February 2019

Toronto Uber drivers win appeal to proceed with class action on employment status

by Mike Beggs

Uber Canada has absorbed monumental flak from disgruntled taxi operators, and pushback from some municipalities, but now it’s facing a proposed class action suit from its own Toronto driver/partners.

Filed by 35-year-old UberEats driver David Heller, the suit claims that Uber drivers are employees rather than contractors and are therefore entitled to minimum wage, vacation pay, and other protections under the Ontario Employment Standards Act.

Since its inception, Uber Technologies has been battling against such claims in jurisdictions around the world, maintaining it is simply an app technology provider connecting driver/partners with passengers. Given its “gig economy” business model, the status of drivers represents a critical issue for the Silicon Valley giant.

In early January, the Court of Appeal of Ontario certified Heller’s class action, reversing a Lower Court decision which would have sent this legal challenge overseas. The Lower Court judge had determined that Uber drivers were bound by the arbitration clause in Uber’s services agreement, which requires all disputes to go through arbitration in the Netherlands.

But as Canadian Press reported, a three-judge panel at the Court of Appeal ruled this arbitration clause amounts to illegally outsourcing an employee standard, and therefore cannot stand. They further concluded that this clause takes advantage of the significant power and financial disparity between Uber and its’ drivers -- who would shoulder costs of up to US$14,500 in filing fees, just to begin the arbitration process, plus the costs of travel, accommodation, and counsel.

The appeal court stated, “It can be safely concluded that Uber chose the arbitration clause in order to favour itself and thus take advantage of its drivers, who are clearly vulnerable to the market strength of Uber. It is a reasonable inference that Uber did so knowingly and intentionally.”

The panel ruled that the Lower Court judge erred by considering the arbitration clause to be like those seen in “normal commercial contracts” where the parties are relatively equal in power and sophistication.

“(Uber’s process) requires an individual with a small claim to incur the significant costs of arbitrating that claim – the fees of which are out of all proportion to the amount that may be involved. And the individual has to incur those costs up front,” the court continued.

The plaintiff’s lawyer Michael Wright, of Cavalluzzo LLP, told CBC News the court’s decision has already made a marked impact on employment law, “by being very strong in emphasizing how seriously it takes any efforts to contract out the Ontario Employment Standards Act.”

The panel also determined that a provision which allows workers to file complaints against an employer with the Ministry of Labour constitutes an employment standard. “And so, in requiring disputes to go to arbitration, Uber’s services agreement is illegally contracting out the employment standard that establishes a mechanism to deal with complaints, and depriving (Heller) of the right to have the Ministry investigate the complaint,” the decision read.

“This is of some importance for, among other reasons, if a complaint is made then the Ministry of Labour bears the burden of investigating the complaint. That burden does not fall on the appellant. Under the arbitration clause, of course, the appellant would bear the entire burden of proving his claim.”

Additionally, the panel observed that, “the arbitration clause requires each claimant to individually arbitrate his/her claim and to do so in Uber’s home jurisdiction, which is otherwise completely unconnected to where the drivers live, and to where they perform their duties. Still further, it requires the rights of the drivers to be determined in accordance with the laws of the Netherlands, not the laws of Ontario, and the drivers are given no information as to what the laws of the Netherlands are.”

The court ordered Uber to pay Heller the $20,000 costs of his appeal.

An Uber Canada spokesperson told CP the company will be reviewing the Court of Appeal ruling.

Long-time Toronto owner/operator Gerry Manley suggests that it would be “very easy” to prove Uber drivers are employees in Canada (where the Excise Tax Act states that Private Transportation Companies must be treated the same as taxi companies), and in Toronto (where By-Law 546 states that Uber and Lyft drivers can only get their orders from their company’s electronic platform and cannot sit on taxi stands, nor take flags off the street).

“If they can’t make money any other way, they would have to be employees,” he reasons. “Uber is their sole supplier of orders.”

But he stresses such measures as those in the Excise Tax Act have yet to be enforced.

And while the Heller case “has potential”, he suggests, “Uber will just change their business model slightly, and go through this whole court thing again.”

“Don’t forget Uber is an $80-billion corporation, soon to be a $120-billion corporation,” he adds.

Of the recent crackdown on PTC’s by New York City legislators, Manley argues that while the cap put on the number of PTC vehicles is a good start, “the greater impact comes from companies like Uber and Lyft now being required to guarantee a minimum wage of $17.22 per hour.” (He notes again, these measures have yet to take effect).

“Under this scenario, their workers will most likely now seek employee status, and companies like Uber and Lyft will have to pay all the benefits associated with being an employee,” he projects. “With the cap, and perhaps their drivers becoming employees, their rates would skyrocket past taxi-cabs, and that finishes the advantage they have enjoyed for almost five years.”

In December of 2017, Uber was dealt a major blow when the European Court of Justice ruled that it is a transportation service provider and must be regulated like any other cab operation, and that Uber, “exercises decisive influence over the conditions under which its’ drivers provide their service.”

This landmark decision allows member nations within the European Union to regulate the conditions for providing PTC service, seriously adding to their costs of operation.

Meanwhile, in India, Uber and rival Ola drivers are threatening to resume their recent strike for better wages.

While observing that “it all helps” in the cab industry’s battle for survival, Independent Toronto Taxi Inc. president Mike Tranquada notes Uber drivers in California have been fighting for employee status and the right to seek class action since 2009.

“Judges have ruled that they are employees. But Uber will stall it in the courts for years,” he alleges.

(In September of 2018, Uber won a legal victory when a federal appeals court denied drivers the right to class action, ruling that, “drivers must arbitrate their claims individually and not pursue class action law suits”. Thousands of California drivers had previously been granted the right to class action in a lower court decision.).

A driving force behind the Toronto plate owners’ proposed $1.7-billion class action suit against the City, fellow owner/operator Andy Reti says of the Court of Appeal ruling, “Anything that will hurt Uber would be a good thing. But it will not help us.”

“Uber is not about to fold up tents and go out of town,” he suggests. “So far, there hasn’t been a single conviction against them. So far, they have had their way. Nothing has changed. These bits of information, it doesn’t make an iota of difference, because this industry is dying.”


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