The status of Owner-Operators under the Canada Labour Code: is change needed?(Notes and Comments)

Owner-Operators (O/Os) are a significant component of Canada's truck driving workforce, particularly in the long distance sector. These self-employed persons are not covered under Part III of the Canada Labour Code (CLC) and the economic viability of the owner-operator in Canada has been a concern for many years. The 1987 Owner-Operator Task Force Report (Labour Canada 1987) recommended that "the notion of dependent contractor be incorporated in the Code itself and that regulations be adopted to specify the methods of calculation applicable to Part III benefits." These recommendations were not adopted but owner-operators are recognized as "dependent" employees under Part I of the CLC, allowing them to organize collectively and be represented by a union. Whether O/Os should be considered employees continues to be an issue amid demands by unions and individuals supporting that position and trucking employers who are against such change.

The Federal Labour Standards Commission was mandated to review Part III of the CLC and submit recommendations for legislative and non-legislative options to the Minister (Federal Labour Standards Commission 2005). Part III pertains to employees of employers or enterprises in the federal jurisdiction, establishing minimum standards of employment. The underlying rationale for the commission is that Part III may be out of date and needs changes to be relevant to the 21st century workplace, which is global and technology-enabled. One area that was considered was whether the scope of Part III should be extended so that some or all provisions cover certain own account self-employed workers. (1)

STUDY METHODOLOGY

An analysis of the O/O segment of trucking was conducted as part of a comprehensive examination of labour workplace issues in intercity trucking (Chow 2006). The study combined an extensive literature review with stakeholder interviews and a nationwide truck driver survey.

* Ninety-five persons were interviewed in nine focus group field interviews, fifty-eight individual company field interviews, and four telephone interviews. Stakeholders interviewed included carriers, trucking associations, unions, owner-operators, Labour Affairs Officers, driver agencies, and journalists.

* A nationwide driver survey interviewed 449 drivers at fifteen truck stops in seven provinces. Representation was 280 employee drivers, 12 agency drivers, 157 owner-operators employed by 391 for-hire carriers, and 55 private carriers. Comparison of the demographics of the driver survey with a benchmark Statistics Canada profile of for- hire truck drivers validates the aggregate representativeness of the driver survey (Dube and Pilon 2006).

ROLE OF OWNER-OPERATORS IN TRUCKING

There are many benefits to trucking firms as employers to use O/Os, and as a result O/ Os play a significant role in Canada's trucking industry. (2) Indicators of the role of O/Os are as follows:

* O/Os can be a significant percentage of the capacity of their fleets, more so for highway than city driving. Carrier stakeholders indicate that some fleets are 100 percent O/Os while others are 100 percent employees and many are a mix of the two. A larger percentage of truckload (TL) fleets used O/O than less-than-truckload (LTL) fleets.

* In 1975, owner-operators accounted for only 11.2 percent of total industry operating expenses (Nix 2003). Today, O/O payments are the second largest expense across the for-hire trucking industry, accounting for 24 percent of total expenses (Statistics Canada 2006).

* The percentage of O/O drivers working in the trucking industry comprised slightly over 32 percent of the drivers in the for-hire sector of trucking, almost double the percent across all occupations. This would mean that there were 57,786 owner-operators in the for-hire trucking segment in 2004. Similarly, 157, or almost 35 percent, of the 449 respondents to the truck driver survey were O/Os.

* According to the Small For-Hire Carriers and Owner-Operators survey (SCO), the number of businesses that identified themselves as owner-operators was estimated at approximately 35,000 in 2002. Overall, they accounted for 67.8 percent of all active businesses in the trucking industry and 27 percent of its total revenues.

OWNER--OPERATOR MOTIVATIONS

For the driver, being an O/O has the advantage of being self-employed with the attendant financial strategies, as well as the ability to control their workload and select the most desirable type of work and lifestyle. Drivers often become O/Os on the perception that they can earn larger incomes, though this may be achievable only by driving longer periods of time or driving more miles than their employee counterparts. The reality is that if O/Os drive more miles per year or period of time, both the vehicle and the driver are more productive during that period of time. Whether the O/0 or the carrier captures the gains from that productivity depends on the terms of the carrier--O/O contract.

The O/O's real income may be increased by the deductions he or she can take from gross revenues. O/Os ultimately do have the choice to refuse or not accept freight, so they control their work/life balance directly. This is not to say that the work/life balance of O/Os is not affected by financial pressures to drive long hours and take long trips, but that the O/Os at least have the choice. In some instances, the contractual relationship between the O/O and carrier allows more a flexible work relationship than would be allowed by the Labour Code. For example, in the household goods sector, O/Os work the maximum hours during high season and essentially take a vacation during the low season. The role of the owner-operator in the trucking industry was well summarized by one employer stakeholder, who stated that owner-operators depend on the carrier for getting work but are independent with respect to how they get that work done, provided the carrier's safety and service standards are met. Unlike company drivers, owner-operators have the privilege of choosing such factors as the route they wish to travel, the truck stops they want to use, the length of their layover, and the make of truck they want to drive. Carriers have said that the industry could not have grown and become as dominant as it has without the owner-operator, who has given the industry the opportunity to meet demands for new business by obtaining good qualified people quickly, efficiently, and easily.

DEFINING OWNER-OPERATORS

Under the CLC, there are two categories of owner-operators: dependent and independent. While the terms are often used interchangeably, the dependent owner-operator works under contract exclusively for a single motor carrier. They are dependent on the carrier in that they work exclusively for that carrier but are independent business owners who have the freedom to make their own business decisions in a number of areas. Dependent O/Os are responsible for all the costs associated with acquiring, operating, insuring, and maintaining their vehicle but often rely on the contracting carrier who, for a fee, will arrange purchase programs for fuel, for example, and keep certain records such as fuel tax information and file the required tax returns on their behalf. The dependent owner-operator operates under the contracting carrier's National Safety Code (NSC) number and operating authority (if required), and often the O/O's vehicle is registered under the carrier's name for licensing and insurance purposes, even though the beneficial ownership remains with the owner-operator. Being that the owner-operator is exclusively tied to a single carrier, the carrier is responsible for insuring that the O/O safety performance meets firms obligations under its NSC and any violations are attached to the carrier's NSC profile, not the owner-operator. The hiring policies and other criteria such as experience and ability profiles that carriers have for hiring company drivers are usually the same as those used for obtaining owner-operators. Dependent O/Os are dispatched by the contracting carrier.

Because O/Os are independent from the carrier from a business management point of view and to distinguish their relationship from that of an employee, carriers often refer to their owner-operators as independent contractors. A true independent contractor or owner-operator would not have the exclusivity clause that ties the O/O work exclusively to one carrier. Such an O/O would be able to transport goods for one carrier on one trip and for another carrier on another trip. Carrier stakeholders indicate there are few, if any, true independent O/Os in Canada. There are several reasons for the lack of independent operators in Canada. Firstly, carriers prefer dependent O/Os with whom they are familiar and have some assurance of quality and capacity. A dependent O/O is more likely to be available for dispatch, must meet the carrier's safety and other quality requirements, and, most important, will not be transporting goods for competing carriers. Secondly, carriers--especially the larger carriers--are able to obtain bulk discounts on insurance, fuel, maintenance, and equipment, which they pass on to the O/Os. The latter may also be embodied in an agreement where the O/O finances the vehicle through the carrier. As noted above, larger carriers use O/Os more extensively. Small carriers are less likely to be able to provide these reduced costs to O/Os. In contrast, an interview with the Owner-operator and Independent Drivers Association (OOIDA) in the United States indicated that there are true independent O/Os in the U.S. (3) Their viability is in part due to the ability of these independents to purchase insurance, medical coverage, maintenance, fuel, equipment, and other services at cost levels comparable to what could have been obtained through a carrier from OOIDA. Through this association, O/Os achieve the mass buying power to get bulk and quantity prices for these inputs.

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