For the first time in years, the federal government is following through on promises to get serious about enforcing laws regarding the misclassification of drivers. That should lead shippers to take a close look at those who haul their freight — and consider locking in capacity with carriers that comply with such laws.
The Canadian Trucking Alliance and its related provincial member associations have lobbied against the so-called Driver Inc. scheme for years. They say a significant portion of trucking companies use incorporated drivers (those who are employees in every other sense) to operate company-owned equipment as a way to reduce costs by skirting payroll deductions.
Drivers often prefer the model because there has been little oversight as to how – or if – they pay income taxes, critics allege. Those who support the model say it’s about freedom of choice. Of course, drivers adopting this payment method also forgo legal labor rights that are there to protect them, as well as employment benefits such as vacation pay and paid sick days.
A moratorium T4A slips – in effect since 2011 in response to pushback from businesses that didn’t want to issue T4As for all service payments – was lifted for the trucking industry in the recently passed federal budget. At the same time, the feds promised to crack down on the misclassification of drivers in the trucking industry. Yeah, yeah. We’ve heard that before.
But this time things feel different. There seems to be actual enforcement taking place. And with teeth.
This has rattled the Canadian Truck Operators Association (CTOA), which claims its member carriers are facing the brunt of direct enforcement.
In a press release issued this week, CTOA said 60% of its Toronto-area members have received Employment and Social Development Canada (ESDC) inspection notices, with many given just 48 to 72 hours to respond.
CTOA argues the timing couldn’t be worse, in peak freight season with the industry under pressure from U.S.-imposed tariffs on Canadian goods. It characterizes this as “the most economically fragile time in a decade” and says the short notice given fleets subject to ESDC inspections is “unreasonable, punitive and disrupts operations during peak season.”
But you know who’s not being disrupted? Carriers who refuse to engage in the misclassification of drivers.
Derek Koza, president of Wellington Group of Companies, said his company welcomes scrutiny of its employment protocols. In a LinkedIn post this morning, he urged carriers to: “Audit your classification practices. Clean up your contracts. Make compliance a selling feature, not an afterthought. When enforcement hits full stride, the companies that have been doing it right won’t just survive, they’ll lead.”
Shippers need to be aware that many of the low-cost carriers they’ve relied on during this three-plus year industry downturn are already strained to the limit. If they have survived the industry’s most persistent downturn on the merit of misclassifying company drivers as independent contractors, then their days may well be numbered.
There is an abundance of capacity in the market and has been for some time. An enforcement crackdown on driver misclassification won’t cause a supply chain crisis. (We were told the 2023 bankruptcy of Yellow Freight and the loss of its 30,000 drivers would do so, but the capacity was absorbed by the market in a hot minute).
A driver misclassification enforcement crackdown, however, may spark a capacity crisis within shipper organizations that have turned a blind eye to the employment law violations committed by the carriers that haul their freight.
The time for shippers to audit their carrier base is well overdue, particularly if they hang their hats on employment, social and governance (ESG) policies. (Let’s not forget the S and the G in ESG.)
Another reason shippers need to be more attentive to who’s hauling their freight comes from south of the border, where a crackdown is underway on illegally issued non-domiciled commercial driver’s licenses and drivers deemed to lack English language proficiency.
There, U.S. Secretary of Transportation Sean P. Duffy, has warned shippers that the DOT could come after them directly if they use such drivers to haul their freight.
“I will hold trucker companies and shippers that load up big rigs ACCOUNTABLE! A company can’t hire a trucker and do it knowing they can’t speak English,” Duffy posted to X on Oct. 31, after an appearance on FOX News in which he threatened the same.
For too long, shippers have willfully ignored the question of whether the carriers that handle their freight comply with employment laws. They do so now at their own peril, as enforcement on both sides of the border appears to be getting real.
Credit: Source link
