Don’t expect a quick result from the Uber class-action lawsuit

By Tony Poland, LegalMatters Staff • As many as 366,359 Uber couriers in Ontario got the green light to proceed with a $400 million class-action lawsuit alleging that they are employees, and not independent contractors in a fight that has gone on for years and will undoubtedly take many more to resolve, says Toronto class-action lawyer Margaret Waddell.  

On August 12,  Ontario Superior Court Justice Paul Perell certified Heller v. Uber Technologies Inc. as a class proceeding on behalf of “any person who, since January 1, 2012, in Ontario used an Uber app to transport passengers and/or to provide delivery services pursuant to a Service Agreement with [Uber].”

“What is apparent from the certification decision is that this is a very messy, complicated case.  The court repeatedly refers to it as an extraordinary case,” she tells LegalMattersCanada.ca. “That’s absolutely correct. There really is nothing standard about this situation at all. It is the first time that the classification of service providers in the gig economy is being litigated in Canada, and there are strong proponents on both side of this issue among the service providers.”

Perell notes the plaintiffs describe their case as “a conventional misclassification of employment class action.”

‘Raises unique problems of how class actions should adapt ‘

“There is, however, nothing routine about it, and it is misdescribed as a misclassification of employment status class action,” he writes. “The proposed class action is better described as a compound classification of employment status class action. The Plaintiffs’ proposed class action raises unique problems of how class actions should adapt to what has been called the ‘sharing economy’ which is animated by information, computer, and Internet technology.”

Despite the complications, Justice Perell concluded that there were issues that could be resolved in common for the proposed class, particularly with respect to the interpretation of the standard form service agreements.

Perell noted, “That the case at bar is not a conventional misclassification of employment class action does not mean that it is not certifiable. The prospect of certification in the immediate case still turns on the matter of commonality versus idiosyncrasy.”  While there are many iterations of the service agreements, the Court found that they could be interpreted in common for all Class members.

Waddell, who is not involved in the case and comments generally, says Perell “got it right that this can be decided on a class-wide basis.”

“One of the important takeaways from the decision is the fact that the judge says it is possible to decide if there was an employment agreement or an employment relationship on a class-wide basis,” she says. “He is not ruling, or even suggesting, that the trial judge will find that there is an employment relationship.  He was very careful not to lean one way or the other on that issue in his decision. He simply said these are standard documents and they can be interpreted to determine if they create an employment relationship.”

Waddell says some “would see this as significant.”

Each case needs to be decided on an individual basis

“But really all he is saying is that the court can decide the case at that high level, on the common basis,” she says. “He goes on to say, more importantly, that the guts of each case would have to be decided on an individual basis.”

“Just because the certification battle has been won does not mean that the plaintiffs have won the litigation war. This action is far from over, and could take an extremely long time to litigate,” says Waddell, a partner with Waddell Phillips Professional Corporation. “I suspect there’s going to be many layers to this before the parties get anywhere near a trial. For example, Uber could certainly seek leave to appeal the certification decision. If that happens there will be even more delays.”

The class action began in January 2017. A year later Uber won a motion to have the action stayed in favour of arbitration in the Netherlands. The decision was overturned by the Ontario Court of Appeal in January 2019 before making its way to the Supreme Court of Canada (SCC).

The SCC was told potential delivery personnel had to agree to a long, standard contract and any legal problems with the company would have to be resolved by arbitration at the International Chamber of Commerce in the Netherlands at the worker’s expense. The Supreme Court ruled “the arbitration clause is unconscionable and therefore invalid.”

That judgment allowed the proposed class-action lawsuit to continue, leading to Justice Perell’s decision.

Many more steps that need to be taken

There are many more steps to be taken before there will be any final decision.  First off, once the certification order is final, there will be the opt-out session, giving Uber couriers who do not wish to be identified as employees an opportunity to exclude themselves from the litigation entirely. Untangling who is in and who is out will be a lengthy process, even after the opt out period is over, Waddell says.

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“This is sort of a one-step-forward, one-step-back-situation as far as the certification goes because there’s still going to be some really serious determinations that have to be made on an individual basis after the common issues trial,” she explains. “Even if the plaintiffs are successful in a common issues trial establishing that there is an employer-employee relationship, it still leaves everybody in the class having to come forward to prove that they have not contracted out of the class action, that there was a breach of Employment Standards legislation in their particular case, and what their damages are. It’s really a bit of a behemoth situation that the plaintiffs are going to be facing to succeed.”

Who was paid, what they were paid, and who is responsible for the drivers’ expenses incurred for which the drivers have claimed tax deductions are just some of the matters that will take time to determine, says Waddell.

“You literally have to go through it on a week-by-week basis,” she says. “It will be an accounting nightmare ultimately.”

Another threshold issue to be considered

Waddell says there is also another threshold issue to be decided. The changes Uber made to their service agreement after losing the arbitration argument will come into play.

“Basically, what Uber tried to do is reimpose that clause by putting safety measures around it. People can opt out of the arbitration and no class action clause so arguably it is not unconscionable because the users are not bound to arbitrate,” she explains. “Uber will undoubtedly rely on that clause heavily in their defense to say people opted in to arbitration and are excluded from the class action. If so, they are not entitled to any damages because they are not part of the class to begin with.”

In his ruling, Perell “made a point of saying that the issue will need to be addressed individually,” Waddell says.

“The judge has said that this is a really important issue that class members need to know about right from the outset,” she says. “If the court finds that clause is enforceable, then for each individual there will be a determination about whether or not they can even litigate their individual claims. After the common issues trial, there will be an individual determination of whether workers are bound by that clause.”

Right to resolve disputes through arbitration

Waddell says what makes the issue interesting is that courts recognize a worker’s right to resolve their dispute through arbitration.

“We have a general policy in favour of deferring to arbitration rather than the courts if that’s what the parties have agreed to do. So, there are policy reasons for upholding that clause,” she says. “But then you overlay it in the employment context. I think if the courts are inclined to find there is an employment arrangement, they will be equally inclined to find that the new arbitration clause, buried in the service agreement, is also unconscionable and that people shouldn’t be forced into arbitration.

“The question is whether you can drop such a clause into the middle of a standard form agreement that’s buried in a ‘you must click to participate’ arrangement, and then compel arbitration when the agreement was not freely negotiated. That’s one of the things the court will be wrestling with. “

Waddell says the lawsuit can be seen as “an attack on the gig economy” that can have a profound effect on its future.

“It could potentially be the demise of the entire service provider industry that has developed from these technological advances,” she says. “A plaintiff win means the service will become much more expensive because Uber will have to layer in all the costs that are involved with being an employer, which then makes the services less-than-desirable. The increased costs associated with being found to be an employer could potentially drive companies like Uber out of the market.

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