MISSISSAUGA, Ont. — For many, independence is one of the most alluring aspects of becoming an owner-operator, but just how independent are they? It may depend on whom you ask.
Many owner-operators may consider themselves to be independent, but does the Canada Revenue Agency (CRA)? How about the Workplace Safety and Insurance Board (WSIB), a quasi-government agency in Ontario whose definition of independence varies even from that of CRA?
Getting it wrong can be costly, for both the carrier the owner-operators are contracted to and the owner-operators themselves. A panel at a recent Driving for Profit seminar shed some light on what constitutes an independent owner-operator.
Tracy Gustafson, senior manager, private company services group with PricewaterhouseCoopers, said there are five factors taken into consideration by CRA to determine whether an owner-operator is truly independent:
Do they have control?: Can the owner-op decide where they go and what loads they haul? Can they determine how their days and weeks are run? Can they haul freight for other companies?
Do they own their own tools?: In this case, the truck.
The degree of financial risk: Who is incurring fixed costs that won’t be reimbursed if there’s a shortfall?
The opportunity to generate profit or loss: Does the carrier help offset any losses generated by the owner-operator?
The degree of integration: Can the carrier survive without the owner-operator or is the owner-op integral to its business?
While those guidelines may seem clear enough, Cezanne Charlebois, a lawyer with Charlebois Law, said WSIB has a different definition and in some cases may determine an owner-operator is in fact an employee, even when CRA deems otherwise.
“They have their own criteria,” she warned of WSIB.
Even incorporated owner-operators could be deemed employees by WSIB, she added.
“It doesn’t matter if you’re incorporated or you’ve spent the last 10-20 years believing you were self-employed and independent and following all of CRA’s rules,” she said.
If WSIB deems an owner-operator an employee, it will seek two years’ back payments for WSIB premiums from the carrier.
Contracts between carriers and independent owner-operators must be iron clad to ensure there’s no room for misinterpretation by WSIB, Charlebois warned. She also warned against requiring owner-operators to attend safety meetings or undergo mandatory training – anything that shows they’re treated the same as company drivers.
“If you invite all your drivers to mandatory health and safety meetings or training meetings, you are now putting your owner-operators, your self-employed businesspeople, in the category of being deemed employees. You’re essentially treating the whole group of them the same,” she said.
She also noted contracts with independent owner-operators should not make reference to possible discipline.
“Take that word right out of any independent owner-operator agreements you have,” Charlebois advised, since it implies an employer-employee relationship exists.
“You must remember to treat them as self-employed independent owner-operators, not in the same way you would treat an employee driver,” she added. “That is what will get a carrier and owner-operator into a huge amount of difficulties in the WSIB system with a surprising amount of premiums landing on their plates.”
But this is easier said than done, acknowledged Marilyn Daniel, chief operating officer of Titanium Transportation Group. She said the carrier has a legal responsibility to ensure its owner-operators are adequately trained and safe, even if it means treating them, in some ways, like a company driver, for example by submitting them to a road test before signing them to a contract.
“The problem you have is, there are overlapping lines, no matter what everybody says,” Daniel explained. “Do I want the safety culture to be any different (between company drivers and owner-operators)? No. Do I want them to attend mandatory meetings? Absolutely. Do I want them to have the same tests and training? Yes.”
Daniel said Titanium ensures its contracts are well written to emphasize the owner-operators contracted to it are free to haul freight for other companies and exercise their independence. She also urges owner-operators hauling freight for Titanium to seek third-party advice from experts.
“I always advise, especially new owner-operators, I always tell them we’re not the experts. Find your accountants, get advice from them,” she said. “When I give them a contract, I give it to them ahead of time and tell them to read it, to take it to someone who understands it. They’re going to spend money but it costs money to start a business. As carriers, our job is to say ‘You need to get advice,’ not, ‘Buy a truck and we’ll decal it and off you go.’ There’s a bit more to it than that.”
Charlebois conceded there’s a case to be made for treating owner-ops and drivers the same when it directly affects a carrier’s risk and liability exposure.
Even if a carrier’s relationship with its owner-operators is clearly of an independent nature, there are certain things that will attract scrutiny from both CRA and WSIB.
Gustafson said CRA is likely to conduct payroll audits on carriers, which could raise questions about the status of their owner-operators.
“The chances are, if the company is doing one wrong, they’re doing a lot wrong,” she noted. “The onus is on the carriers and the companies that contract with independents to make sure they have all their ducks in a row. You don’t want to be caught saying ‘I just didn’t know.’ The punitive measures fall on your lap in terms of source deductions that weren’t remitted on behalf of this person.”
There are several ways a carrier can find itself under WSIB’s microscope, Charlebois said. One is just being successful. “If you are a big, rich successful carrier, you are going to get audited for sure,” she warned. “They want to see what you’re doing with your owner-operators so they can capture more premiums into their premium web.”
Carriers are also often scrutinized when one of the owner-operators hauling for them seeks out-of-province medical care and doesn’t mention to their medical caregiver that they have their own alternative insurance coverage. This will lead the Workers’ Compensation Board (WCB) in whatever province they were injured in to pay for their care and then seek reimbursement from WSIB, leading the WSIB back to the carrier.
“All of a sudden you’re in a mess of unimaginable proportions,” she warned.
She added carriers must also ensure their independent owner-operators have adequate coverage outside of WSIB.
“Worse, is an owner-operator who has decided somehow to go without any disability insurance and now is without a mechanism of getting replacement income,” she explained. “What does the owner-operator do? Calls up WSIB, WSIB is out in full force, that person is going to get benefits, guaranteed, and your company is on a list to be audited.”
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