Will U.S.-style gig worker litigation come to Canada?

Some U.S. states have passed laws that effectively classify gig workers as employees. U.S. officials have also sued platform companies for breaking those laws by treating gig workers as contractors. The platform companies fiercely defend all lawsuits and have spent millions on ballot initiatives to carve out exceptions for gig workers in classification legislation. In Canada, both government action and platform companies’ responses look a little different.

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California and Massachusetts recently passed laws formalizing the ABC test, under which workers are considered employees unless the hiring company can prove three things: it doesn’t control how the worker performs their work; the worker performs work that is outside the company’s usual course of business; and the worker is customarily engaged in an independent business of the same nature as the work they’re performing for the company.

Most gig workers pass the ABC test and would therefore be classified as employees. So in 2020, platform companies spent $220 million to push a California ballot measure, Proposition 22, which sought to exempt app-based transportation and delivery workers from the ABC test and continue to classify them as independent contractors. Prop 22 also required platform companies to pay 120 per cent of local minimum wage to drivers for time spent driving (but not waiting) and required them to provide a health insurance stipend to drivers who normally work more than 15 hours weekly (again, not including waiting time).

Despite fierce opposition from worker and consumer advocacy groups, Prop 22 passed in November 2020 with 58 per cent support. But in August 2021, the California Superior Court found the ballot initiative was unconstitutional for two technical reasons. First, it infringed on the legislature’s power to regulate workers’ compensation. Second, since Prop 22 prevented the legislature from passing laws permitting app workers to unionize, it violated the requirement that ballot initiatives be limited to one subject. The court also noted the ban on app workers unionizing “appears only to protect the economic interests of the network companies in having a divided, un-unionized workforce.” The platform companies are appealing this decision.

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In Massachusetts, Uber and Lyft Inc. spent $17.8 million backing a similar ballot measure that would have cemented ride-share and delivery gig workers’ status as independent contractors “for all purposes with respect to his or her relationship with the network company.” Like the California initiative, it would have provided a minimum wage based on “engaged time,” as well as a health-care stipend for drivers who meet a weekly minimum of engaged hours.

In January 2022, a labour-backed coalition sued, arguing the proposed ballot measure violated a state law that requires all ballot measures to contain related subjects. In June 2022, the Massachusetts Supreme Judicial Court found the measure violated that law, as it included provisions regarding gig worker classification, as well as provisions that limit platform companies’ liability if a gig worker was injured on the job. It therefore threw out the ballot measure.

Other states, however, are passing pro-platform company employment laws. In March 2022, Washington state established minimum wages for Uber and Lyft drivers, again based on engaged time. The law also provides them with paid sick leave and access to workers’ compensation, but defined them as contractors, not employees.

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Ontario — the only Canadian province to pass gig worker-specific employment laws — is following the Washington model, thereby sparing platform companies the hassle of trying to carve out exemptions to the ABC test.

In April 2022, Ontario passed the Digital Platform Workers’ Rights Act, which guarantees gig workers the provincial minimum wage, but only based on “each work assignment.” Time spent waiting for an assignment remains unpaid. According to a 2021 report from the City of Toronto, rideshare drivers spend 40 per cent of their time available for a trip. As a result, platform companies could effectively pay gig workers just $9 per hour. While this law provides gig workers with benefits not available to contractors, it strips them of many protections granted to employees.

Gig workers throughout the U.S. have sought employment status through individual labour complaints, lawsuits and class action litigation.

For instance, in June 2015, the California labour commissioner considered whether an Uber driver was an employee or independent contractor. This was before California had enshrined the ABC test in law. The commissioner noted Uber had vetted driver Barbara Berwick, controlled what car she could use, monitored her ratings from riders and set prices. The commissioner therefore found Berwick was an employee and ordered Uber to pay her wages, overtime and interest, but this decision wasn’t binding on any other driver.

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In February 2022, an employment standards officer in Ontario came to the same conclusion regarding Uber Eats courier Saurabh Sharma. The officer found Uber exercised considerable control over Sharma, including delivery details, routes, timeframes, fees, complaints and suspensions and that he was therefore an employee. The officer ordered Uber to pay Sharma the difference between what he had earned as a courier and the provincial minimum wage. Uber is appealing this decision at the Ontario Labour Relations Board.

There’s some precedent at the board for finding gig workers aren’t independent contractors. In 2020, the board considered Foodora couriers’ employment status for labour relations purposes. It determined they were dependent contractors — a midway point between employees and independent contractors — and were entitled to unionize. Shortly afterwards, Foodora declared bankruptcy and left the Canadian market. The Canadian Union of Postal Workers alleged this was retaliation for the union drive and an unfair labour practice. The couriers eventually reached a $3.46 million settlement with Foodora.

The California and Massachusetts attorneys general, alongside attorneys general from certain cities within those states, have sued a slate of platform companies for misclassifying gig workers and violating state labour laws.

The attorneys general have won some injunctions and, in Massachusetts, defeated Uber and Lyft’s attempt to get the lawsuits dismissed, but all litigation is still working its way through the courts.

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In Canada, attorneys general don’t sue employers for labour violations on behalf of workers. Instead, provincial Ministries of Labour investigate employment standards complaints. On occasion, they’ll proactively investigate problematic industries or employment patterns, such as unpaid internships, can issue compliance orders or fines and will sometimes prosecute an offending employer.

But for the most part, Canadian gig workers must take the reins themselves, either by filing individual complaints, as Sharma did, or through class proceedings.

In August 2021, the Ontario Superior Court of Justice certified Heller v. Uber Technologies, a misclassification class action against Uber on the grounds of breach of contract and violation of Ontario’s employment laws. The certification came after a five-year battle over whether Uber drivers could sue in Ontario or if Uber’s contract, which required gig workers to bring expensive arbitration in the Netherlands, could stand. In 2020, the Supreme Court of Canada found the arbitration clause was unconscionable and the misclassification class action could proceed.

Canadian workers have launched — and won — many employment misclassification class actions, but none have been about gig workers. Whether courts find that Uber drivers and couriers are employees or contractors may take many more years, but will have serious repercussions for all.

Sara Tatelman is an associate at Koskie Minsky LLP in Toronto.