On November 14, 2023, Miller Thomson’s National Transportation & Logistics Group hosted an in-person educational seminar in Toronto, discussing the latest legal trends and insights surrounding the transportation and logistics industry. It was hosted by Miller Thomson’s Transport and Logistics Co-Chairs, Louis Amato-Gauci and Jaclyne Reive.
This article is Part 1 of a two-part series on the topics discussed, and will cover (i) environmental, social and governance (“ESG”) issues in the transportation and logistics (“T&L”) industry including the new modern slavery laws and greenwashing; (ii) mergers & acquisitions in the T&L world; (iii) commodity tax issues for carriers and freight intermediaries; and (iv) labour & employment matters.
Part 2 of the series will address the remaining two topics: (i) doing business in Quebec – lien rights under the Civil Code and new French language laws; and (ii) the use of biometrics and inward-facing dash cameras and related privacy considerations.
1. Hot topics in ESG and their impact on the T&L industry
Modern slavery legislation
- Canada has produced modern slavery legislation with effect as of January 1st, 2024. Many businesses will have to file a new report before May 31, 2024 addressing child and forced labour. This report will be publicly available for scrutiny. Read our article learn more about Canada’s modern slavery act (the Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff).
- Companies in the supply chain industry will need to closely review whether the requirements could apply to them as “importers” or “distributors” of goods. For example, has the company imported electronic logging devices, tablets or phones, electric vehicles, or other goods from another country? Is the company acting as “importer or record” as a value add for its customer? If so, then this legislation could potentially apply.
- There are financial penalties for failure to complete a compliant report by the deadline. Companies should be working in earnest right now on this report and obtaining the related information that will be needed from key supply chain partners.
- Even if the new law doesn’t apply to you, it (or similar foreign laws) will likely apply to your business and supply chain partners and you should expect to be receiving inquiries soon. Those parties will need information about your practices and policies in order to respond to the report in a manner that addresses their entire supply chain.
ESG, lenders and investors
- Lenders and equity providers are increasingly rewarding businesses that demonstrate a commitment to ESG. Investors continue to want to see satisfaction of fundamental and conventional business metrics but with ESG increasingly viewed as capable of objective and auditable financial measures.
Greenwashing in the transportation industry
- In order to ensure that environmental claims about a product or service are not considered false and misleading, companies need to ensure that the claims are truthful, accurate, specific and supported by adequate and proper substantiation.
- For example, claiming that your company provides “the greenest alternative to move cargo,” aspires to have “a fully electric fleet by 2030” or operates a “carbon neutral,” “green” or “eco-friendly” facility could all be potentially problematic environmental claims if not made in compliance with legislation.
- When making a claim, the company will need to take into account both of the literal meaning of the claim, and the general impression that a credulous and inexperienced consumer would have of the claim. Remember that the regulator will consider the entirety of the claim as a whole, meaning not just the text, but also any images, logos, tag, lines, and seals or certifications that are included.
2. Mergers and acquisitions in the T&L world
We would like to thank both Robert Fedrock, Managing Director, Origin Merchant Partners, Karen Fisman, Origin Merchant Partners and Sara Josselyn for their contributions to the key points provided in this section.
- While M&A activity is down in the T&L sector, the turbulent markets put a spotlight on well-run operators, or companies with scarce assets or a technological edge that a buyer can leverage. Buyers are continuing to recognize the value in these types of
- If you’re a company owner who is thinking of exiting the business, plan ahead! Start by selecting M&A advisors and legal counsel who have extensive experience with this industry and its regulatory framework. Then, give yourself at least two years to prep for sale: ensure that your corporate and financial records are ship-shape, contracts well-organized, asset ownership correctly documented, with a clean safety profile and operating authorities in good standing.
- Seek expert advice on valuation, and educate yourself on some of the more complex structures you may need to consider depending on market conditions, such as earn-outs, vendor financing and rollover equity.
- Whether you are a buyer or seller in an M&A deal, it is wise to consider whether representations and warranties insurance (“RWI”) makes sense early-on in your deal making process. The use of RWI is becoming an increasingly “market” approach in private M&A deals in Canada. In addition to being an excellent risk allocation tool affording meaningful benefits to all parties to a deal, RWI also ensures a more efficient process in the event of an indemnification claim post-Closing.
3. Commodity tax issues for carriers and freight intermediaries
- Managing Canadian sales and commodity taxes can be particularly complex for businesses in the T&L industry. Establishing clear legal relationships between parties and carefully considering all sales and commodity tax implications of the business operations, such as charge-backs, incidental services, and tax rates on various freight movements, is critical.
- To support the legal relationships and tax positions in the event of an audit with a tax authority, parties should have clear agreements in place and ensure all supporting documents, tax filings, and financial reporting are aligned.
4. Overtime rules for provincially-regulated and federally-regulated commercial motor vehicle drivers
- It is essential to determine whether your business is federally-regulated or provincially-regulated, as the distinction will have significant implications on the overtime rules that apply to your drivers.
- Overtime pay in most (but not all) jurisdictions is calculated at 1.5 times regular hourly wages.
- Federally-regulated employers must provide overtime pay to “city motor vehicle operators” for each hour worked in excess of 9 hours of work per day or 45 hours of work per week, and to “highway motor vehicle operators” for each hour worked in excess of 60 hours of work per week.
- Provincially-regulated employers in Ontario must provide overtime pay to “local cartage drivers” for each hour worked in excess of 50 hours of work per week, and to “highway transport drivers” for each hour worked in excess of 60 hours of work per week.
Concluding Thoughts
As noted above, this article is Part 1 in a series of summaries of the November 14, 2023 Transport & Logistics Educational Seminar hosted by Miller Thomson. If you would like to learn more about the topics in this article or how our Transportation & Logistics Group can assist, please do not hesitate to reach out to Louis Amato-Gauci or Jaclyne Reive, Co-Chairs, Transportation & Logistics Group. If you would like to obtain a copy of our presentations, please contact torontoevents@millerthomson.com.
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