Trucking leadership flags down ‘Driver Inc.’

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This article was published 19/07/2024 (445 days ago), so information in it may no longer be current.

Trucking companies operating illegally — by misclassifying employees to avoid paying taxes — are running rampant in Manitoba, according to the sector’s biggest advocate.

“It’s becoming a larger and larger challenge,” said Aaron Dolyniuk, executive director of the Manitoba Trucking Association.

Canadian industry leadership have been sounding alarm bells for at least six years. However, the problem seems to be getting worse amid an oversaturation of trucks and less demand for loads, Dolyniuk said.

Trucking groups call the scheme “Driver Inc.”

Participating companies have workers who don’t own or lease their trucks, effectively acting as employees. On paper, however, companies write off such employees as contractors or personal services, paying them by cheque or another method.

The industry has owner-operator contractors, but those individuals own their trucks and are a separate entity from the so-called Driver Inc.

Businesses operating under the Driver Inc. model avoid paying employment insurance, pensions, payroll tax and Workers Compensation Board fees.

The scheme may cost the federal government up to $1 billion annually in lost tax revenue, the Canadian Trucking Alliance estimates.

Neither Dolyniuk nor provincial Transportation Minister Lisa Naylor had an estimate on how much money Manitoba may be losing out on.

It’s unclear how many companies are participating in Driver Inc., Dolyniuk added. Most Manitoba trucking firms are small; a slice of the industry, perhaps 20 per cent, consume the lion’s share of orders.

But the big businesses are losing customers. The Free Press spoke to executives from three Manitoba-based national trucking companies on the condition of anonymity.

Smaller corporations not paying labour costs are offering lower prices to clients than those who are paying taxes can offer.

“It’s taken away any competitive advantage that we’ve built up,” said one executive.

The Workers Compensation Board of Manitoba has increased trucking company compliance checks in response to rising concerns from stakeholders, spokeswoman Sarah Wallace wrote in an email.

Since January 2022, the WCB has issued more than $115,000 in fines to Manitoba trucking companies for under-reporting their assessable payroll, which can be a sign of Driver Inc. activity.

Manitoba’s trucking industry was dinged for 24 WCB compliance penalties in 2022-23, up from three between 2019-21.

Some people in the industry, including executives of major companies, believe the fines aren’t enough.

One called them “minute,” adding “the return on your money (for non-compliance) is as good as anything out there.”

There are repeat offenders, racking up multiple fines within a few years.

Dolyniuk believes companies operating legitimately could shutter due to non-competitiveness with Driver Inc. rivals.

“Much like any other industry, you get what you pay for,” Dolyniuk said.

“You pay less, what are you getting for that? Probably a driver that’s trained less, probably a company that doesn’t care about safety and a company, at this point, that doesn’t care about tax and labour standards.”

He worries road and public safety are negatively impacted, as well.

The issue persists during what Dolyniuk described as a “freight recession.” Demand for trucks boomed during the COVID-19 pandemic; trucking companies haven’t seen the same revenues over the past year, he said.

And there are more trucks to choose from. Manitoba Public Insurance clocked a 21 per cent increase in registered semi-trucks between 2020 and 2024.

“Over the pandemic, because there was so much demand for freight, we saw an explosion of new startup companies,” Dolyniuk said.

He believes Driver Inc. is becoming more prominent as companies look to save money and gain a competitive edge.

Currently, the province hosts 16,108 registered semi-trucks, up from 13,278 in 2020.

Industry leaders also expressed concern about workers under Driver Inc. conditions. Some seek the model for a higher take-home pay, one executive said; another added the setup, however, could result in “slave labour.”

Workers at such companies may not receive vacation time and other government-mandated rights.

There’s likely a correlation between Driver Inc. and labour and immigration abuse, Dolyniuk said.

Since the beginning of 2023, seven of nine Manitoba businesses charged for not complying with the Temporary Foreign Worker and International Mobility programs have been trucking firms.

The Manitoba government has formed a working group with stakeholders and its own departments to tackle exploitation within the trucking industry. Manitoba is also working with other provinces to bring Driver Inc. to Ottawa’s attention, according to Naylor.

“The scale of this issue — it’s national, probably international,” the cabinet minister said. “Manitoba can’t do this by ourselves.”

According to an Ontario Workplace Safety and Insurance Board report, between January 2019 and March 2020, 47 per cent of 204 audited trucking firms had under-reported driver earnings, which can be an indicator of misclassification.

Dolyniuk believes a blanket mandate requiring trucking companies to issue T4A slips would solve the problem of Driver Inc. (The T4A identifies amounts paid during the calendar year for certain types of income from many different sources, including self-employment, according to the government of Canada website.)

Such a change would create auditable paper trails for income, Dolyniuk said. “If people want to be paid as contractors, there’s a way to chase up and ensure that they’re paying their portion of income tax.”

In 2022, the federal government earmarked $26.3 million over five years to curb non-compliance related to employee misclassification. The difference has been minimal, Dolyniuk contended.

There’s been more help at Employment and Social Development Canada (ESDC), but the Canada Revenue Agency has provided a “lack of resource or support,” Dolyniuk added.

The CRA generally takes an “education-first” approach when non-compliance is identified, spokesperson Benoit Sabourin wrote in an email.

The government branch is reaching out to potential personal services businesses to review their books, Sabourin continued, adding it has “enhanced data-sharing” with the ESDC.

The ESDC has used the $26.3 million to create a team of inspectors focused on eliminating employee misclassification. Since April 1, 2023, the ESDC has inspected 50 Manitoba trucking companies, spokesperson Maja Stefanovska wrote in a statement.

The ESDC can’t release information on specific employers, but it found non-compliance related to misclassification, the statement reads. Stefanovska points to a legislation change in June, where gig workers are considered employees until proven otherwise in federally regulated industries.

“The onus is now placed on employers to prove that a worker is a legitimate independent contractor,” she wrote.

The onus to halt Driver Inc. is, in part, on customers who knowingly use companies that operate illegally, industry executives said.

Former federal labour minister Seamus O’Regan was on the Driver Inc. file. He announced his resignation Thursday and didn’t answer Free Press questions beforehand.

gabrielle.piche@winnipegfreepress.com