The Driver Inc. Model Update: More Inspections and Fines Coming to Carriers

The Driver Inc. Model and its Issues

The Driver Inc. model has been long criticized by truckers and government officials alike. The model is a business operation which classifies a fleet’s drivers as independent contractors. Such drivers do not pay the same taxes as other drivers and owner-operators. As a result, drivers operating under this model seem to take home larger paycheques.

The arrangement itself is quasi-legal. Nevertheless, many fleets use the model to avoid the extra costs associated with hiring employees. For instance, a fleet would not have to pay an independent contractor CPP or EI like they would an employee. They pay less taxes too. Undoubtedly, this has caused massive losses in government tax revenue.

Canada’s Labour Program is now starting to investigate companies which misclassify their drivers. They warn there will now be fees and fines if an investigation uncovers a company knowingly misclassifying their employees as contractors to circumvent their employer obligations. The monetary penalties may range from $1000 to $12,000. This all is dependent on the size of the fleet and its overall revenue.

In addition, companies could be subject to enforcement methods such as compliance orders or prosecution. Labour Canada will be inspecting the pay records, contract details, workplaces and more on the behalf of select carriers. There should be more information about what the investigations uncover in the following months.

The ESDC and CTA on the Driver Inc. Model

Employment and Social Development Canada (ESDC) had some interesting opinions on the subject. Firstly, they hope the naming of specific employers who have violated the Code will provide incentive to become compliant. Some drivers may not even be aware the carrier they work for has been violating the Code. It is important they know their rights. Similarly, fleets found to be in violation may have to pay back money owed to employees.

According to Canadian Trucking Alliance (CTA) president Stephen Laskowski, several carriers have already been written. The carriers were identified as being in potential violation of the code. They have been notified an investigation is coming. However, these carriers will have a chance to change their model to become compliant prior to the investigation.

WSIB Audits

In 2020, the Ontario Workplace Safety and Insurance Board (WSIB) audited thirty-four fleets suspected of misusing this model. This resulted in twenty-one of them paying adjustments. In total, $933,468 was paid back. The adjustments accounted for reported contractor earnings and adjusted earnings. Interestingly enough, while twenty-one companies were required to pay adjustments, just four major fleets owed 90% of the total amount paid.

One of the fleets who paid adjustments in 2020 defended their business practices, suggesting it was a trend for many years. They say the issue is not the fleet’s classification of its drivers as independent contractors. Instead, they claim the issue is drivers not paying all the taxes they owe. Independent contractors are responsible for reporting their own income, unlike employees.

The fleet maintains that it will not have to pay adjustments again as they have altered their business practices and rules.

Independent Contractor vs Employee

The line between an employee and independent contractor can be a fine one. But, there are several questions one can ask to determine which definition they fall under:

  • How much control does the company have over the driver? If the answer is ‘a lot,’ they are likely not an independent contractor.
  • Does the driver provide their own tools or equipment? If the answer is no, they are likely not an independent contractor.
  • Can the driver decline work? If the answer is no, they are likely not an independent contractor.
  • How much financial risk and opportunity for profit exists for the driver? If opportunities are not lucrative, they are likely not an independent contractor.
The Unfair Advantage of the Driver Inc. Model

The CTA believes the Driver Inc. model gives certain carriers an unfair advantage over others. Oftentimes, a fleet operating under Driver Inc incurs payroll costs 35% cheaper than other fleets. Because these fleets expend less on payroll, they can enter bids for contracts with shippers at lower rates. All of this is having a damaging effect on law-abiding fleets.

Additionally, it is the drivers who work for fleets operating under the Driver Inc. model who suffer the most. According to Wendell Erb, chairman of the Ontario Trucking Association (OTA), the drivers are the ones who face the back taxes.  Moreover, some of them don’t even realize their employment status is being misclassified. They have no idea that their employer owes them additional benefits. Others specifically ask for their company to classify them as a contractor because they believe they can make more money.

The Future of the Driver Inc. Model

Companies currently operating under the Driver Inc. model are not giving it up anytime soon. Instead, they are adapting. They are looking for ways to skirt the rules without getting caught. Certainly, they will try to stay one step ahead of the government and regulations. Thus, it is important to continue the fight against the rule-breakers to protect drivers and those law-abiding fleets.

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