The federal government will invest $77 million over four years to address employee misclassification and increase penalties for wage theft in federally regulated sectors.
Budget 2025 provides funding starting in 2026-27 for the Canada Revenue Agency to implement a program addressing non-compliance related to personal services businesses, with $19.2 million in ongoing annual funding. The budget also lifts the moratorium on reporting fees for services in the trucking industry.
The measure targets employers who deliberately misclassify employees as independent contractors, avoiding income tax withholding and Canada Pension Plan and employment insurance contributions. Misclassified employees lose labour law protections and benefits available to employees.
Wage theft penalties
The government remains committed to substantially increasing penalties imposed on federally regulated employers who commit wage theft. Work to increase penalties is underway, with consultations on proposed changes taking place over the coming months.
Wage theft occurs when an employer fails to pay compensation rightfully owed to an employee. The budget identifies it as one of the most common labour standards contraventions in federally regulated sectors.
The 2024 Fall Economic Statement announced the government’s intent to make regulatory changes to increase penalties. Budget 2025 reaffirms that commitment.
Trucking industry focus
Employee misclassification has been particularly common in the trucking industry. The new measures will strengthen compliance by ensuring employers meet reporting requirements and tax obligations while protecting workers’ rights.
Budget 2025 also proposes to amend the Income Tax Act and the Excise Tax Act to allow the CRA to share information with the Department of Employment and Social Development to address worker misclassification.
Over 90 per cent of transportation sector workers are men and approximately 35 per cent are newcomers to Canada, according to census data cited in the budget.
Labour protections expanded
The measures form part of broader worker protection initiatives in Budget 2025. Additional protections include a Personal Support Workers Tax Credit providing up to $1,100 annually for eligible workers from 2026 to 2030.
The budget also includes $570 million over three years starting in 2025-26 through Labour Market Development Agreements with provinces and territories to support training and employment assistance for workers affected by tariffs.
A new reskilling package will support up to 50,000 workers affected by trade disruptions. Employment Insurance will become more flexible with extended benefits.
Workforce alliances
Budget 2025 provides $382.9 million over five years starting in 2026-27, plus $56.1 million ongoing, to launch Workforce Alliances. These will bring together employers, unions and industry groups to help businesses and workers succeed in the changing labour market and coordinate public and private investments in skills development.
A new Workforce Innovation Fund will invest in projects tailored to local job markets to help businesses find workers and help workers access training and job opportunities.
