Understanding Driver Inc. | What Shippers need to know

What is Driver Inc.

Driver Inc. is a business model that involves a trucking company classifying its Drivers as independent contractors rather than employees. The primary reason behind this classification is to minimize the company’s tax/insurance liabilities and avoid providing the benefits normally required for employees by treating them as partners rather than employees. In theory, this is a great way to reduce overhead costs on the part of the trucking company. Still, it has been criticized by many in the industry because of the red flags it raises around worker rights, insurance requirements, and taxes.

What’s The Impact?

Driver Inc. impacts the trucking industry in several ways- some more profound than others.

Driver Inc. can lower carrier costs by reducing employee-related expenses, resulting in artificially lower bids for freight services. These lower prices come at the expense of the Drivers by stripping them of the rights, protections, and benefits that typically come with an ’employee’ status. In the worst cases, Drivers new to Canada are charged by Driver Inc. carriers for ‘immigration assistance’ to help start their new careers and then ultimately held captive to poor conditions and pay. This arrangement is illegal and a form of human trafficking that is getting more exposure in the industry.

This all becomes an issue for the shipper when the increased weight of that burden results in Drivers not adhering to proper safety standards, Driver regulations, or maintenance schedules that are normally required of full-time employees. Exposing shippers to the legal risks associated with carriers that are not fully adhering to labour/tax laws and potentially holding them liable alongside the carrier for any unpaid wages, taxes, or penalties.

How can you spot carriers operating with the Driver Inc. model?

To spot a carrier operating under this model, you have to look at the conditions its Drivers are working under. Even though most Owner-Operators work as independent contractors, Carriers operating under the Driver Inc. model will have multiple Drivers working under employee-like conditions without the benefits you would typically expect for someone working full-time.

The Ontario Trucking Association recommends asking your carrier various questions like:

• Do they have incorporated Drivers operating carrier-owned equipment?
• Are they making the necessary source deductions from Driver pay and if they are remitting their share?
• Do they issue a T4A to each Driver for tax purposes?

For a full list of questions and more tips on what to look out for, take a look at this comprehensive tip sheet made by the Ontario Trucking Association. https://ontruck.org/wp-content/uploads/OTA-DriverIncTipSheet_public.pdf

Conclusion

While on paper Driver Inc. may seem like a good way for shippers to obtain lower prices and cut overhead costs, but it puts them at significant risk and can pose a myriad of challenges that can have lasting impacts on their business. It is always best to seek out a carrier with a reliable track record and transparent practices. Look for carriers who have a good reputation and established safety protocols to avoid the risks that come with the Driver Inc. model.

If you think a carrier is using Driver Inc. practices, please report it to the Canada Revenue Agency (CRA) Leads Program here: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/suspected-tax-cheating-in-canada-overview.html 

For more information about Driver Inc., check out these valuable resources:

• https://www.stoptaxandlabourabuse.ca/
• https://ontruck.org/help-deliver-driver-inc-warning-to-the-supply-chain/
• https://cantruck.ca/media-reports-wage-theft-misclassification-plaguing-trucking-industry-drivers-complain-about-driver-inc/
• https://cantruck.ca/esdc-announces-data-agreement-with-cra-to-facilitate-driver-inc-enforcement/
• https://cantruck.ca/where-is-cras-plan-to-deal-with-driver-inc/
• https://www.canada.ca/en/employment-social-development/corporate/portfolio/labour/programs/labour-standards/reports/misclassification-trucking.html#h2.1
• https://cantruck.ca/cta-to-shippers-check-your-supply-chains-for-modern-slavery-human-rights-violators/