The footage was captured by a colleague who said he had raised the problem with employers without result.
The vehicle was being driven through the Leicestershire countryside towards Market Harborough, with the driver telling someone to apply for a job.
Operator FCC Environmental said the driver would remain suspended while a "full investigation" took place.
The footage shows the lorry going through a village, passing several HGVs and being steered with one hand.
The unidentified driver is talking throughout the short clip.
It was filmed by an unnamed colleague in September last year, shortly before he left the company.
He told the Daily Mirror: "I would repeatedly tell him not to do it.
"I couldn't believe it - a child could have run out at any moment or he could have ploughed into a house.
"I took it to the bosses, but they just never seemed to do anything about it."
Northampton-based FCC Environmental is contracted by Harborough District Council for bin collections, street cleaning, recycling and grounds maintenance.
A spokesman said it was taking the incident "very seriously" and "the business has in place strict operating procedures that explicitly prohibits the use of handheld mobile phones whilst driving company vehicles".
A spokesman for road safety charity Brake said: "It is particularly concerning to see this footage of an at-work driver using a mobile phone.
"We work with a range of companies to encourage them to put into place best practice policies. This includes ensuring that drivers never use their phones whilst driving - no call is worth risking a life."
A refuse collector filmed using his mobile phone while driving down a country lane has been suspended.