Over the past few years an alleged increase in the misclassification of truck drivers as independent contractors – known as “Driver Inc.” – has received a lot of attention within the Canadian trucking industry.
In previous articles, we have addressed the difference between employees and independent contractors, as well as the potential consequences of misclassifying a worker.
In this article, we will discuss practical and legal considerations for whether a company may want to hire truck drivers as employees or independent contractors.
Employees
In general, employees work for their employer – their work and working hours are dictated by their employer; their employer may supply/maintain the tools required for the work; and employees usually do not work for multiple employers at the same time.
There are advantages to hiring employees such as worker loyalty, availability, and exclusivity to the company; the ability to train the worker to do the job exactly the way the employer wants it done; the ability to have complete oversight over the work being done; greater control over when, how, where, and what work is done by the employee; and building long-term trust and camaraderie with that worker.
Drawbacks
There are some drawbacks to hiring employees, as well.
Employers need to ensure that employment contracts and termination provisions are drafted carefully to guarantee enforceability. If they are not enforceable, an employer may be liable to provide dismissed employees with their common law entitlements (which can be much greater than what employees are entitled to under the relevant employment standards legislation), or with the balance of the contract (if it was a fixed-term contract).
Employees are protected by employment standards legislation, as such, employers are required to provide employees with all applicable statutory entitlements, including vacation and holiday entitlements, as well as the various job protected leaves. Further, interprovincial and international trucking are governed by the Canada Labour Code, which includes an unjust dismissal section that can make it complicated to dismiss certain employees without cause.
Further, employers are responsible for making the appropriate salary deductions (e.g., taxes) and the appropriate contributions (e.g., EI and CPP) for their employees.
Independent Contractors
In general, independent contractors are in business for themselves – they will often control their own hours, control how the work is done, supply their own tools, do work for multiple clients, set their own prices, etc.
Many employers want to use independent contractors because they are not protected by employment standards legislation and it is the independent contractor’s responsibility to take care of their own taxes, contributions, or other work-related costs or fees.
There are also other advantages to using independent contractors as workers:
Independent contractors are great for situations where employers only need workers with a specialized skillset for a specific project (or for a specific period of time). For example, if machinery only needs to be examined by someone with a special certification every few years, instead of keeping a qualified person on as an employee all the time, an employer may look to hire such a person as an independent contractor only when the examination period arises.
Hiring independent contractors also permits the employer to have flexibility when it comes to the size of their workforce. A company may want to limit their workforce to the number of employees they typically need for normal business operations and use independent contractors to increase the workforce when required.
Given that independent contractors will typically supply their own tools, hiring independent contractors to temporarily increase the size of the workforce means that the company may not have to invest in supplies that they do not normally need. For example, when facing a busy period requiring extra truck drivers, a trucking company that normally provides their employee drivers with company-owned trucks may want to hire independent contractors who own their own trucks so that the company does not need to purchase/supply trucks that are not needed for their typical business operations.
Drawbacks
While there can be many benefits to hiring independent contractors, it is important for employers to be aware of the potential drawbacks.
Employers will not have the same level of control over independent contractors as they do over employees. If an employer wants to control or oversee the work or the worker – how the work done, when it is done, the various steps of the work, the timing of the work, what other jobs the worker can take on while doing the job for the employer, etc. – then the employer may be better off hiring an employee rather than an independent contractor.
Further, as independent contractors usually work for many employers, they may not be available when an employer needs them.
Finally, a large risk employers take when hiring independent contractors, especially if the contractors become highly integrated into the company and are treated similarly to employees, is the potential that a court, tribunal, or other legal authority will find that the worker was misclassified and has actually been an employee all along. The employer may then end up on the hook for any statutory entitlements the worker should have but did not receive, and could also face additional penalties (including monetary penalties) for the misclassification.
Final Note
It is important for trucking companies to properly identify what type of worker will suit their needs the best, engage in a relationship with the worker that properly reflects whether the worker is intended to be an employee or independent contractor, and have expertly drafted contracts in place.
Please do not hesitate to contact us if you require assistance.
