Knock, knock. Who’s there? The Ministry of Labor.
OK, there’s no funny ending to that joke. But carriers – compliant and noncompliant alike – are increasingly being visited by Employment & Social Development Canada (ESDC), Canada’s federal labor department, as it looks to stamp out the illegal misclassification of truck drivers.
It had been about five years since J&R Hall was audited by ESDC. This year, it has been audited in both Ayr, Ont., and Winnipeg.
“They gave us about a week’s notice and told us what they wanted,” J&R Hall president Jeff Hall told trucknews.com. “They said ‘We’ll need about four hours of your time,’ but they were gone in 45 minutes. They were looking at driver files and strictly looking for Driver Inc. There was nothing else really even mentioned. It was focused on whether we had owner-operators or contract employees, which we don’t have either. So that’s why I think the session lasted as little time as it did.”
The auditors were pleasant, Hall said, and left satisfied that the company’s drivers are properly classified as employees.
Hall would like to see ESDC focus its resources on fleets that are more likely to be noncompliant but understands the need not to target specific segments of the industry. Overall, he’s encouraged to see stepped up enforcement of employment laws.
“I don’t ever want to be a noncompliant fleet, but if they’re not going to enforce these rules then what’s the point?” he asked.
The Canadian Truck Operators Association (CTOA) has accused the department of selectively targeting carriers from specific regions or communities.
“Misclassification cannot be used as a weapon to target an entire region or community,” the association wrote in a recent document sent to trucknews.com outlining its position on driver misclassification. “Compliance must be based on facts, not lobby-driven narratives. Education and collaboration produce better results than punitive blitzes.”
It said it wants the ministry to clarify if recent enforcement activities are random or regionally targeted and asked why the Greater Toronto Area (GTA) and “especially ethnically diverse companies” are disproportionately affected.
However, trucknews.com is increasingly hearing from fleets outside the GTA and those with traditional payroll arrangements with drivers who have also been audited.
OTA chairman gets a visit
Even Spring Creek Carriers of Beamsville, Ont., owned by Mark Bylsma, chairman of the Ontario Trucking Association, which has vocally condemned driver misclassification, wasn’t immune from the ministry’s scrutiny.
“We have never been audited in the previous 29 years,” Gerard Kuntz, safety director and driver liaison told trucknews.com.
“The inspector showed up unannounced June 3. She asked questions about all aspects of our health and safety program including our workplace safety committee, monthly meetings, site health and safety inspections. As well, she did a high-level WSIB audit to ensure federal compliance. She asked for documentation for a number of these items. We completed the audit with a safety inspection walk-through of the facility where she asked questions about health and safety matters.”
Bylsma said he continues to hear from OTA member fleets who have been audited.
“Everyone that has called me in the last few months/weeks to tell me they’ve been audited are not upset,” Bylsma said. “They don’t feel targeted and are happy to cooperate if it means an eventual end to Driver Inc. and the many other labor and safety issues that are plaguing our industry.”
Wellington welcomes audit
One such fleet is Wellington Group in Guelph, Ont. President Derek Koza has been critical of driver misclassification on social media and sure enough, ESDC recently popped by unannounced.
“The agents entered through reception, identified themselves, and within minutes were seated in our boardroom to begin the audit,” Koza recounted.
The auditors pored through employment records for all 350 staff, but gave special attention to the company’s driver force, which includes 104 full- and part-time employee drivers. A related company, Contract Express Ltd., was audited the prior day at a different location.
“No issues were identified. We have real-time access to payroll, driver contracts, and supporting documents, allowing us to clearly demonstrate the distinction between owner-operators and company drivers, and to confirm that all company drivers had source deductions completed each pay period,” Koza said.
Auditors demanded to see driver files, contracts and payroll records, which were viewed on screen with specific files then emailed to the ministry for record-keeping and authenticity verification.
Preparing for an audit
Celso Mata, Wellington’s chief financial officer, oversaw the audit. We asked him for advice on preparing for a Ministry of Labour audit.
“Given this was an unannounced visit, the best way to be prepared is to ensure records are always clean, current, and readily available to demonstrate that all drivers and operators are in full compliance,” he said. “For salaried drivers, payroll must be fully supportable. HR and payroll should be able to produce a clear breakdown showing that all statutory deductions have been properly withheld and remitted.”
Records for owner-operators are especially important, Mata said. He added the company must be able to clearly demonstrate, on the spot, that:
- The truck is owned by the individual listed as the owner-operator in the transportation management system (TMS) and reflected consistently in the earnings reports;
- Or where the driver operates through their own corporation, the driver can prove ownership of that corporation, supported by documentation such as articles of incorporation, director listings, and share ownership.
Koza advised fleets that honesty is the best way to be prepared for an audit. And he, too, is encouraged to see increased enforcement even if unannounced audits are time-consuming.
“If you are misclassifying drivers, the time is up. Take action now, because when auditors show up — and they will — you do not want to be out of compliance,” he advised. “Falling short will immediately impact your ability to operate, turning compliance into a scramble instead of a proactive, controlled transition.”
Koza said many carriers that misclassify drivers feel trapped within the model, fearing their drivers will leave en masse if forced to work – and taxed — as employees.
“That thinking is flawed,” he told trucknews.com. “Enforcement will not stop until this issue is corrected across the industry. Drivers who believe they can simply move elsewhere are mistaken — audits are coming for everyone. Our audit was quick and clean only because no noncompliance was found. Once misclassification is identified, agents will review every driver, issue a noncompliance report, and impose a strict timeline to become compliant. While it is still unclear whether back taxes will be pursued, the potential exposure for both companies and drivers is significant.”
