O/Os: Employees or independent small businesses?

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In recent months there have been a number of publicized cases with regard to the status of owner/operators. In Quebec, we have seen the conflicting stories over whether owner/operators will be forced to unionize.

In Ontario, O/Os at a major carrier were recently unionized following an Ontario Labour Relations Board decision. A Manitoba carrier recently went out of business after a dispute with Revenue Canada over the status of its drivers.

The Ontario Ministry of Finance has issued new guidelines for independent operators and the Employer Health Tax. And, the Ontario Workplace Safety Insurance Board, recently announced that it too was revisiting the question of independent contractor coverage.

Clearly the ownership of a truck is a key determinative factor, as is incorporation. But, they are not the only criteria. The law is the law, and while it is open to interpretation, it must be considered when entering into a business relationship.

Various departments, agencies and boards of our federal and provincial governments have the power to decide whether a vehicle operator is an independent contractor, or if he/she is an employee of the company.

Not a new issue

Moreover, these organizations may not always come to the same determination for the same driver. While the criteria used by the various government players to make a status determination can be different, they all follow certain common law tests, to one degree or another.

(In Quebec, civil law is used which brings with it a somewhat different approach, but the major issues are similar regardless of the jurisdiction.)

This is not a new issue. Nor is it clear that the threat of the “death of the owner/operator as a small independent business” is any greater now than it has been in other years.

However, the uncertainty that is being created would justify such thoughts and action must be taken to bring some stability to the situation.

But what action? There are those who argue that the answer is to change the law. If only it was that simple. Regardless, it is important for owner/operators and carriers to understand the basis upon which these determinations are made and to establish business arrangements that speak to business independence.

The old adage, ‘Looks like a duck, walks like a duck, smells like a duck…’ certainly applies. If an owner/op looks like a worker under the various legal criteria, he will likely be deemed a worker. If he looks like an independent small business he is more likely to be deemed as such.

It is imperative, therefore, that owner/operators and carriers – if they want to maintain the advantages that accrue to both parties from a relationship built on independence – make themselves aware of the guidelines and other criteria used by the various agencies they deal with.

About three years ago, the Canadian Trucking Alliance and the provincial trucking associations published a booklet The Owner-Operator and Revenue Canada: Employee or Independent? One of the country’s foremost labor lawyers was engaged to write the 25-page booklet chalk full of useful tips and information that could potentially save a lot of heartache and money down the road.

If you want a copy, contact the product sales department of your provincial association. Let’s just say that up until now sales have been underwhelming.

But why is that?

Have most owner/operators and carriers consulted with their respective legal advisors and entered into properly structured contractual relationships? Or, have too many simply continued to do things the way they have always done without understanding the law?

Case-by-case basis

The mere existence of the industry custom of individuals owning, maintaining and driving a truck and considering themselves to be self-employed is not enough. Moreover, each case will be looked at on an individual basis.

All facts and circumstances will be considered. What is happening with other owner/operators and carriers, or what is customary in the industry is not necessarily of any particular relevance.

As difficult as it is to accept some of the decisions, it is also difficult to assert that a witch-hunt is under way, or that there is a general desire on the part of governments to put an end to the use of owner/operators.

It is the nature, form and substance of the relationship between an owner/operator and a carrier that is considered.

The tests used by most government agencies have basically evolved from a series of court decisions that have been rendered over recent decades.

Generally, four basic tests are applied: control, ownership of “tools” (equipment), chance of profit/risk of loss, and the integration test.

In a nutshell, the greater the control exercised by the carrier, the more likely a relationship of employer-worker will be determined. Can the O/O turn down loads?

In terms of ownership of the equipment, some of the key criteria used are the amount invested by the owner/operator, the value of the truck, whether the equipment is leased/rented and who is responsible for maintenance.

With regard to the chance of profit/risk of loss, it is important that the owner/operator have the ability to exercise entrepreneurial discretion. Can the O/O choose where to buy fuel, for example?

There are owner/operators that have to accept that if they wish to enjoy the tax and other benefits of being independent small businesses, they cannot also expect the protection that comes from being a worker.

Who is responsible for losses associated with delays, bad debts or operating costs?

The integration test basically asks the question: Does the owner/operator consider the carrier to be part of his commercial activity, or is the owner/operator part of, or integrated into the carrier’s business? Issues such as company colors can become important.

These tests are usually to be considered using a “four in one” or “fourfold test.” In other words, the entire relationship is to be examined.

Various factors

Clearly, there are peculiarities within the trucking industry that cloud the waters – the legal requirements relating to operating authorities, and safety, for example – that compel owner/operators to be attached to one carrier, or be subject to a certain degree of control. These must all be considered.

While the mere existence of a contract is not foolproof (governments can still look at what is being done in practice) a good written contract is still very important.

Where the four tests do not clearly determine owner/operator status, the intention of the parties in their written contract will likely govern the situation, or at least be fully considered.

I have heard so many complaints over the years with regard to problems in the relationship between a carrier and O/O.

My first question is always: What does your contract say? I have also heard an equal number of reasons for why there is no contract.

I am just the lobbyist. I’m a former economist, not a lawyer. It is not for me to tell anyone how to run their business.

However, I do feel that many of the problems associated with questions arising out of the status of the relationship between carriers and owner/operators could be answered satisfactorily if a properly structured contract existed between the two parties.

So, rather than waiting for some bureaucrat to come and tell you what you don’t want to hear, why not consult with a lawyer first and make sure that your contract points to a relationship of independence, not boss-worker.

David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.


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