Fleets that misclassify employed truck drivers as independent contractors – a model often referred to as “Driver Inc.” – was once seen as a phenomenon mainly affecting Ontario. But the business model is now crossing the Quebec border in full truckloads, and carriers in that province are sounding the alarm.
“We’ve been talking about this scheme in Ontario for 10 years. Now it’s gaining momentum here, and we have to stop it,” says Groupe TYT president Patrick Turcotte.
“We’re up against crooked entrepreneurs who know the system inside out. They’re organized,” adds Groupe Robert president Michel Robert.
They were among seven executives at major Quebec trucking companies interviewed by Transport Routier, all concerned about businesses that use the scheme to avoid source deductions and other employer obligations.
“These companies bid on dedicated contracts. They also use brokers. We’re losing trips left and right,” adds Jean-François Pagé, executive vice-president at Transport Hervé Lemieux.
10% cost advantage
Labor costs represent 35% to 50% of fleet operating costs, leaving Driver Inc. companies with a 10% cost advantage, he explains. “Ten percent in transportation is a difference that will make a shipper quickly turn to another carrier.”
All the fleet executives expressed concerns that employees at non-Driver-Inc. companies will ultimately suffer because of the lost revenue.
“The gains that have been made in recent years, for example in truck driver wages, risk being lost if law-abiding companies lose contracts and revenue to companies that shirk their tax and social obligations,” Pagé says.
Daniel Bérard, President of Danfreight Systems, agrees wholeheartedly. “When you cut rates, you put pressure on the financial performance of companies that pay their drivers according to legitimate methods, so you prevent these drivers’ salary evolution.”
Losing drivers
There’s also a risk that employed drivers will quit and move to those that offer the Driver Inc. model, because the net income for an incorporated business can seem enticing.
“In the trucking industry, there is a long history of companies using the misleading Drivers Inc. practice, whereby drivers are encouraged to self-incorporate and operate as independent contractors without being provided information on the downsides of the practice,” Finance Minister Chrystia Freeland said when delivering the fall economic statement.
“By not classifying drivers as employees, companies are denying them access to important rights and entitlements under the Canada Labour Code, such as paid sick leave, health and safety standards, employer contributions