Driver Inc. - The Misclassification of Truck Drivers as Independent Contractors

Driver Inc. - The Misclassification of Truck Drivers as Independent Contractors

Over the past couple of years, organizations such as the Canadian Trucking Alliance have raised concerns about the Canadian trucking industry, alleging there is an increasing practice of misclassifying truck drivers as independent contractors. This situation has been called "Driver Inc."

Taxes and employment standards are two large legal areas where it is important for truck drivers to be correctly classified. While there is plenty of overlap in these two areas with respect to worker classification, there are also some differences between the Income Tax Act ("ITA") and the Canada Labour Code ("CLC"). For example, under the ITA, there is a "Personal Service Business" classification that incorporated truck drivers may belong to, however that classification does not exist under the CLC.

This article explains the differences between employees and independent contractors for the purpose of the CLC.

Why is worker classification important?

How a worker is classified determines whether or not they are able to access the entitlements and protections of the relevant employment standards legislation, such as the CLC.

A worker's classification as an employee or independent contractor impacts whether the employer is obligated to comply with the CLC for overtime pay, statutory leaves, vacation entitlements, etc. It also impacts whether the employee is able to access unjust dismissal protections.

Worker classification issues often arise when a worker seeks to access protections or entitlements under the CLC.

Who determines the classification of a worker?

In general, an independent contractor is in business for themselves while an employee works for someone else. In practice, it actually can be quite difficult to determine which category a worker falls into.

While a company and worker may agree, and even sign a contract stating, that a worker is an independent contractor, that agreement does not prevent the Labour Program (the government department that oversees compliance with federal labour legislation, including the CLC), a court, or an arbitrator from determining that the worker is actually an employee based on an assessment of the facts of the work relationship.

Factors considered when determining the classification of a worker

Typically, when the Labour Program, an adjudicator, or a court assess the classification of a worker they will look at factors such as:

• The level of control the Company has over the worker's work and how it is done;
• The ownership of tools and equipment;
• The worker's ability to subcontract work and/or hire assistants;
• Financial risk - the worker's chance of profit and risk of loss; and
• The worker's integration into the workplace. 

Some indicators that a worker is an independent contractor are:

• The worker does not work exclusively for the company, they are permitted to also hold contracts with other companies for the same kind of work;
• The company has limited control over how and/or when the work is done;
• The worker owns their own equipment and/or tools and are responsible for their care and maintenance;
• The worker is permitted to subcontract out the work they were hired to do, or hire an assistant to aide them in completing the work;
• The worker has operating costs and takes on financial risks that may result in losses (i.e., the worker may need to make investments to provide the services required and they do not get reimbursed by their "employer" for work expenses), but may also result in profit;
• The worker can set their own prices;
• The relationship between the worker and the company is one for specific jobs/tasks, rather than an ongoing indefinite relationship; and
• The worker is not required to wear uniforms, hold themselves out to be a part of the Company, be "supervised" by a Company supervisor, or attend Company meetings.

Some indicators that a worker is an employee are:

• The worker is not permitted to work for other companies (or for themselves) doing the same kind of work;
• The company dictates how and when work is done;
• The company provides the tools and equipment and is responsible for their care and maintenance;
• The worker must do the work themselves - they cannot subcontract it out or hire an assistant to aide them without the permission of the Company;
• The worker is reimbursed for work-related expenses;
• The worker does not have any operating costs and does not need to make any sort of investment to do their work;
• There is no risk of "loss" to the worker;
• Often the relationship between the worker and the Company is ongoing and for an indefinite term; and
• The worker may be required to wear a uniform or comply with Company attire policies, hold themselves out to be a part of the Company, be supervised by Company supervisors, and attend Company meetings.

Why is this important to trucking companies?

If it is determined that a worker who has been treated as an independent contractor is actually an employee, the company will need to become compliant with the CLC or risk facing consequences such as administrative monetary penalties and having the company name published in connection with the CLC violation.

Under the CLC, it is the company's onus to prove that a worker is not an employee, but rather an independent contractor (s.167.2 of the CLC). As such, it is important for companies to understand how their relationship with their workers will be assessed, and what factors will be considered when classifying a worker.

At Hyde HR Law, our expert lawyers are able to assist employers in identifying how their workers may be classified and any associated statutory obligations, identifying potential risks if there is a misclassification determination, managing ongoing worker relationships, as well as in setting up contracts and establishing the appropriate relationship with workers at the start of the relationship. Please do not hesitate to contact us.