Divisional court largely upholds certification alleging misclassification of drivers
The Ontario Divisional Court has largely upheld certification of a proposed class action by Pizza Nova delivery drivers alleging they were misclassified as independent contractors.
However, it also struck a sweeping conspiracy claim tying together more than 140 franchisees.
In reasons released March 24, 2026, Justice Matheson, writing for a three‑judge panel, said: “For the reasons set out below, I would grant the appeal with respect to the above conspiracy issue and otherwise dismiss the appeals.”
Drivers say they were employees, not contractors
Plaintiff Juan Jose Lira Cervantes worked as a pizza delivery driver for four Toronto locations (the “Cervantes franchisees”). He was “paid as an independent contractor and did not receive statutory employment benefits such as a minimum wage, vacation and other pay that he may have qualified for under the ESA,” and the franchisees “did not make EI or CPP contributions on his behalf.”
He brought a proposed class action against the franchisor Pizza Nova Take Out Ltd. and 141 franchisees, claiming breach of the Employment Standards Act, 2000, breach of contract and the duty of good faith, negligence, conspiracy and unjust enrichment, and alleging that all defendants were “common employers” such that “every franchisee would always be liable for the ESA obligations of every other franchisee.”
On certification, the motion judge certified claims for “breach of the ESA, breach of contract and the duty to act in good faith, conspiracy, unjust enrichment and, in the alternative to the other claims, negligence,” but—except for conspiracy—limited them to the franchisor and the four Cervantes franchisees.
No ‘common employer’ among franchisees
On appeal, Cervantes argued the motion judge erred in refusing to find that all franchisees were “common employers” under ESA s. 4. The Divisional Court disagreed, noting the claim “is not based on the particular arrangements at this franchise. It would apply to all franchises.”
The motion judge had found “no pleading capable of supporting a claim that any franchisee engaged in any ‘associated or related activities or businesses’ with any of the other franchisees.” Instead, “each franchisee had a business relationship with the franchisor,” while “the individual franchisees operated their own independent businesses and had independent relationships with the franchisor, not with each other.”
Justice Matheson concluded that “the motion judge did not err in the common employer analysis,” rejecting the submission that a finding the franchisor is a common employer means each franchisee must be as well: “The role of a franchisor under its agreement with a franchisee may result in a finding that it is managing the franchisee, but not that one franchisee has a role managing another franchisee.”
Franchise‑wide conspiracy claim goes too far
The most significant change on appeal involved the conspiracy claim. The motion judge had accepted a theory that “the defendants sought to implement a universal, franchise-wide practice, directed towards the class, to deprive the class of their [statutory employment benefits],” and certified conspiracy “between all of the Defendants as if they all conspired together, and with one another.”
The franchisees argued that the pleadings showed only the franchisor’s standard arrangements with each franchisee, not an agreement among franchisees themselves. Justice Matheson agreed that a core element of conspiracy is agreement, and that “to plead a civil conspiracy, a statement of claim must state the agreement to conspire to commit the unlawful act.”
Here, “the amended statement of claim does not allege any agreement to control, or attempt to control, the relationship of one franchisee’s drivers by any other franchisee, or an agreement to collectively mischaracterize their drivers as independent contractors.” At best, it showed that franchisees “each acquiesced to the franchisor’s requirements regarding drivers,” but “acquiescence is insufficient for a conspiracy,” and “there is no tort of engaging in acts that further someone else’s conspiracy.”
“It is plain and obvious that the plaintiff is relying on the relationship as determined by the franchisor in its requirements about drivers…not on any other conduct to conspire including the franchisees,” Justice Matheson held. “The motion judge erred in certifying the claimed conspiracy between all of the defendants as if they all agreed to commit an unlawful act with one another.”
The court granted the franchisees’ appeal “in relation to conspiracy” and directed the parties to submit a draft order amending the certification order accordingly.
Employment status and negligence issues
The Divisional Court upheld the motion judge’s decision to certify the question of whether drivers were employees or independent contractors as a common issue. The motion judge had found “some basis in fact that core factors relating to employment status of the delivery drivers could be determined in common,” with differences “at the margins of the working relationship, not at its core.”
Justice Matheson said the franchisees were essentially asking the court “to re‑weigh the evidence,” and had not shown a palpable and overriding error.
The court also upheld certification of a negligence claim for pure economic loss, in the alternative to breach of contract. Relying on Maple Leaf Foods and other authorities, the motion judge had concluded that it was arguable “‘the reasonable availability of adequate contractual protection within a commercial relationship’ does not apply to the employment relationship on the facts as pleaded,” because “a delivery driver searching for low paid shift work may not have the same ability to regulate their affairs in a contract.”
The Divisional Court noted the motion judge had made “no finding that a negligence claim would succeed at trial,” only that it was not plain and obvious the claim would fail.
In the result, “The plaintiff’s appeal is dismissed. The franchisees’ appeal is granted in part, in relation to conspiracy.” Cervantes was ordered to pay the franchisees $20,000 in costs on his own appeal and $12,500 on theirs.
