Transportation, Distribution, Logistics

TRUCKING AND TRANSPORT INDUSTRIES A  HOTBED OF CONTRACTUAL COMPLEXITY

In this day and age most commercial activities involve the formation and application, interpretation and enforcement of contracts but none more that the trucking and logistics industry.  From service/employment agreements with employees, independent contractors and dependant contractors to truck leasing and financing agreements this industry demands both the use and interpretation of complex agreements that while not appearing complex or confusing when entered into can be when and if problems arise.

A prime example of the contractual problems that can arise in this industry commonly found in the contracting of independent owner operator drivers/contractors.  It is often believed that the companies agreements either self or professionally drafted to ensure that these independent contractors cannot and will not be considered employees with all the obligations and remittances that flow from this status, however, the Courts upon review of the circumstances of this type of agreement have on consideration of the conduct of the parties and the nature of the performance of the agreed services have found that even if both parties to the contract agree and assume that the driver is an independent contractor he or she can be found to be a dependant contractor or employee raising issues both as to governmental remittances and questions as to wrongful dismissal upon termination of the agreement.  This position is well outlined in the case of Decision No. 1392/17, 2017 ONWSIAT 3980 (CanLII) which held;

(iv)   Decision

(a)         Worker or Dependent Contractor?

[7]                                         In this case, the ARO correctly cited Board Operational Policy Manual (OPM) Document No. 18-02-08, which states the following in regard to determining whether an individual is a dependent contractor:

Dependent contractor

The Labour Relations Act, 1995 defines a dependent contractor as a person, whether or not employed under a contract of employment, and whether or not furnishing tools, vehicles, equipment, machinery, material, or any other thing owned by the dependent contractor, who performs work or services for another person for compensation or reward on such terms and conditions that the dependent contractor is in a position of economic dependence upon, and under an obligation to perform duties for, that person more closely resembling the relationship of an employee than that of an independent contractor.

In general, dependent contractors are remunerated based on the gross earnings received for performing a certain contract of work, sometimes referred to as piecework, for a contractor. The contractor does not issue a T4 statement since payroll taxes are not deducted at the source. A dependent contractor may report as a self-employed individual for income tax purposes with the Canada Revenue Agency (CRA). To be considered a dependent contractor, the worker must be covered under the contractor’s WSIB account at the time of injury.

[8]                                         The ARO concluded in this case that the worker was a dependent contractor.  In reaching that decision, the ARO found that the employer would provide a route and pay the worker a gross amount for driving the vehicle on that route.  He was paid for the miles he drove by cheque, with no statutory deductions.  The worker did not receive a T4 slip and reported gross earnings to Revenue Canada.  He also paid his portion of CPP, Tax and EI.  The employer did however pay premiums to the WSIB on behalf of the driver.

[9]                                         The worker also testified in this case that he was 62 years of age and came to Canada in 1995.  He stated that he worked in a pizzeria and a factory before opening his own restaurant for several years.  He stated that he also began working as a truck driver in 2000.  He stated that he worked for a contractor that did long haul trucking for another company.  He stated it was typically temporary work several times a year.  He stated he stopped driving for a time when his wife became ill in 2005, and he also closed the restaurant.

[10]                                      The worker stated that he returned to truck driving in January 2008, working for a contractor who did long haul truck driving as a subcontractor for another company.  As noted above, the Board and ARO concluded that the worker was a dependent contractor.  However, as the worker testified, the nature of his arrangement when driving was not as an owner of a business, but similar to that of an employee.

[11]                                      I note first that there were some features of the worker’s job that seemed more in keeping with a dependent contractor relationship.  For example, it was confirmed on file that the worker was engaged on an as needed basis to co-drive with the owner of the truck.  He only worked for a short time and he was paid by cheque, without statutory deductions.  He was also evidently paid a commission calculated by the miles driven, and not a standard hourly wage.  He did not receive a T4 slip and paid into CPP on his own.

[12]                                      That said, the worker also worked exclusively for the subcontractor, who owned the vehicle driven.  He also was essentially on call to drive as needed for that company.  He did not have any ownership stake in the company or in the truck being driven.  He did not pay for insurance, fuel or maintenance/repairs, and he did not broker or negotiate the loads.  He was in brief, an on-call as needed co-driver, without any exposure to profit or loss, no responsibility for expenses, and was told when and where to drive.  Put succinctly, he testified that he was not conducting his own business, which was the reason he did not produce any financial statements, as they did not exist.

[13]                                      The worker also stated that he would have continued driving for the subcontractor, but for the accident, as he needed full-time work.  Further, while the summary of his tax information appeared at first glance to indicate he was self-employed, the evidence overall did not support a finding that the worker was operating his own business.  He stated that the bottom line was he was a worker who was simply paid to drive the truck.

[14]                                      In this case, it was evident that the worker was employed as an as needed driver, who was not operating his own business.  Rather, I agree with the submission from the worker’s representative that the employer had significant control over his work schedule, training, job duties, and assignments.  The employer set the rate of pay per mile, it was not negotiated.  The truck was provided and the worker had no financial obligation for the truck, gas, maintenance or insurance.  Nor did the worker deduct any business expenses from his gross pay as reported for tax purposes.  It was also notable that the worker received training and was expected to be available to drive on a full-time basis.  Again, he had no control over when or where he would drive, and was to follow the orders of the dispatcher.  

[15]                                      The worker’s employment circumstances are not unlike those in Decision No. 235/14, submitted by the worker’s representative.  As stated by the Vice-Chair in that decision:

[17]  It is clear that the appellant was not an “Owner Operator” as he did not own the truck he drove or any other equipment used to generate income. He simply drove the trucks provided by the employer. There are some indicia which indicate that the appellant could be classified as a dependent contractor, namely, the employer did not make source deductions from his income after he started driving on a commission basis, and the worker registered a business and reported his income to the Canada Revenue Agency (“CRA”) in the name of the business. However, in my view, an examination of the real nature of the working relationship between the appellant and the employer reveals that he was a worker rather than a dependent contractor.

[16]                                      The Vice-Chair in Decision No. 235/14 went on to note a similar working relationship to the one at hand, and also noted that the worker had gone so far as to register a business.  The Vice-Chair also dealt with the nature of as needed driving work similar to this case, in that it was not “piecework”.  Rather, the Vice-Chair concluded the following:

[19]         Thus, the only reason the appellant registered a business was because the employer required him to do so. The appellant never registered a business for the truck-driving services that he did prior to joining the employer in August 2007. Further, in my opinion, at the time of his accident in November 2007, the appellant was not being remunerated “for performing a certain contract of work.” He was not performing “piecework.” In my view, “a certain contract of work” suggests a specified job of work with a clearly envisioned completion point. In other words, it is different than work which is envisioned to be ongoing with no specified completion point. In this case, when the worker began delivering fuel for the employer it was not envisioned that he would complete a certain contract of work, after which his commercial relationship with the employer would end, and the appellant would move on to other work with another employer. According to the appellant’s testimony at the hearing of this appeal, the intention of the parties was that the appellant would work for the employer on a full-time and ongoing basis. There was no pre-determined or specified target for completion of his work for the employer. The intention was for a full-time and open-ended employment relationship. Accordingly, in my view, the appellant was not performing “a certain contract of work” for the employer.

[17]                                      I find similar to Decision No. 235/14 that the worker in this case, while perhaps only employed for a short time, was also in an “open-ended employment relationship” that was expected to be full-time and ongoing.  Further, he may have declared to be self-employed, but in fact was not responsible for profit or loss, had no financial responsibility, did not own the truck, did not broker the loads, and did not deduct any expenses.  This worker was paid to drive as an employee would be paid on a mileage basis.  In my view, the balance of the evidence supports a finding that he was a worker and not a dependent contractor for the purposes of calculating his benefits under the WSIA and Board policy.

While this decision is lengthy it demonstrates beyond any question that no matter what the intent of the parties an alleged independent contractor can be determined given the facts to be a dependant contractor or employee and if so found have all the rights and obligations attributed to an employee or dependant contractor.

It must be noted that a finding of this nature can also impact insurance coverage and liability of both the company and/or the driver as well as any agreements as to the leasing or lease to own agreements in respect to trucks.

Thus as every aspect of this type of business involves potentially complex and contested issues arising from a contract so if you would like assistance navigating the possible hazards and perils facing you as a trucking and logistics company or as a driver for same please contact us by phone at;  800-362-4713 or email at; info@mississaugaparalegal.ca

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