Canada Strengthens Labour Code Rules Against Misclassifying Drivers
Amendments that took effect in June 2024 presumed federally regulated workers to be employees unless employers proved otherwise, a change aimed partly at Driver Inc.
In June 2024, Canada changed the Canada Labour Code to make it harder for federally regulated employers to treat workers as independent contractors. The amendments were part of the Budget Implementation Act, 2024, No. 1 (Bill C-69), which received royal assent on June 20, 2024. The Labour Program said the changes came into force on royal assent. For trucking, they bore directly on the "Driver Inc." model, in which drivers are asked to incorporate and are paid as contractors.
The problem the government described
In a briefing binder prepared for an April 29, 2024 committee appearance, Employment and Social Development Canada (ESDC) said there was a growing trend in road transportation for employers to have their employees self-incorporate. The department described misclassification as wrongfully treating an employee as an independent contractor, and said it can let employers avoid minimum wage, overtime, paid sick leave and termination rights, as well as payroll costs such as Employment Insurance and Canada Pension Plan contributions.
The Code had already prohibited misclassification. Amendments that took effect on January 1, 2021, made it illegal to treat an employee as if they were not an employee, and put the burden on employers to prove otherwise when a complaint was made to the Labour Program. A pilot project the Labour Program launched in its Ontario Region in March 2021 found widespread misclassification in road transportation. The 2022 Fall Economic Statement then committed $26.3 million over five years for enforcement in the federally regulated road transportation sector.
What Budget 2024 proposed
The April 16, 2024 federal budget proposed amending the Code to strengthen the prohibitions on misclassification, with gig workers named as a main concern. It also said ESDC and the Canada Revenue Agency would enter into data-sharing agreements to support inspections and enforcement. Statistics Canada estimated there could be up to 41,000 gig workers in the federal private sector, about 63% of them in interprovincial road transportation, according to the April binder.
What the amendments did
ESDC's later summary of the amendments listed the main changes:
- a presumption that workers are employees unless proven otherwise;
- a prohibition on misclassifying an employee as an independent contractor in Part I (industrial relations) and Part II (occupational health and safety) of the Code;
- a strengthened prohibition in Part III (labour standards);
- a burden on the employer to prove a worker is not an employee when that status is contested, except in prosecutions.
The department said workers who are true independent contractors are not affected by the amendments.
Why it mattered for carriers
The Code applies to federally regulated employers, which include carriers operating across provincial or national borders. For those carriers, the amendments meant a worker contesting their status would be presumed to be an employee, entitled to the Code's labour standards, health and safety protections and bargaining rights, unless the carrier could show otherwise.
The changes did not by themselves set new tax rules. Enforcement relied on Labour Program inspections and on the planned information sharing with the Canada Revenue Agency.
Archive: this article describes rules and events as of June 2024. Regulations may have changed since, so check the current rule before relying on it.