable of once it decides to ruin a life: she admits she is afraid for her family’s financial well-being.

Her father, Brian Barkman, is the founder of Lakeland 2000 – a 30-truck fleet hauling a variety of freight through all of North America. The small carrier carved out a niche in the vast world of trucking by specializing in moving Paliser furniture manufactured south of the Rio Grande.

“Not a lot of people want to go to Mexico,” explains Todd Thurston, a relatively new addition Barkman’s team.

And the word “team” is used here in the Winnipeg Jets sense of the word: defunct, extinct, dissolved, vanished, ashes-to-ashes, dust-to-dust…

But unlike the rash of recent fleet failures across Canada related to the sluggish economy or poor corporate growth strategies, Barkman fell victim to a nefarious plot unfolding out of Ottawa, which threatens the very backbone of the Canadian trucking industry.

The lease/operator – a staple of many fleets in this country looking to build a talented stable of business-minded professionals while at the same time controlling capital costs – dwells at the heart of the matter. The big question is this: Is a lease/op an employee or independent contractor?

Mob tactics

When this federal syndicate of civil servants exterminated Lakeland over the lease deals it cut with independent truckers it ramrodded past any potential hiccups, such as fairness or due process, insists Barkman.

According to the now departed fleet’s owner, the situation is a clear abuse of power akin to that of any French Olympic figure skating judge with ramifications for not just the industry, but the entire country.

The CCRA railroaded the enterprising fleet into an early grave using every legislative loophole at its disposal.

“That’s the scary part,” says an emotional Barkman, “that’s the part that threatens everyone’s freedom.”

Despite the fact Lakeland is still heading to the Tax Court of Canada appealing two rulings – the first for the period from 1997- ’99 for $185,000 and the second from 2000-’01 in the amount of $200,000 – the CCRA seized money and receivables to cover the bill.

While agency officials publicly insist this would only be done as, “an absolute last resort,” given the haste with which the action was taken, this hardly seems to be the case.

In fact, Lakeland had paid the first portion of its tab fully expecting to get the money back on appeal. It wasn’t easy for the $5-million operation, but it thought the ordeal was finally over at the end of last year. That is until the CCRA struck a final death blow.

Thurston, who was set to buy into the business, explains he was on the phone with the revenue agency when he was told smugly, “Oh, haven’t you heard? There’s a second Order in the amount of $200,000.”

Like Tony Soprano greedily putting the screws to some degenerate gambler, the CCRA arbitrarily picked random accounting figures for the fiscal year 2001 without an audit and decided Barkman’s monthly vig would be $30,000 if he couldn’t come up with the full amount. Since his business now sleeps with the fishes at the bottom of the Red River, it’s not hard to see what the real motive was for the bullies from Bytown.

“Think how many big fleets there are, each using hundreds of lease/operators,” says Barkman. “How much money can they go after from the big guys if they set a precedent by taking a small guy like me down first?”

Not convinced the feds want to open the door on this Pandora’s Box? Consider the fact they went after Lakeland’s biggest customer, Paliser, for hundreds of thousands in receivables. While the company’s general manager of logistics, Bill Hilash admits it is routine for the government to garnishee for Workers’ Compensation premiums, he’s never seen this before.

“To my knowledge, this is the first time a shipper has been issued an Order to Pay for these types of source deductions,” he says.

Common practice

The current state of the industry is to treat lease/ops as independents; they’re responsible for their own Canada Pension Plan (CPP) source deductions and since they’re considered to be self-employed, no Employment Insurance (EI) premiums are collected from either party.

The system is far from perfect; all too often shady fleets have taken advantage of wannabe owner/ops through what is often referred to as trucking’s “never-never plan.”

New lessees find themselves saddled with high monthly payments and crippled by skyrocketing maintenance costs associated with used equipment. As if that weren’t enough, they’re often left with the dregs of their company’s cargo to haul.

But when a carrier takes the time to do it right, so the trucker is able to make a good living and pay-off their tractor, the arrangement is definitely a win-win. And it’s legal, or at least it was going into the Lakeland case.

As explained by Jean-Marc Ruest, a lawyer with Fillmore Riley, in a letter to Barkman, the generally accepted test for answering this question has always been the Weibe Door Services test.

In what became a precedent setting ruling, the Canadian Federal Court of Appeal said there were four issues to be considered in trying to determine whether a person is an independent contractor or an employee:

1. The degree or absence of control exercised by the alleged employer.

2. The ownership of tools.

3. The chance for profit, risk of loss.

4. The integration of the alleged employee’s work into the alleged employer’s business.

Barkman admits back when this saga really began in 1996 – when then Revenue Canada (now the CCRA) first took Lakeland to court in an effort to answer the question of employee versus lease/op – the way his business was set up, it probably didn’t pass these conditions.

“Based solely on the merits of the 1996 case, I would have lost,” he says. “However, due to a technicality I was about to win.”

As a sign of good faith, he says he walked away from his impending victory and agreed to pay Revenue Canada $13,000.

“I never wanted to fight,” he insists to this day. “I was just trying to go about my business.”

With the matter of 1996 settled, Lakeland rolled on. Agreements were formalized, O/Os and lease/ops with the company suddenly became equals – Barkman insists he learned his lesson and his lawyers agree.

“In considering all four aspects of the Weibe Door test, we believe that a strong case may be made to support Lakeland’s contention that leasing-operators are independent contractors,” writes Ruest. “On this basis, we recommend that an appeal of the CCRA’s assessments pertaining to 1997, 1998 and 1999 be pursued.”

This correspondence was acutely sent prior to the 2000-01 ruling came out on Jan. 11. A second letter was since sent by Fillmore Riley’s Cy Fien to the Minister of National Revenue.

“We believe that CCRA’s position will be found in error and the appeal will be successful,” writes Fien.

“However, such a victory will not matter much as our client will have lost its business by then.”

The system worked

Legal opinions aside, the true test of any fleet’s operation should always rest with its truckers.

“If anything Brian was too good to his lease/operators,” says Dennis Wohlgemuth, an O/O with Ohio-based Heyl’s Canadian operation. The 11-year trucking veteran served as the guinea pig for Barkman’s lease program.

He explains the two started out with a verbal agreement that was tweaked and fine-tuned along the way. The end result saw him able to buy out the contract in less than a year avoiding inflated interest charges and potentially crushing long-term debt.

“There are always go
ing to be disgruntled truckers in any operation and since we ran Mexico, a short trip out was two weeks and a long one might be four … there were people who wanted more home time,” he admits. “But if you understood business and wanted to make money, it was a great arrangement.”

According to Wohlgemuth, who climbed out of the cab for 10 years to be an attorney before signing on as a spareboard driver with Lakeland, Barkman always paid honest miles, kept his equipment in excellent shape and the lease/op rate was a true buck for someone who’d been there running safely for five years or more.

“He paid for all of the plates and registration, so once your maintenance, fuel and tires came out, practically everything else went in your pocket,” he says. Lakeland’s closure meant he missed two weeks on the road, but because his iron is now his own, his fixed costs are low and parking his ’96 International while he searched for a new job wasn’t a great hardship. While Wohlgemuth stresses he was lucky enough to land with another good company, “most of the guys are now probably finding out just how good they had it with Brian (Barkman).”

For Wayne Vogen, another former Lakeland lease/op, changing fleets has put his truck somewhat in jeopardy. The Beausejour trucker was still leasing his rig when the CCRA forced Barkman’s hand.

“I think I stepped into a fairly good company with Smith and Ruthorford, but it will be 35 days until I see my first cheque,” he relates from an anonymous mile of highway somewhere near Black River Falls, Wisc. Ironically he has been forced to reach into Ottawa’s pocket to make the payments on his truck.

“I’ve been dipping into what the CCRA is supposed to be getting,” admits Vogen, banking on the hope he can, “build it back up before taxes are due.”

Perhaps the situation is best summed up by one former lessee who asked to remain anonymous.

“I suspect Brian pissed somebody off somewhere in the CCRA,” he says. “There are some good people in there, but there are also a lot of incredibly incompetent individuals working in taxation who can never see the bigger picture.”

Economic impact

If the federal government suddenly slashed 3,000 jobs from the friendly province’s capital, Winnipeg, there would be a public outcry.

While the axing of 30 positions with a small cartage company may not sound like a catastrophic event, make no mistake, for the Rural Municipality of Brokenhead and the Town of Beausejour, the consequences are no less dire.

When you consider together they have a population of about 6,500 people – equal to about one per cent of Winnipeg’s approximately 650,000 – the grim results are clear.

In the heart of the small community’s downtown sits Vickie’s Snackbar.

This bustling greasy spoon is a testament to its owner, Frank Kazina, and his creativity.

Vickie’s not only boasts a tasty menu, it’s also a dry-cleaning drop-off point and a depot for Grey Goose Bus Lines – to say nothing of the fact that Kazina is also town mayor and chairman of the economic development corporation in his spare time.

“Our biggest beef, if this is something that many fleets do, is why didn’t the CCRA go after a much larger company from a larger community?” complains Kazina still wearing his apron from dealing with the lunch rush at Vickie’s.

“We’re working hard to keep people working locally so they spend locally … getting industry here means we’ve got a shot at keeping our young people in town – and they are our future.”

One such young person is Melissa Gmiterek. This 21-year-old worked at Lakeland handling the receivables and put her six months of formal training to good use around the Lakeland office in what was her first career.

“I don’t really have too many friends around town, they’ve mainly moved away to find work,” she sighs.

“This was just too perfect, I am so angry … now I’m probably going to have to take a job at Home Hardware or move to Winnipeg if I want something in my field.”

For another Lakeland employee moving to the ‘Peg is not something she wants to put her family through. With the exception of a short time when they were first wed, Darlene Winnicki and her husband have always called the Beausejour area home, but she knows finding another job that will give her the same income probably won’t come from the area.

“There are a few jobs like that around town,” she says, “but someone generally needs to die or retire for them to open up.”

Brokenhead’s Reeve Al Tymko says the systematic targeting and destruction of Lakeland will likely have long-term repercussions on the small municipality. Like any trucking company, Brokenhead faces a certain number of annual fixed costs – one of the most onerous being road repair and maintenance.

“Even though our population and tax bases are being eroded, we still have to deliver the same services,” says the long-time school principal. “We have 400 lineal miles of road to maintain to support a large agricultural base.”

He suspects the federal politicians have steered clear of the Lakeland debacle for one simple reason.

“When it comes to support from Ottawa, there are not many votes out here,” he admits. “So we are left playing second fiddle.”

Perhaps the nation’s leaders should consider forging into these turbid waters before the drama is repeated.

When Lakeland slipped under the surface for the third and final time, the $5 million it was pulling into the Canadian economy also slipped below the 49th parallel to a U.S. fleet.

The truly sad part of this story, however, is even though the prevailing legal opinion suggests Lakeland stands a great chance to win its appeal, the company has already met the same end as a raccoon that lingered too long on the Trans-Canada.

The hours Barkman has spent fighting for the last seven years will have fallen fruitlessly through the hourglass forever; something daughter Chelsea recognizes all too clearly.

“Nothing can ever repay the lost time with my Dad.”

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