In  Heller v. Uber Technologies Inc.,  the Ontario Superior Court of Justice certified a class action lawsuit brought by Uber drivers who claim they have been misclassified as independent contractors and denied employment benefits.

Background

In 2017, the representative plaintiffs, an UberEats driver and an Uber driver (the "Plaintiffs"), commenced a proposed class action in Ontario against Uber Technologies Inc. and related entities (together, "Uber") on behalf of persons who have entered into Service Agreements with Uber to use software applications ("Uber Apps") developed and operated by Uber to provide transportation and food delivery services (the "Class Members").

The Service Agreements label the Uber drivers or delivery people as "independent contractors". This legal categorization was disputed by the Plaintiffs, who alleged that they should be classified as employees, and therefore, entitled to the benefits of Ontario's Employment Standards Act, 2000 ("ESA") and other federal employment-related legislation such as the Canada Pension Plan and the Employment Insurance Act.

Uber initially asserted that the Plaintiffs' class action was precluded by an arbitration clause in its Services Agreements that required all disputes to be resolved through arbitration in the Netherlands. As we noted in 2020, the Supreme Court of Canada ruled that the mandatory arbitration clause in Uber's service agreement was unconscionable, and therefore invalid, with the consequence that the proposed class action could proceed to court.

Following the Supreme Court's ruling, the Plaintiffs moved to certify the proceeding as a class action.

Overview of the parties' positions

The Plaintiffs submitted that Uber had misclassified the proposed Class Members as independent contractors rather than employees, and that there was some basis in fact for the commonality of all the proposed common issues that would determine and classify the employment relationship. For instance, they all used the Uber App, were bound by the standard form service agreements, and shared rules of contract performance imposed on them by Uber.

In their Statement of Claim, the Plaintiffs advanced four causes of action: (i) breach of the ESA; (ii) breach of contract; (iii) negligence; and (iv) unjust enrichment. The Plaintiffs claimed that their proposed class action is similar to other employment status misclassification cases that have been certified and that it too should be certified.

Uber, on the other hand, argued that the Class Members were independent contractors as this was a status expressly attributed to them in the Service Agreements. Uber also argued that the Class Members made the choice to provide services to riders using the Uber App, with Uber's role being to develop, license, and market the app, as well as to facilitate payment for services (among other things). Uber claimed that the matter of employee or independent contractor status could not be determined at a common issues trial because, regardless of the common Uber Apps, common Service Agreement, and common rules and regulations, employment status is ultimately an idiosyncratic analysis that varies from driver to driver.

The Certification Decision

The Court certified the class proceeding, finding that the five criteria set out in section 5 of Ontario's Class Proceedings Act, 1992 (the "CPA") were met, namely that:

  • the pleadings disclose a cause of action;
  • there is an identifiable class of two or more persons;
  • the claims of the class members raise common issues;
  • a class proceeding would be the preferable procedure for the resolution of the common issues; and
  • there is a representative plaintiff who would fairly and adequately represent the interests of the class in accordance with a workable plan and who does not have a conflict of interest with other class members on the common issues to be raised.

Cause of action

While the Court concluded that the Plaintiffs satisfied the cause of action criterion for breach of the ESA and breach of contract, the Court agreed with Uber that the Plaintiffs did not satisfy the cause of action criteria or the preferable procedure criteria for their claims of unjust enrichment and negligence.

The Court held that the Plaintiffs' claims for ESA entitlements and other unpaid statutory payment and out-of-pocket expenses were all breach of contract claims, and that the equitable relief of unjust enrichment was not available where the plaintiff possesses a right to contractual relief. Relying on the Supreme Court in Atlantic Lottery v. Babstock, the Court held that disgorgement is generally not available for breach of contract and is only available in extraordinary circumstances, which did not exist in this case.

With respect to the negligence claim, the Court held that the putative Class Members' pure economic loss claims did not fall within any of the recognized categories where recovery for pure economic loss is permitted in negligence and that the claims were more than adequately addressed by the ESA and the alleged contracts of employment. The Court further held that this was not an occasion for concurrent liability in contract and tort. Moreover, the Court held that any claim in negligence would be redundant and cumbersome and would not satisfy the preferable procedure criterion.

Identifiable class

The Court held that the Plaintiffs satisfied the identifiable class criterion, but that the class definition needed a modest revision. Specifically, the Plaintiffs' proposed class definition referred to "any person who, since January 1, 2012, worked or continues to work ... pursuant to a Service Agreement". Finding that this definition obscured the key issue in the case as to whether the Class Members, all of whom are Uber App users, are "working for" Uber, the Court revised the definition to identify the putative Class Members simply as any person who "used" the Uber App to transport passengers and/or to provide delivery services.

Common issues

The commonality or idiosyncrasy of the proposed common issues questions was a "major factual and legal battleground" of the proposed class action.

After reviewing the extensive evidentiary record, the Court held (notwithstanding Uber's arguments to the contrary) that there was some basis in fact for a number of proposed common issues, including whether the Uber App users were employees or independent contractors, and the Class Members' related breach of contract and statutory claims. Moreover, the Court held that all proposed Class Members had in common that they invariably used Uber Apps and were bound by the Service Agreements. In light of the foregoing, the Court held that there were sufficient common issues to bind all Class Members. The ultimate determination of whether an employment relationship exists will be decided by a common issues trial judge at a later date (pending the outcome of any appeals, to the extent made).

Significantly, the Court held that, in this case, the question of aggregate damages was not certifiable as a common issue. The CPA provides that a court can determine damages on an aggregate (i.e. class-wide basis) when "no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined in order to establish the amount of the defendant's monetary liability" and "the aggregate of the defendant's liability can reasonably be determined without proof by individual class members". In this case, however, the Court held that individual questions of fact relating to the determination of each Class Member's damages remained to be determined on an individual basis, with Class Members required to provide proof in support of their damages claims at individual issues trials.

In the event that the Class Members are successful in proving they are Uber employees at the common issues trial, individual issues trials will follow to determine the Class Members' individual damages. While the number of individual issues trials in this circumstance could be quite large (there are 366,259 Class Members), the Court noted in its decision that the take up of individual claims may be small due to Class Member attrition (individuals may decide that they do not have provable claims or that they would not benefit from a "employee" finding).

Preferable procedure

The Court held that the Plaintiffs satisfied the preferable procedure criterion and rejected Uber's arguments that the individual issues in this case stemming from employment classification and limitations issues will overwhelm the common issues and make the class action unmanageable.

The Court held that there are viable common issues and a class action would be a meaningful route to access to justice for both parties. According to the Court, the proceeding would be manageable, and a common issues trial would provide "considerable momentum for individual issues trials". The Court noted that waiting for legislative reform would be of no use to Class members who have present day claims and that the court could eventually rely on section 25 of the CPA to develop protocols for the resolution of the individual issues trials.

The fifth certification test requirement (an adequate representative plaintiff with a workable litigation plan) was not contested.

Key Take-aways

Businesses in which independent contractors form part of the workplace fabric will want to keep an eye on this case, which – as a result of this ruling – could now proceed to a common issues trial. There is of course the possibility of an appeal of the certification order, and it will be interesting to see if that is pursued and what the result is. In any event, it should be remembered that this decision is not a decision on the merits: there is still a long way to go before any determination will be made as to the classification of Uber drivers as independent contractors or employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.