Canadian Employment Class Actions in the Gig Economy

The Supreme Court of Canada (“SCC“) ruled in Uber v Heller (“Heller“) that a dispute between Uber and its drivers will remain in Canada. The dispute dates back to 2017 when Mr. Heller, who worked as a food delivery driver for Uber in Toronto, commenced a class proceeding against Uber for violations of the Ontario Employment Standards Act, 2000, c. 41 (“ESA“) in the Ontario Superior Court. Uber brought a motion to stay the class proceeding in favour of arbitration in the Netherlands as provided in the standard form services agreement between Mr. Heller and Uber. Mr. Heller argued that the arbitration clause in the services agreement was invalid on two grounds: it was unconscionable and it contracted out of mandatory provisions of the Ontario ESA.

Initially, Uber was successful in staying the class proceeding. Mr. Heller appealed. The Ontario Court of Appeal (“ONCA”) reversed the motion judge’s decision and held that the arbitration clause was unconscionable. Uber appealed to the SCC. On June 26, 2020, the SCC affirmed the ONCA’s finding that the arbitration clause is invalid because it is unconscionable. The SCC did not directly address the issue of invalidity arising from contracting out of the Ontario ESA. The class action is now able to proceed in Ontario as Mr. Heller originally intended. The classification of the working relationship between Uber and its drivers, and consequently the applicability of the Ontario ESA to those drivers will be the primary issue.

The impact of Heller on the law of unconscionability in Canada is the subject of our colleagues Bruce and Nicholas Reynolds’ recent article. The implications of Heller on the law of arbitration, including the limits to the applicability of the competence-competence principle in Canada are discussed in our colleagues David Edinger and Tristan Packwood-Greaves’ recent article.

Implications for Employment Law Class Actions in Canada

Despite not shedding light on whether, and if so, how the Ontario ESA applies to Uber’s drivers, the implications of the Heller ruling are potentially far-reaching in the employment realm given the prevalence of standard form employment contracts, especially in the gig economy. It is commonplace for employers, especially those operating in multiple jurisdictions, to utilize boilerplate clauses regarding classification of working relationships, employment standards, and privacy rights. Misclassification of working relationships and entitlements to benefits and overtime pay have been the subject of class proceedings in Canada in recent years and continue to be so. For example, in Cervantes v Pizza Nova Take Out Ltd., the proposed class action concerns the classification of workers – whether Pizza Nova’s drivers are employees and therefore entitled to payment of minimum wage, overtime, vacation pay, and public holiday pay in accordance with the Ontario ESA, or whether they are independent contractors to whom the Ontario ESA does not apply.

The use of standard form employment contracts opens employers up to such class proceedings. The use of standard forms across a workforce may make it easier for courts to find some of the important factors favoring certification: an identifiable class of two or more persons who can be represented by the class representative; a claim that raises one or more issues that all members of the class have in common; and circumstances where proceeding via class action is preferable for the fair and efficient resolution of the common issue(s).  Examples of class actions against both federally and provincially regulated employers are set out below.

Federally Regulated Employers

Class actions against federally regulated employers have involved unpaid overtime wages owing pursuant to the Canada Labour Code (the “Code“). In McCracken v Canadian National Railway Company, 2012 ONCA 445, the representative plaintiff McCracken was a Canadian National Railway Company (“CN“) “first line supervisor” who brought the case on behalf of over one thousand present and former CN first line supervisors working across Canada. The claim alleged that CN misclassified first line supervisors as management employees in order to escape its obligations to pay overtime under the Code. Ultimately, the class action was not certified by the ONCA on the basis that there was not sufficient commonality between the individuals in the proposed class.

In Fulawka v The Bank of Nova Scotia, 2012 ONCA 443, the class members were current and former non-management, non-unionized employees working as personal bankers or other front-line customer service staff in any of Scotiabank’s Canadian retail branches from 2000 to 2012. The plaintiff alleged that members of the class were assigned heavier workloads than could be completed within their standard working hours and that Scotiabank failed to pay for the overtime work in direct contravention of the Code. Ultimately, the parties reached a settlement.

In Fresco v Canadian Imperial Bank of Commerce, 2012 ONCA 444, the ONCA allowed the certification of certain common issues concerning unpaid overtime for a class of 31,000 current and former non-management, non-unionized employees of CIBC in Canada who alleged that they were assigned heavier workloads than can be completed within their standard working hours and that CIBC failed to pay for the overtime work in direct contravention of the Code. In 2020, after more than a decade of litigation, the Ontario Superior Court of Justice has found CIBC liable for breaching its obligations to pay overtime under the Code.

Provincially Regulated Employers

Each provincial government is responsible for legislating the employment standards minimums within their province. While there are many similarities across provinces, differences exist in categories such as, for example, minimum wages, hours of work and overtime, pregnancy and parental leave, and vacation entitlement. Advancing a class action within a province is relatively straightforward, but the pursuit of a multijurisdictional class action with differing employment standards in play across multiple jurisdictions is not without its challenges.

Aps v Flight Centre is a proposed class action filed in Ontario against Flight Centre, a travel services provider operating in Canada and internationally. The claim alleges that Flight Centre systematically failed to pay overtime to its retail sales employees and implemented policies that failed to comply with the overtime entitlements in different jurisdictions. The claim is advanced on behalf of all current and former Travel Consultants employed by Flight Centre in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, and Newfoundland. Despite operating in provinces with different employment standards legislation, the class asserts that the legislation in each jurisdiction contains materially similar provisions with respect to overtime entitlements. Certification is likely to depend on whether the Court finds that there are sufficient common issues. This matter is still in the early stages of litigation before the Ontario Superior Court.

Employment Class Actions in Ontario and British Columbia

The vast majority of employment-related class actions within Canada are advanced in Ontario. Cases have been advanced in Ontario in respect of failure to provide wages in accordance with the Ontario ESA including overtime pay, holiday pay, vacation pay, termination pay, and severance pay.

In Kumar v Sharp Business Forms Inc., [2001] O.J. No. 1729, the plaintiff worked for Sharp Business Forms and brought an action for breach of contract alleging that Sharp had failed to provide minimum overtime pay, holiday pay, and vacation pay as required under the Ontario ESA. Mr. Kumar brought the action on behalf of approximately 50 of Sharp’s former and current employees and was successful. This is a landmark decision that set out the circumstances in which class actions can be brought to enforce the Ontario ESA.

Sondhi v Deloitte Management Services LP, 2018 ONSC 271, is a class action in which document reviewers hired by Deloitte allege that their working relationship was misclassified.  They argue that they are employees, not contractors, and are thus entitled to certain protections afforded by the Ontario ESA. The class members include “all persons having performed or currently performing document review or eDiscovery services at Deloitte pursuant to an independent contractor agreement since January 2014 to the date of certification”. Three out of the seven common issues advanced by the class were certified, one of which is whether the class members were employees or independent contractors. The lawsuit will now proceed to a common issues trial or summary judgment motion. As of the date of writing, neither a trial date nor a motion date has been set by the Court.

Fewer employment-related class actions have been brought in British Columbia because BC courts have repeatedly held that claims founded on breach of the British Columbia ESA must be addressed by utilizing the enforcement mechanisms set out in the British Columbia ESA. For example, in Belanger v Tsetsaut Ventures Ltd., 2019 BCSC 560, the BC Supreme Court followed the BC Court of Appeal’s ruling 11 years before in Macaraeg v E Care Contact Centres Ltd., 2008 BCCA 182 which held that employees are not able to enforce their statutory rights under the British Columbia ESA through a civil action. The Ontario ESA, however, only restricts employees from pursuing a civil action in respect of failure to pay wages or comply with Part XIII (Benefit Plans) if they have advanced a complaint under the ESA with respect to the same matter.

As a result, class actions recently advanced in British Columbia in the employment realm involve claims of systemic harassment and/or discrimination rather than breach of the British Columbia ESA. In Merlo v Canada (Attorney General), 2013 BCSC 1136, the class members were formed of female employees of the Royal Canadian Mounted Police. The class claimed, among other things, that the RCMP systemically failed to provide a workplace free of gender and sexual orientation-based discrimination, bullying, and harassment. Settlement of this matter, and the related class action brought in Ontario, Davidson v Canada (Attorney General), 2015 ONSC 8008, was approved by the Federal Court in May 2017.  

Importantly, the type of class actions being advanced in British Columbia may change.  British Columbia’s Class Proceeding Act, RSBC 1996, c 50, prior to amendments effective October 1, 2018, made it procedurally more challenging to advance multi-jurisdictional class proceedings in British Columbia. One of the major amendments to the British Columbia CPA was moving from an opt-in to an opt-out scheme, which now mirrors that in place in Ontario. Previously, class actions were limited to BC residents; non-residents had to make an election to opt into the class action if they wished to join a BC proceeding. With an opt-out regime in place, both resident and non-resident class members are automatically part of a class unless they opt out of the action. In addition, the amendments provided procedural guidance for the certification of multi-jurisdictional class proceedings.

On July 8, 2020, Bill 161, the Smarter and Stronger Justice Act, 2020 (“SSJA”) passed third reading in the Ontario provincial legislature and received royal assent, becoming law. The SSJA amends several pieces of legislation including the Ontario Class Proceedings Act, SO 1992, c 6. Perhaps the most significant of the amendments is the coordination requirement for multi-jurisdictional class proceedings. Ontario courts, at certification, will now need to assess whether a class proceeding has been commenced within Canada but outside of Ontario involving the same or similar matters and, if so, whether it is preferable for some or all of the issues before the court to be resolved in another proceeding. While it seems that Ontario is now in line with other jurisdictions within Canada regarding the coordination of multi-jurisdictional class proceedings, it remains unknown whether this will hinder or help employment related class proceedings being advanced in Canada.

Analysis

Mr. Heller’s case, if certified, may widen the already open door in Canada to class proceedings claims in the employment law context, particularly on the issue of alleged misclassification. Class proceedings based on standard form contracts appear to be good candidates for certification based on the common issue that may predominate in such cases. On the other hand, resistance to certification may be possible on a closer look at whether or not:

1. individual issues are likely to predominate (see McCracken v Canadian National Railway Company, 2012 ONCA 445);
2.  in the case of proposed multi-jurisdictional class proceedings there are an unwieldy number of different jurisdictions with different applicable laws; or
3. there are reasons under the SSJA or equivalent legislation or jurisprudence to determine that some or all of the issues in the proposed class proceeding should be determined in another jurisdiction.

Should employers, especially those in the gig economy, brace for a deluge of class action proceedings in the near future post-Heller?  Heller may be the thin end of the wedge.  Following the SCC’s ruling in Heller, the proposed class action against Winnipeg-based food delivery company Skip the Dishes filed in 2018 is set to proceed. The action was on hold while Heller was before the SCC but will now proceed to an application for certification. The action, filed by a former Skip the Dishes courier, alleges that the company misled its drivers by classifying them as independent contractors rather than employees. The misclassification allowed the company to avoid statutory requirements covering minimum wages, paid sick leave, and other benefits. It is expected that class actions in other jurisdictions will follow.

Though Heller may have left many unanswered questions in its wake concerning the law of unconscionability and the enforceability of arbitration clauses, it may now be clearer sailing to certification.  The courts’ gatekeeping function in certifying class actions remains intact but a perfect storm may be brewing following the SCC opening the door to Mr. Heller’s class proceeding. This is especially so in light of the recent mass terminations and temporary layoffs flowing from the COVID-19 outbreak.  There is a real chance of increased employment-related class actions in Canada given the ongoing pandemic and its predicted long-term economic repercussions. Which issues are suitable for class proceedings remain an open question and may depend upon the jurisdiction in which the proceedings are advanced.

Employers should take this opportunity to take stock of their workforce, what agreements and policies are in place, the different jurisdictions in which they operate, and should critically assess those agreements and policies to assess their risks. As Uber v Heller shows, boilerplate clauses, especially in regards to dispute resolution, are clearly no longer sufficient. Even if an employer operates in multiple jurisdictions it may have common issues across its workforce or contractors. Familiarity with Canadian class proceedings may turn out to be the price of doing business using standard form contracts.

* Cen Yang, summer articled student, assisted with the preparation of this article.

For more information, please contact: