Canadian government aims to put the brakes on widespread worker misclassification

The Canadian government is taking steps to crack down on a worker misclassification scheme impacting the country’s transportation industry.

On Dec. 1, Employment and Social Development Canada announced an inspection blitz would be held in Hamilton and the Greater Toronto Area in the “coming weeks.” Officials said the focus would be to identify non-compliance with federal labor standards.

“Canada’s trucking industry is built by devoted workers who keep our communities and economy moving. Misclassification is not only exploitation, but also illegal – plain and simple,” said Patty Hajdu, Minister of Jobs and Families. “This inspection blitz is about finding employers who are breaking the law and holding them accountable so every truck driver in Canada is treated fairly.”

The misclassification scheme – known as the Driver Inc. model – is a tax and employee misclassification scam in which a trucking company has its employees register as a corporation. Rather than giving their employees a paycheck, the company will pay them through their new corporation.

Because the company is paying another corporation, it is not producing a regular paycheck, so the payments are not subject to tax deductions. Because of this, the company also doesn’t pay into social programs or workers’ compensation funds, significantly affecting protections and government programs typically reserved for employees, not incorporated entities.

“Workers should never lose pay, benefits or safety protections because an employer is trying to cut corners,” Secretary of State John Zerucelli said in a statement. “This blitz sends a strong message: if you violate federal labour laws, there will be consequences.”

During the inspection blitz, carriers suspected of misclassification will be subject to a full investigation, with officials saying they will “swiftly issue penalties when violations are found.”

The Canadian Trucking Alliance has been sounding the alarm about Driver Inc. for quite some time, calling out the Canadian government for a slow response. In October 2022, CTA said the federal government had “fallen short” in addressing the worker misclassification scheme.

In the wake of the announcement, the trucking group applauded the government’s decision to increase enforcement, calling it an “important step toward ensuring fairness, safety and long-term stability” of the country’s transportation industry.

“As the backbone of national trade, Canada’s trucking sector relies on a strong and protected workforce,” CTA said. “It is essential the workers who keep goods moving are properly supported and law-abiding employers are not undermined by illegal labour practices.”

In March 2024, the Canadian government announced the creation of a “dedicated national team” to address worker misclassification. At that time, officials said the federal government was “strongly committed to addressing the illegal practice of employee misclassification” and would continue to “expand the pace and scope of its efforts” when it comes to addressing the issue across Canada.

“The industry has been calling for stronger enforcement, and today we’re pleased to see the government taking concrete action,” CTA President Stephen Laskowski said in a statement. “This blitz is a big win for responsible carriers who follow the law and for the professional drivers who deserve dignity and protection on the job.” LL