The Growing Concern Surrounding Driver Inc. in Canada

In recent years, the Canadian transportation industry has seen the rise of a controversial employment model known as "Driver Inc.". This model, which involves classifying truck drivers as independent contractors rather than employees, has sparked significant debate and concern within the sector. Shippers using transportation companies that use this model should be wary of the legal and ethical implications that come with it.

At its core, the Driver Inc. model is a way for trucking companies to classify company drivers as independent contractors, even though they work just like regular employees. Unlike owner-operators, these drivers do not own their own tractor; they are driving a company-owned asset just like a "company driver".

However, the difference is that these drivers are not considered employees. They are typically responsible for their own taxes, insurance, disability coverage, yet they have little control over their work schedules or routes, resembling traditional employees.

The appeal for trucking companies using this model lies in the significant cost savings, as they avoid paying various employee benefits and contributions, such as Employment Insurance (EI), Canada Pension Plan (CPP) contributions, and employer health taxes.

Legal and Regulatory Implications

The legal landscape in Canada is becoming increasingly hostile to the Driver Inc. model. Government agencies, including the Canada Revenue Agency (CRA), Employment and Social Development Canada (ESDC), and provincial workplace safety insurance providers (such as the WSIB in Ontario) are cracking down on companies misclassifying employees as independent contractors. Misclassification can lead to substantial penalties, back-payment of owed contributions, and damage to the company's reputation.

Moreover, as this model skirts the boundaries of legal employment standards, trucking companies might face lawsuits from drivers seeking compensation for benefits and protections they would have been entitled to as employees. This legal uncertainty makes reliance on the Driver Inc. model risky for any business.

Ethical and Social Considerations

Ethically, the Driver Inc model is contentious. It often places the financial and operational burden on drivers, who may not fully understand their rights or the implications of being classified as independent contractors. This arrangement can lead to precarious working conditions, financial instability for drivers, and a general erosion of fair labour practices in the industry.

From a social perspective, the widespread use of this model can undermine the standard employment framework, contributing to a decline in job quality and stability in the sector. It also threatens the public purse, as fewer contributions are made to social programs like EI and CPP.

What Can You Do?

Trucking is a low-margin, highly-competitive industry. If you’re receiving freight quotes that are significantly lower than what is quoted by other transportation companies, that should set off red flags. Some questions you should ask your carriers include:

What are the carrier’s labour practices? Ask them how they pay their drivers and if they use ‘incorporated drivers’ who operate the carrier’s equipment.

Ownership of ‘tools’ – in this case a truck – is a key component of the WSIB’s, ESDC’s, and CRA’s test for independence. True owner-operators (independent contractors) will own or lease their truck while incorporated drivers that do not have a financial stake in their ‘tools of the trade’ will likely be considered employees by regulatory authorities.

Ask the carrier if they are making all appropriate source deductions and if they are remitting their share.

If the company does not have true owner-operators, ask if they are holding and remitting income tax on behalf of their employees. Are they also paying the employer portion of CPP and EI? Companies not meeting these requirements for their employees are committing serious offences.

If you can find advertisements for the carrier online (on their website, postings on job boards, etc.), have a look at their pay packages for drivers.

If the job is a seemingly normal driving position, but indicates that the employer pay “+HST” or they “ pay to corporations”, this is a signal the carrier may be a Driver Inc. company.

When drivers who would normally be considered employees incorporate and participate in Driver Inc., there is a chance the company is not paying the driver’s WSIB premiums as well.

This means when your firm utilizes these drivers and/or they are on your property, you might be putting yourself in a precarious position. It is also not unusual for Driver Inc. companies to register a very small percentage of their drivers in order to produce a clearance certificate. To limit your liability exposure, it is good practice to ensure your carriers have coverage for all of their workers.

If the company has incorporated drivers, ask if they issue each driver a T4A for tax purposes.

They should be doing this if their drivers are incorporated and operating as personal services businesses (PSBs). And don’t forget – even if this is being done, if these are Driver Inc. drivers, and not true owner-operators – the carrier may still be in violation of labour laws.

Other questions you might want to ask

• Have you ever had a WSIB audit? If so, what was the outcome?

• What is your WSIB certificate number? And how much did you pay in WSIB premiums last year?

• Please provide proof your Employer Health Tax (EHT) remittances were paid last year How many employees were the EHT remittance for?

• How many company trucks do you have? And what is your total T4 payroll expense?

• How many CVORs do you operate and what are the numbers?

Every company wants to save money. But ask yourself this: if low cost carriers are cutting corners and knowingly mistreating workers, what other ways are they breaking the law? Are they endangering public safety by cheating on hours of service rules (as did the company involved in the Humboldt Broncos crash)? Are they intentionally disengaging green, anti-emissions technology on commercial trucks? The old adage “ you get what you pay for” has never been more true in today’s trucking market.