KINGSTON, Ont. – The April issue of Truck News explored the experiences of Lakeland 2000 as it came to terms with a Canada Customs and Revenue Agency (CCRA) ruling that its lease operators were in fact employees.

The response to this piece has been split almost dead even in three directions between, ‘Oh my God, I knew nothing about this pitfall,’ ‘The same thing happened to me,’ and, ‘Wake up, these rules are not new.’

While not entirely happy about the possible repercussions, many around the industry are glad the word is starting to spread among the less-than-legal folks.

“Most carriers are not doing what they need to,” David Bradley, chief executive officer of the Canadian Trucking Alliance, recently told the Kingston Centennial Transportation Club.

He complains most of the confusion stems from the four-fold test used to decide whether your contractors are of the dependent or independent variety.

“Clearly the fact they bring a $100,000-tool to work with them is a big factor,” says Bradley. “But it’s not the only one.”

As well as ownership of tools, CCRA considers the risk of profit and loss, the integration of the two supposedly independent operations, and the degree of control exercised by the alleged employer over the contractor.

According to Bradley, no one factor is given heavier weighting in the decision, although he is quick to point out, in the case of fleets leasing equipment, it becomes much harder to argue there is no control or integration present.

After reading about these criteria, a member of the management team with one of Canada’s largest fleets (they asked to remain nameless for obvious reasons) recently contacted Truck News to suggest their company may not have the proper safeguards built into its O/O contracts.

So even if the CCRA isn’t ramping up efforts on this front, pitfalls do exist and not quite as many fleets and owner/operators are as secure as they may think.

Exactly how do the feds decide on a target?

There really are a couple of ways says Colette Gentes-Hawn, a spokesperson for CCRA.

“Somebody’s job terminates and that person wants to claim employment insurance,” she says. In trying to decide whether the person has a right to employment insurance, an audit of the fleet is often triggered.

As well, there is a random process sweeping through the industry and it’s just a matter of time before your company gets hit.

“We do payroll audits and that’s another way this could come to our attention,” says Gentes-Hawn.

Employees and independent contractors treated similarly while generating different accounting entries generally tip a red flag leading to further investigation.

“We look at the relationship between the person doing the work and the person paying to have the work done,” says Gentes-Hawn.

“Is it, ‘Get this load to Florida by May 1,’ or, ‘We want you to leave tomorrow at this time and we want you to arrive at this time?'”

The CTA’s Bradley adds spending a little money up front ensuring you have a proper contract in place, protecting your divided status will go a long way toward keeping you off the CCRA’s radar, but it isn’t a magic bullet by any stretch.

In the case of Larry DiMaria, formerly the owner of L&DD Trucking of Prescott, he thought he had all of the necessary bulkheads in place – and in fact he did when first audited in 1993. By the time of his second audit in 1996 the federal agency changed its mind.

DiMaria’s situation was a little different mind you. His seven drivers and two owner/ops were paid as independents.

They all registered business names and were, at least on paper, individual driver services.

“We were audited in 1993 and everything was fine, but three years later they came back, did another audit and said we owed $32,000 in UIC and CPP contributions,” he says.

The rules were changed and DiMaria was on the hook.

“We got them paid but it nearly forced us to declare bankruptcy,” he says. “If they were planning to change the rules, it would have been nice if they could have let people know so we could operate within the law.”

At the time he had 90 days to pay the debt, so a second mortgage came out on the house right away.

“About six days after the letter came, they froze all of our assets,” says the former fleet owner who later gave up trucking for health reasons. “We had more than $75,000 in cheques come in and no way to cash them to pay the bill.”

He enlisted everyone from his bank manager to his local MP to help grease the wheels with CCRA’s predecessor.

“They called for me to say, ‘This isn’t right – this guy’s got 90 days to pay,’ and all they were told was, ‘We’re Revenue Canada, we can do whatever we want,'” he recounts.

“This is Canada, not Russia – it isn’t right.”

The one time fleet owner complains the rules are cloudy at best.

Gentes-Hawn says the agency realizes the rules can be confusing in some industries. To help ensure everything is done above board, she suggests contacting CCRA to get a predetermination before you ink a contract.

“It’s not an unusual thing,” she says. “It’s not frequent because for most employers it’s very well defined.”

This is obviously not the case in the world of trucking.

One group that’s out to fix the problem-areas plaguing fleet/ owner/op relations is the National Association of Professional Drivers (NAPD). Don Robertson, the western body’s vice-president, insists, “I’m going to make an issue of this.”

Aside from voicing his concerns at the next association meeting, he wants to see the matter brought to the attention of federal politicians and bureaucrats.

“We as an industry need to go to the government and say, Give us the resources to clean up our backyard,” he says. “These are the types of grey areas we need to clear up.”