Question Period Note: INCORPORATED DRIVERS IN THE ROAD TRUCKING INDUSTRY– EMPLOYER-EMPLOYEE RELATIONSHIP

Incorporated drivers in the road trucking industry or commonly known as, the Driver Inc. model are often employees misclassified as independent contractors in order to avoid obligations under the Canada Labour Code.

As Minister of Labour, I am committed to promoting fair, safe and productive workplaces across Canada.

The Government of Canada is committed to working with stakeholders to ensure federally regulated employees and employers are aware of their rights and obligations.

The Canada Labour Code includes a provision that prohibits federally regulated employers from misclassifying employees to avoid their obligations or to deprive employees of their rights.

Any employer who knowingly misclassifies an employee to avoid their obligations may be subject to various enforcement measures, including compliance orders, or administrative monetary penalties under the Code.

The Labour Program continues to engage in awareness activities, targeted proactive inspections as well as investigation of complaints to address the misclassification of employees. Initiated in September 2022, a coordinated rollout of activities is underway and this issue will be the focus of proactive measures on a national scale.

The 2022 Fall Economic Statement proposes to provide $26.3 million over five years, starting in 2023-24, to Employment and Social Development Canada to take stronger action against non-compliant employers through orders, fines, and prosecutions to enforce the Canada Labour Code.

In 2018, the Canadian Trucking Alliance (CTA) first raised concerns about the incorporated driver model, noting that this model creates an unfair competitive advantage for compliant employers who treat their drivers as employees and respect their obligations under the Canada Labour Code (the Code). They have asked the Labour Program and the Canada Revenue Agency (CRA) to investigate employers who use the incorporated driver model and take action where non-compliance is found. The timeline continues as follows:

In December 2019, the CTA initiated a campaign encouraging its members to send letters to Members of Parliament asking that the government enforce the labour standards provisions of the Code.

In January 2020, Labour Program and CRA officials met to discuss opportunities for collaboration. While halted due to the pandemic, further discussions resumed in late 2021.

In December 2021, Labour Program officials began meeting regularly with CRA to collaborate on this issue. Overall, the collaboration has been positive but legislative differences between the LP and the CRA requires ongoing coordination.

Starting summer 2022, the Labour Program initiated a comprehensive communications plan on social media (Facebook, Twitter, LinkedIn) to raise awareness of the employer-employee relationship and to inform of the pitfalls of misclassifying workers.

Compliance Measures under the Canada Labour Code

As of January 1, 2021, any employer who contravenes section 167.1, i.e. knowingly misclassifies their employee to avoid their obligations under the Code or to deprive employees of their rights, may be in violation of the Code.

The Code contains a number of enforcement tools to support compliance of Part II (Occupational Health and Safety) and Part III (Labour Standards) – such as Directions, payment orders, and administrative monetary penalties.

Drivers who are registered as an incorporated entity usually do so as part of an agreement with a carrier to sell their driving services as an independent contractor. Drivers who become incorporated are not treated as employees by their employer; they are paid without source deductions and do not benefit from labour standards protections under the Code. They also do not receive the full occupational health and safety protections afforded to employees as they are considered persons who are granted access to the workplace.

When the Labour Program receives a monetary complaint against a federally regulated employer, an officer investigates the complaint to determine whether an employer-employee relationship exists following program guidance. If an employer responds that the complainant is not their employee, they have the burden to prove that the worker is properly classified.

When and employer-employee relationship exists, the officer may enforce the provisions of the Code and make a determination of amounts owed. The officer may issue a Payment Order to the employer if the employer does not voluntarily comply and pay the amounts owed.

An employer who knowingly misclassifies an employee in order to avoid their obligations will be found to have misclassified their employee. Employers may be subject to various enforcement measures, including compliance orders, or administrative monetary penalties.

Administrative monetary penalties provides for a range of escalating monetary penalties that the Labour Program may impose on employers. In this case, the penalty for contravening the misclassification provisions could range from $1,000 to $12,000 depending on the size of the employer (as assessed by the number of employees and/or gross annual revenue).

If Pressed: Fall Economic Statement funding to address misclassification

The 2022 Fall Economic Statement proposes to provide $26.3 million over five years, starting in 2023-24, to improve working conditions for thousands of employees, including newcomers and racialized Canadians while creating fairer, safer workplaces for everyone by ensuring that federally regulated transportation employers are not misclassifying their drivers.

When drivers are intentionally misclassified as independent contractors, employees are deprived of rights and protections under the Code, including wage entitlements, health and safety protections, and access to paid leaves, among others.

Drivers that are employees should be protected by the Code. This investment does just that by enforcing existing rules prohibiting labour misclassification. This investment will build the Labour Program’s capacity to enforce these provisions and ensure that employees can access the rights and protections that they are entitled to.

Enforcement activities include educating employees and employers of their obligations under the Code, inspections, and issuing compliance orders.