Case Update on Heller v. Uber Technologies - Are Uber Drivers Employees or Independent Contractors?
Updated: Sep 9
Misclassification occurs when a worker is assigned to a different category than the one he or she should be in. In many employment law cases, independent contractors are found to be misclassified, and as a result, they are ineligible for all employment law entitlements reserved for employees. On the other hand, the possibility of an employee being misclassified as an independent contractor remains a major concern. The same question was raised in Heller v. Uber Technologies Inc.
Topics Will be Covered in This Post:
1. What is the Test for Independent Contractors?
The Labour Relations Act (LRA) governs the employer – employee relationship for unionized workers and the Employment Standards Act (ESA) governs non-unionized workers. Employment law deals with non-unionized workplaces, whereas labour law is the area of law that deals with unionized workplaces.
If you are classified as an independent contractor rather than an employee, neither the ESA nor the LRA protect you.
The Court and the Canada Revenue Agency (CRA) have both employed a four-point test to assess whether you are an employee or an independent contractor:
Is the corporation authorized to determine the amount of the monthly payment as well as the time, place, and manner in which the work is to be completed? And is there a time limit on when you can stop working on the job you were hired to do?
2. Ownership of tools
The possession of a tool is no longer a reliable indicator. In some occupations, such as painters and garage mechanics, even workers under an employment contract must provide their own tools.
The cost of using the tools is a much more accurate indicator.
Employees who buy or rent equipment or large tools that require significant upfront investments and ongoing maintenance are usually self-employed, as they may lose money when replacing or repairing their own equipment.
3. Chance of profit / risk of loss
Do you stand to lose money as a result of bad debts, equipment or material damage, or delays, and do you cover your own operating costs?
4. Economic dependency & Integration
Is the employee doing business with more than one client? Is the payment from the corporation the primary source of income for the worker?
If the Court determines that the four-point standard has been met, the worker will be considered an employee, regardless of the terms of the contract.
The rights and expectations of the parties should always be reduced to writing. It is critical to have a well-written business agreement that clearly states the intentions of the parties.
2. Case Update on Heller v. Uber Technologies Inc.
Drivers and delivery employees must first create an account on the Uber website before they can use the app. The first time a driver or delivery person opens the app on his or her phone, he or she must agree to a services agreement. Despite using their own vehicles as the "tool of trade", many people works 8 to 10 hours a day as an Uber driver, who must abide by the protocols set by Uber, or they stand to lose their main source of income. The million-dollar question is whether or not these drivers are Uber employees?
a. Superior Court - Heller v. Uber Technologies Inc., 2018 ONSC 718
Heller v. Uber Technologies Inc., 2018 ONSC 718 called into question the very foundations of misclassification.
The facts of the case are as follow, as stated in Heller, at para. 15-20:
Through the internet, Uber services are available ... in Ontario since February 8, 2012.
Drivers in Ontario do not enter into contracts with Uber Technologies Inc. or Uber Canada Inc. The Drivers rather create an internet account and a contractual relationship with Uber B.V. and with Rasier Operations B.V. and, or Uber Portier B.V [in Netherlands].
Under the Service Agreements between the Driver and Rasier Operations or between the Driver and Uber Portier, the Driver is granted a licence to use the App and to obtain the carriage service. The Driver agrees to pay a service fee and represents that the Service Agreements create a legal and direct business relationship. The Driver acknowledges that the parties are not in an employment relationship.
Before a Driver’s account is activated to use the Driver App, he or she must meet certain requirements, which are determined by Uber’s legal team in the Netherlands. In Ontario, a Driver must provide copies of: (i) a driver’s licence, (ii) a vehicle registration, (iii) proof of eligibility to work in Canada, (iv) their motor vehicle insurance policy, and (v) an Ontario Safety Standards Certificate.
To review and accept the operative licencing agreement, the Driver clicks a hyperlink presented on the screen within the App. To click “I agree”, a Driver must scroll through the entire agreement, about 14 pages in length. After a Driver has confirmed his or her agreement, he or she is then prompted to confirm his or her acceptance a second time, prior to which the App states, in caps: “PLEASE CONFIRM THAT YOU HAVE REVIEWED ALL THE DOCUMENTS AND AGREE TO ALL THE NEW CONTRACTS.” Once a Driver has clicked “YES, I AGREE” a second time, he or she is able to access the Uber App, and their agreement is automatically sent to their “Driver Portal,” which provides access to account information.
Uber B.V., Rasier Operations B.V., and, or Uber Portier B.V. periodically revise their agreements with Drivers. Each time a revision occurs, the Driver is required to consider the revised terms in order to receive continued access to the Driver App. The Driver must agree to the revised terms through the process described above.
On January 19, 2017, Mr. Heller, an Uber Eats driver, filed a Statement of Claim against Uber, seeking to bring a class action on behalf of "any person who has worked or continues to work for Uber in Ontario as a driver or delivery person since 2012."
Mr. Heller contends that he and other similarly situated Uber drivers and delivery personnel in Ontario are Uber employees and thus protected by the ESA.
On October 13, 2017, Uber filed a motion in the Ontario Superior Court of Justice to have the proposed class action dismissed in favour of the arbitration agreement.
In favour of the arbitration agreement in the service agreement that Mr. Heller accepted, the Court granted a stay of proceedings in Heller, at para. 80.
b. Court of Appeal - Heller v. Uber Technologies Inc., 2019 ONCA 1
Mr. Heller appealed the decision, and the case was decided in favor of Mr. Heller at Heller v. Uber Technologies Inc., 2019 ONCA 1.
Mr. Heller argued that even if Uber Eats drivers and Uber drivers are entrepreneurs with some degree of freedom and control over their own businesses, some contractors, including himself, should be deemed to be employees, and the Company they worked for should be deemed to be an employer, if the "employer" has rules for the "employees" to follow, a governing body that functions similarly to management, and the members are financially dependent on the "employer."
Arbitration Clause MUST Conform to "Employment Standard"
In para. 28, the Court of Appeal determined that it did not need to decide whether Uber drivers are employees in order to rule on whether the agreement is invalid on a preliminary motion. The Court assumed Mr. Heller's claim was "capable of proof" for the purposes of the motion and asked, "If the appellant (and those like him) are Uber employees, does the Arbitration Clause constitute a prohibited contracting out of the ESA?"
Assuming Mr. Heller is an employee, the Court of Appeal ruled, in para. 31, para. 41 and para. 49, that even if the employees signed an arbitration clause with the employer, it is voidable at the employees' discretion, and the employees are free to file an ESA action regardless of the existence of an arbitration clause.
Arbitration Clause MUST NOT be Unconscionable
1. a grossly unfair and improvident transaction;
2. a victim's lack of independent legal advice or other suitable advice;
3. an overwhelming imbalance in bargaining power caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
4. the other party's knowingly taking advantage of this vulnerability.
The Court of Appeal, in para. 68, ruled that the Arbitration Clause is Unconscionable by applying the 4-part test:
1. The Arbitration Clause represents a substantially improvident or unfair bargain. It requires an individual with a small claim to incur the significant costs of arbitrating that claim ... the fees for which are out of all proportion to the amount that may be involved. And the individual has to incur those costs up-front.... Uber is much better positioned to incur the costs associated with the arbitration procedure.... Arbitration Clause requires each claimant to individually arbitrate his/her claim ... in Uber’s home jurisdiction, which is otherwise completely unconnected to where the drivers live, and to where they perform their duties.... in accordance with the laws of the Netherlands, not the laws of Ontario.....
2. There is no evidence that the appellant had any legal or other advice prior to entering into the services agreement nor is it realistic to expect that he would have. ... [T]he appellant has no reasonable prospect of being able to negotiate any of the terms of the services agreement.
3. There is a significant inequality of bargaining power between the appellant and Uber – a fact that Uber acknowledges.
4. ... Uber chose this Arbitration Clause in order to favour itself and thus take advantage of its drivers, who are clearly vulnerable .... Uber did so knowingly and intentionally....
c. Supreme Court - Uber Technologies Inc. v. Heller, 2020 SCC 16
Uber Technologies Inc. appealed the Court of Appeal decision. It went all the way to the Supreme Court of Canada in Uber Technologies Inc. v. Heller, 2020 SCC 16.
In line with the Court of Appeal decision, the Supreme Court avoided to have a definitive ruling as to whether Mr. Heller was an employee of Uber. The Supreme Court held that the Arbitration Clause is unconscionable and reasoned that:
Unconscionability requires both an inequality of bargaining power and a resulting improvident bargain. An inequality of bargaining power exists when one party cannot adequately protect its own interests in the contracting process. A bargain is improvident if it unduly advantages the stronger party or unduly disadvantages the more vulnerable.
Applying the unconscionability doctrine in this case, there was clearly inequality of bargaining power between Uber and Mr. Heller. The arbitration agreement was part of a standard form contract and a person in Heller’s position could not be expected to understand that the arbitration clause imposed a US$14,500 hurdle to relief. The improvidence of the arbitration clause is also clear because these fees are close to Heller’s annual income and are disproportionate to the size of an arbitration award. Arbitration clause is the only way Mr. Heller is permitted to vindicate his rights under the contract, but arbitration is out of reach for him and other drivers in his position. The arbitration clause is unconscionable and therefore invalid.
It's always crucial to understand what you are signing. It is strongly recommended that you seek legal counsel to fully understand your rights and responsibilities, as well as the legal ramifications before accepting an employment contract.
d. Superior Court - Heller v. Uber Technologies Inc., 2021 ONSC 5434
Following the decision in Supreme Court, Mr. Heller proceeded to have his class action certified in Heller v. Uber Technologies Inc., 2021 ONSC 5434.
It's still too early to tell the impact of Heller v. Uber Technologies Inc. It's still to early to tell. But the Court approved Augusta Ventures to be a third-party funding provider to fund the Class action. In allowing the third party agreement, the Court reasoned, in para. 22, that "Augusta is the largest litigation and dispute funding institution in the United Kingdom by the number of cases funded. As of July 29, 2021, Augusta had access to approximately CA$594 million of undrawn facilities".
This Class Action case of Heller v. Uber Technologies Inc. is going to be interesting. If Mr. Heller wins, it's probable that similar class action suites will be forthcoming as Uber has refused to acknowledge couriers and drivers who utilize its platform as employees and has declined to provide benefits to them.
Despite having some degree of freedom and control over their own businesses, some contractors should be deemed to be employees, and the Company they worked for should be deemed to be an employer, if the "employer" has protocols for the "employees" to follow, a governing body that "employees" have to reported and answered to, and the members are financially and economically dependent on the "employer."