Court decision furthers debate about drivers who claim they are not independent contractors
“The decision itself, whichever way it goes, will have very far-reaching consequences for employment law in Ontario and potentially in Canada.”
So says Samara Belitzky in discussing the Ontario Superior Court of Justice’s certification of a $400-million class-action lawsuit against Uber, filed on behalf of Uber drivers who claim that they have been misclassified as independent contractors.
“Ultimately, if we are successful… we will be securing their minimum employment protections and employment rights for all of these Uber drivers. And that will have a ripple effect throughout the gig economy,” says Belitzky, a senior associate at Samfiru Tumarkin in Ottawa, which is representing the Uber plaintiffs.
“It's also important for all the other workers in Ontario and even throughout Canada who are in similar situations.”
The case is unique in that a lot of employment misclassification cases focus on one particular issue, such as overtime, vacation, or whether certain employees are managers or not. And while there have been others debating if someone is an employee versus an independent contractor, those were in more of a traditional employment setting, she says.
“What sets this case apart is that it's the first of its kind in Ontario with respect to what we call the gig economy… this is the first case that deals with the test in these particular circumstances.”
While there have been certifications in the last couple of years with regards to misclassification of independent contractors — such as the 2016 case involving Just Energy and door-to-door sales agents or the 2020 labour relations case involving Foodora couriers — the case involving Uber is noteworthy because it's such a high-profile company in the gig economy, says Paul Boshyk, a partner at McMillan in Toronto.
“That's significant because of the implications or the trickle-down effect that it may have for other companies in this space,” he says.
Certifying the class action
In certifying the class action, the court found that there is at least some basis in fact that the drivers may have been misclassified, and that misclassification is a systemic, common issue for individuals working for the ride-share company.
The common issues focus on whether the relationship between Uber and class members is that of: service provider and customer; employer and employee; or employer and independent contractor, said Justice Paul Perell in his Aug. 12 decision Heller v Uber Technologies Inc.: “There is a serious controversy about the commonality or conversely with the idiosyncrasy of the relationship between the parties and this controversy is amplified because the contracts upon which the relationships are based have constantly been changing.”
The plaintiffs say they are employees working for Uber, based on the commonality of: the functionality of the Uber app; the terms of the standard form service agreements, which are not negotiable; associated rules of contract performance imposed on drivers and delivery people; and some external rules and regulations imposed by municipalities on users of the Uber apps.
However, Uber says the drivers and delivery people are independent contractors, which is a status expressly attributed to them in the service agreements, so there cannot be a common issue about employment status misclassification.
In determining whether a worker is an employee or contractor, the court must consider several factors, including: the intentions of the parties; how the parties themselves regarded the relationships; the behaviour of the parties toward each other; and the manner of conducting their business with one another.
It’s also about looking at the extent to which the worker worked exclusively for that employer, said Perell.
“The greater the level of exclusivity over the course of the relationship, the greater the likelihood that the worker will be classified as a dependent contractor.”
In the end, there is some basis in fact that there is a genuine dispute about whether the Uber App users are working only for themselves in a shared economy with Uber or are working for Uber as an employee or as an independent contractor, he said.
“And there is some basis in fact that there is a commonality of evidentiary factors including principally the system and controls imposed by the Uber App and by the associated Service Agreements.”
Determining commonality, misclassification
Commonality is established in that the class members are either completing rides or deliveries, or both, so there is no other type of work they're carrying out. Plus, they all have the same service agreements, says Belitzky.
“Overall, from a high-level perspective, the terms that these drivers are subject to are basically the same.”
In going through the analysis, the court will have to update the test in looking at various factors, such as the degree of control in the relationship, and what that control looks like, says Belitzky. Traditionally, the courts would also look at who provides the tools for the job, she says.
“In modern day, that's not necessarily indicative of an employee versus independent contractor because there are many employees who may use their own tools, especially during the pandemic for people working remotely. So, these are things that are going to have to be impacted.”
For the plaintiffs to truly be successful, the courts are going to have to find that they are employees, not contractors, says Boshyk.
“Take the Uber driver or delivery person who derives a majority of their income from Uber from the work that they do using the Uber app — that person, because they're economically dependent, could very well be a dependent contractor. But, at the same time, they're using their own tools and equipment; primarily; their own car.; they're setting their own hours, so I think it will make it more difficult at the trial level for the plaintiffs to be successful.”
The courts will also look at whether people are economically dependent on the company as their main source of income, he says.
“Although… dependent contractors aren't covered by the Employment Standards Act or other applicable employment standards legislation, it's just that there's an implied term in a dependent contractor relationship that reasonable notice has to be provided. So, I'm not convinced that it would help the plaintiffs in the Uber case for them to be classified as dependent contractors, because the thrust of what they're claiming is minimum wage, holiday pay, vacation pay, potentially termination and severance pay — all things that are minimum statutory entitlements under the Employment Standards Act.”
Last summer, the Supreme Court of Canada said a clause in Uber’s service agreement requiring workers to take their disputes to the Netherlands was unconscionable and unenforceable. As a result, Uber revised the mandatory arbitration clause to make it more enforceable under Canadian laws. The company also asked drivers to sign an updated contract that states they agree not to take part in class action against the company.
But when those were rolled out, there wasn't clear notification to the drivers about the change, says Belitzky.
“There are specific sections in the Class Proceedings Act that govern communications between class members… and [we allege] that those sections were not complied with… in terms of giving notice to the drivers when they implemented the class-action waiver.”
More recently, Uber put forward a Flexible Work+ proposal, which calls on provincial governments to set up an alternative set of regulations to govern gig workers and offer them "self-directed benefits" and "enhanced worker protections.” It also proposed an Employee Benefits Fund that would be enabled by provincial governments and managed by industry.
“[That] may be helpful down the line, but what we're dealing with right now is the rights of these workers going back many years now and up to the present... so a legislation that would be enacted in the future is certainly not going to provide a remedy for the past,” she says.
This case is far from over, says Boshyk.
“There are some really nuanced and potentially very complicated preliminary issues that still have to be resolved
before we even get to a point where the employee-versus-contractor determination is made.... But it will certainly be interesting… to see where the chips are going to fall.”