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Transport training schools: opportunity at the intersection of enforcement and disruption

“The Most Terrifying Words in the English Language Are: I’m From the Government and  I’m Here to Help” – Ronald Reagan

The quote above is admittedly one that I love to regurgitate. However, government does also play an  important role when it comes to regulating safety.

In this blog, I am shifting gears — pardon the pun — to talk about the regulation of transport training  schools. These schools make up more than 20 per cent of private career colleges (PCCs) in Ontario and, as such, remain a significant opportunity for investors.

I will look at some of the driving forces shaping this sector and outline key regulatory considerations for  investors.

I have had the pleasure of representing registrants and non-registrants on Private Career Colleges Act,  2005 (PCCA) compliance issues for almost two decades of my 27 years in the private practice of law.  Many were trucking schools. More recently, I have also acted for investor groups.

Increased demand for truckers 

Both Canada and the U.S. are facing a serious shortage of truck drivers. As the pandemic kept people  inside over the past 18 months, the demand has only increased. Pay hikes in the sector have prompted  transport training companies to up their ante and pay more to their workers. While the solitude of driving  is not for everyone, here are just some of the pluses for students:

  1. Short program duration. Students can skill or re-skill (mid-career) to become truck drivers in as little as six weeks. Putting aside the debate about the value of a degree to those just  entering post-secondary education, think about the time value of money and opportunity cost  of education to someone mid-career who has just lost their job.
  2. Income opportunity. With a lot of hours logged, entry-level truckers can earn more than $100,000 per year. That’s not bad for a job that doesn’t require more than a six-week  commitment.
  3. Labour market opportunity. Graduates may expect job security as a group where increased  enrolment in transport training programs helps Canadian employers, and Canada, reach two  separate goals:
    • Meet labour market demand. Canada is expected to be short 25,000 drivers by as  early as 2023.
    • Replenish the dwindling tax base. Canada’s labour force is aging, and taxpayers  will shoulder the future burden of repaying COVID-related stimulus relief. Eligibility for international student study visas and post-graduate work permits is beyond the scope  of this blog, but I note with particularity the dire need for truck drivers and personal  service workers among other vocations.

Compliance disparate across training schools  

Despite the significant demand for truck drivers, there is a long road ahead for the schools that train them.

These institutions came under renewed scrutiny from Ontario’s Ministry of Colleges and Universities  (MCU) more than five years ago, and since then, the heat they received came as much from their peers  as it did from the regulator. In the wake of the tragedy involving a semi-trailer and the Humboldt Broncos  hockey team bus that left 16 dead in 2018 came renewed calls from driving instructors across the country  to improve the driving skills of truck drivers on Canada’s highways.

It’s important to point out that transport training schools in Ontario must adhere to the Mandatory Entry  Level Training (MELT) regime, which was implemented in 2017. Under MELT, schools are required to  provide at least 103.5 hours of instruction and cover the entry-level knowledge and skills needed to  safely operate a large truck on Ontario’s roads.

So, how are trucking schools doing at compliance? In a word, they are disparate in quality.

Established truck driving schools argue that a lack of provincial oversight and enforcement in the truck  training sector has churned out poor-quality commercial drivers. A recent article in Truck Stop Canada highlights attempts by responsible peer schools to “out” the bad apples.

The article highlights how students shop for these programs on price, which is entirely plausible. But which schools really need to compete on price? Any program requiring a maximum of 116 hours of  training — and for which there is such a significant labour shortage — is one that passionate, committed  investors might wish to zero in on and quickly enhance.

Market ripe for disruption 

I am in no way surprised to see the MCU scrutinizing and sanctioning non-registrant businesses holding  themselves out as registered trucking schools. Even many registrant schools that have been vetted by  MCU under the s.14 registration requirements of the PCCA, which are subjected to strict annual audit  scrutiny, have been the subject of many discipline notices by MCU in 2020 and 2021 alone.

If students are being fast-tracked into testing after an insufficient number of road hours, that’s both  dangerous and unnecessary. It gives the entire PCC sector (not merely trucking schools) a black eye,  despite the enormous distance the sector has travelled to gain legitimacy over several decades.

My message to registrants who operate these schools and prospective investors, is pointed:

  1. Registrants: If you comply with the rules, students (and the companies that hire them) might just  beat a path to your doorstep.
  2. Investors: Don’t overlook this sector as a great place to park your cash. My usual caveat applies: This is not financial or investment advice as I am not qualified to provide that. I’m a regulatory  lawyer. But I do get to see demographic trends in the PCC sector that give me a unique window  on the current and future labour market demand.

So, where does the opportunity lie in the transport training sector? That’s easy — at the intersection of  enforcement and disruption. Just hang a right, but don’t cut corners.

Look forward to your comments, criticisms, and feedback! Thanks for reading.

e: harris@harrisrosen.com
c: (416) 931-5244

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