Jul 6, 2020  By John Hyde

Is independent contractor status dead?
The Supreme Court of Canada has just given technology companies a reason to think twice about investing in Canada. 

In its much-anticipated decision in Uber v. Heller, our highest court has formally acknowledged the inherent imbalance in bargaining power that exists between sophisticated app developers and the average Canadian working on their side hustle. 

Uber, like many technology companies, had asked Heller, a food delivery driver in Toronto, to click and “agree” that any dispute over his contract with Uber would be resolved at mediation and arbitration in the Netherlands. This was of course to Uber’s significant advantage, in no small part because the process would cost Heller nearly his entire yearly earnings from Uber, making it exceedingly unlikely that he would ever pursue that remedy, if at all. 

This created a Catch 22 situation for Heller when he wanted to argue in a class action lawsuit that Uber drivers were actually employees of Uber under Ontario law. As an employee, he would be entitled to additional protections not afforded to independent contractors, which is how Uber currently classifies its drivers in Canada.   
Uber insisted that Heller would have to spend $14,500 USD to make that argument in the Netherlands, rather than in Ontario where his lawyers likely took on the case for free on a contingency basis.   

The Supreme Court had none of it.  Heller was too powerless to negotiate any of the terms he had agreed to, which were much too unfair, the Court decided.  

In determining that the boilerplate contract was unconscionable, the Supreme Court suggested that many such contracts would also be invalid. This is particularly the case when there is a “gulf in sophistication” between the technology company and the average Joe offering his services for a modest income.   

As a result, Uber drivers are now free to pursue their class action lawsuit in Ontario to argue that they are in fact employees.  

How Uber drivers will fair in that lawsuit remains to be seen. Yet the Ontario Labour Relations Board’s (the “OLRB”) recent decision that Foodora couriers have a right to unionize offers a glimpse into where Canada’s gig economy may be headed.  

In that case, Foodora couriers successfully argued that they were dependent contractors under Ontario labour law. Unlike a true independent contractor relationship, the law has evolved to recognize that because certain contractors are economically dependent on the party they are providing services for, they are entitled to additional rights traditionally reserved for employees. 

Significantly, nearly all of the reasons considered by the OLRB in favour of the Foodora couriers apply to Uber drivers. That is: 1) the app is the most significant tool they use; 2) they are not allowed to engage substitutes to increase profits; 3) they are limited in their ability to independently market their services to, or build relationships with, clients and potential clients; and 4) the company exercises significant control over the manner and means of work by closely monitoring activity to ensure service standards are met.  

Foodora of course recently shut down its Canadian operations amidst ongoing losses, no doubt spurred by their couriers’ recent push for unionization.  

What then are the takeaways for technology companies who provide millions of Canadians with a source of income?

On the one hand, they will have to re-evaluate the standard form contracts they are asking workers to agree to.  As there will always be a “gulf in sophistication” between a multinational technology company and worker, and no practical opportunity to negotiate the terms, companies must scrutinize fairness in all aspects of these agreements, or risk having them be deemed invalid.  

On the other hand, companies must be prepared that Canadian courts will go the way of our friends in California and Europe in deciding that Uber drivers (and many gig economy workers) are employees.  

Even if Uber drivers are not full-fledged employees, a determination that they are dependent contractors could be devastating to Uber’s business model in Canada, where dependent contractors are often treated as employees. Such a determination would entitle drivers to severance and to collectively bargain for their rights in the workplace, factors which would dramatically increase Uber’s cost of doing business.

Prior to the pandemic, no less than 8% of Canadians were engaged in the gig economy and trending upwards. Full-time employment has since become increasingly precarious. Whether or not you are a fan of the gig economy, one thing is for certain: the Supreme Court of Canada has officially put it on notice.  

Newsletter Subscription

Stay ahead of the curve by subscribing to our newsletter today. Written by our expert lawyers, this newsletter is completely free and covers a wide range of HR topics.