Worker Misclassification & Class Actions

A class action can be a means for Canadian workers who share a common goal to collectively and legally make a claim against their employer. By proceeding with a class action, workers have the benefit of strength in numbers. For example, workers may be able to collectively seek compensation for low-value claims which may not be worthwhile to pursue individually.

However, only certain employment issues are suitable for class actions. In order to proceed, class actions must obtain a court certification. Certification requires courts to recognize 5 factors: (i) a cause of action, (ii) an identifiable class of people, (iii) a common issue among the claims, (iv) preferable procedure, (v) a representative. Often times the key issue is whether there is a "common issue" which can be determined on a class-wide basis.

In recent weeks, two separate class actions have been certified in the employment law context. In both cases, the common issue has been the potential misclassification of workers. The workers allege that they have been wrongfully categorized as independent contractors, not employees, and as a result have been denied the benefits afforded to employees, including under applicable employment standards legislation. In each case, the Court considered whether a class action was a suitable procedure for litigating the disputes.

Navartnarajah v. FSB Group Ltd., 2021 ONSC 5418

In this action, the representative Plaintiff, Mr. Navaratnarajah, alleges that certain sales agents of the Defendants have been misclassified as independent contractors when they should be considered employees.

The sales agents in question are paid commissions based on for the number of sales and policy renewals they generate for the Defendants. Each sales agent must be licensed with the Registered Insurance Brokers of Ontario, and they can only work selling insurance products or services for the one insurance broker who sponsors their licence. The sales agents are provided with administrative support from the Defendants. While they are free to work their own schedule, they are required to attend monthly meetings at the Defendants' offices.

In certifying this class action, the Court held that it was not controversial that there was a cause of actin and an easily identifiable class. The Court also held that despite the sales agents having some marginal differences in their respective work relationship with the Defendants, the essence of their jobs is similar enough that the classification question can be addressed in common.

Interestingly, the Court noted the possible negative repercussions, including liability for back taxes, that an employee classification could have on the sales agents. However, it concluded that such risks could materialize whether the action was pursued by way of a class action or a single test case. Thus, the possible business and financial consequences did not prevent a class action from being a suitable procedure.

Heller v. Uber Technologies Inc., 2021 ONSC 5518

On August 12, 2021, just one day after the decision in Navartnarajah v. FSB Group Ltd., the Court also certified a class action against Uber with respect to the misclassification of its drivers and delivery persons.

In this proceeding, a critical issue was whether there was sufficient "commonality" between the drivers and delivery persons. Uber argued that the classification of the possible 366,359 class members would need to be determined on an individual case-by-case basis, given the differences in the contracts between the various class members and the differences in the work arrangements. The Plaintiffs asserted, however, that there was commonality based on the fact: (a) all of the class members used the Uber App, (b) all of the class members entered into standard form service contracts that are non-negotiable, and (c) Uber imposed rules of contract performance.

The Court sided with the Plaintiffs. In finding there was a sufficient common issue with respect to the classification workers, the Court noted that Uber had established a business model with respect to its drivers and delivery persons, and it would be for the trial judge to determine whether that model created an employment relationship or not.

The Court refused, however, to certify the Plaintiffs' claims with respect to unjust enrichment, negligence, and punitive damages on the basis that such claims disclosed no reasonable cause of action.

Importantly, the Court also refused to certify the question of aggregate damages as Uber's potentially liability to the class members remain to be determined. The result of this is that even if the Plaintiffs are successful in establishing the class members are employees, each member may nevertheless have to participate in separate mini-trials to determine what they are owed.

Takeaways:

These decisions highlight both the pros and cons of class actions. In both cases, the workers were successful in seeking certification, which may enable them to pursue claims which might otherwise be untenable. However, in each scenario practical challenges could result from the final judgement, including undesired financial consequences for the class members or the difficulties associated with determining amounts owed to hundreds of thousands of individuals.

In any event, these cases serve as good reminders of the potential issues that can arise if workers are incorrectly classified. Employers and workers alike are encouraged to carefully consider how to structure their work relationship in a manner that suits their needs and minimizes the risks of misclassification.

Lee Workplace Law would be happy to answer any questions you may have about worker classification.