Written by Josh Mandryk, Goldblatt Partners, Toronto
On April 27, 2020, food delivery service Foodora Canada announced that it would be leaving the Canadian market effective May 11. Days later details of its bankruptcy proceedings were reported in the media. Foodora’s announcement comes in the context of an ongoing application for certification by the Canadian Union of Postal Workers (“CUPW”) before the Ontario Labour Relations Board (the “Board”) and on the back of a February 25, 2020 decision by the Board that Foodora couriers were dependent contractors for labour relations purposes and therefore entitled to collectively bargain under the Labour Relations Act, 1995.
While Foodora’s stated reasons for leaving the Canadian market were its inability to turn a profit and the “saturation” of the Canadian food delivery market, the timing of Foodora’s departure is, at best, suspect, particularly given its parent company’s recent announcement that its sales had experienced “an increase of 10% since the beginning of March 2020” and given Foodora’s past withdrawal from the Australian market on the back of employment and tax regulators cracking down on the company for its classification of its couriers as independent contractors.
Many things can be said about Foodora’s disappointing announcement, and I believe most of those are best left to be said by CUPW and its members at Foodora. Instead, this post briefly discusses how, from a labour and employment policy perspective, the Foodora saga is a damning indictment of our hands-off regulation of the gig economy, our approach to determining employment status which permits widespread misclassification, and our employer-specific collective bargaining regime which continues to make collective bargaining inaccessible for so many working people.
A Failure of our Regulation of the Gig Economy
First, the fact that Foodora appears to be on course to conclude its five years stint in Canada without any interrogation of its (mis)classification of its couriers by Canadian employment standards and tax authorities whatsoever reflects the colossal failure that is our regulation of the gig economy. There has been perhaps no other workplace issue more covered in the media or studied in the academy over the past five years than the gig or platform economy. And yet, despite the centrality of the gig economy in our discussion of the world of work, it does not appear that there have been anytargeted inspection blitzes or proactive enforcement actions regarding the status of Foodora couriers or other gig economy workers for employment standards, tax, EI or CPP purposes.
That our regulators are so ill-resourced or lacking in policy direction that they failed to inquire into the practices of a large, multi-million dollar enterprise classifying its workforce as “independent contractors”, notwithstanding that it schedules them shifts, owns and exercises exclusive control over the key tool used for their employment (the app), requires them to use its branded delivery bags, exercises progressive discipline through what it calls “strikes”, monitors their performance using “performance metrics”, and that its sole business purpose – food delivery – is precisely what its couriers do, is, quite frankly, shocking. This failure is particularly striking when considering the comparable enforcement actions taking place around the globe.
A Failure of our Legal Approach to Determining Employee Status
Second, the Foodora saga is emblematic of how our legal approach to determining employee status gives room for the widespread misclassification of workers as independent contractors. The misclassification of the workforce as independent contractors is a key tenet of the gig economy business model, and our approach to employee classification issues allow these types of practices to flourish. This has harmful effects for working people, who are denied their statutory rights to minimum wage, overtime, vacation and public holiday pay, and, if they lose their jobs, are not eligible for employment insurance. Misclassification also has negative effects on our economy more broadly, as our tax, EI and CPP systems are deprived of the revenues lost as a result of misclassification.
Let me be very clear: I believe the majority of workers in the “gig economy” are already employees under our legal tests as currently formulated. However, it is the unnecessary complexity of our approach and the ease with which it can be manipulated by employers which gives room for so many workers to be misclassified as independent contractors. And given that the putative employer is the one that determines how to structure the relationship with its workforce and how to classify them, our approach means that the “independent contractor” relationship will remain structured as such unless and until it is successfully challenged and overturned by a court or other adjudicator.
The first major flaw in our approach is its lack of clarity and statutory guidance. Employment legislation across Canada does not set out clear and defined tests for employee status. For instance, Ontario’s Employment Standards Act, 2000(the “Ontario ESA”) defines “employee” in the following circular, non-exhaustive fashion:
(a) a person, including an officer of a corporation, who performs work for an employer for wages,
(b) a person who supplies services to an employer for wages,
(c) a person who receives training from a person who is an employer, if the skill in which the person is being trained is a skill used by the employer’s employees, or
(d) a person who is a homeworker,
and includes a person who was an employee
This definition lacks any guidance on the relevant criteria for determining employee status. Given this lack of statutory guidance, courts and adjudicators have turned to common law tests for employee status which have developed over time. Unfortunately, these tests lack sufficient clarity and predictability for lay people, and the multi-factored nature of these tests mean that, particularly in the gig economy, employers are able to cast their relationship in such a manner that they can point to certain of these factors, such as the fact that a food courier or rideshare driver owns their own bicycle or car, as indicative of the fact that they are not employees, despite the fact that these workers are the face of the business who performs its sole function – be it transportation, food delivery, or some other service.
The second major flaw in our approach is that, once the purported employer makes the initial determination to classify a worker as an independent contractor, it is then up to that worker to challenge that classification and pursue a claim that they have been misclassified as an independent contractor. This, in effect, shifts the risk of non-compliance with the law from the person who has the resources to enforce it (the employer) to the person who doesn’t (the employee). For a brief period of time the Ontario ESAplaced the burden of proof on an employer or alleged employer to prove that the person is not an employee, but that provision was repealed by the Ford PCs with the passage of Bill 47.
So long as we continue to take an approach to employee status that lacks legislative guidance and places the onus on employees to challenge their misclassification in order to enforce their rights, employers will be able to continue use perceived ambiguity and the reluctance of employees to bring forward claims in order to continue to misclassify their workers as independent contractors.
A Failure of our Employer-Specific, Majoritarian Model of Collective Bargaining
Third, Foodora’s announcement highlights the barriers our employer-specific, majoritarian model of collective bargaining pose to working people. CUPW’s Foodsters United campaign was, by all accounts, pioneering, well-executed, and a model for gig economy organizing. It is one of the most effective and significant large-scale organizing drives of recent memory, alongside the Legal Aid Ontario Lawyers and Ontario Part-Time College Support Staff campaigns. This ongoing campaign marks the closest gig economy workers have come to date in organizing and collectively bargaining.
And yet, for all of the campaign’s successes, this week’s announcement serves as yet another example of the extraordinary hurdles working people must face in order to exercise their right organize in this country. The Foodora experience highlights how much better we must do to support working people accessing their rights to organize and collectively bargain.
The Path Forward
The good news is that, because the problems of facing workers in the gig economy are hardly novel, many of the solutions to these challenges are already out there. Canadian provinces and other jurisdiction around the world struggling with these same issues have already developed models to address some or all of the flaws in our workplace protection regimes exposed by the Foodora saga. Many can be gleaned from documents like Ontario’s Changing Workplaces Review or the Report of Harvard’s Clean Slate Project. All that is missing is the political will in order to make these changes happen. The Foodora saga is but the latest example of why these changes are necessary.
First, Ministries of Labour and Revenue Canada must take a proactive role to ensure compliance with employment standards, tax, EI and CPP obligations. These organizations must use all of the powers they already have, and governments must strengthen them and give them the necessary resources and policy direction for inspections and enforcement actions to occur. Second, Canadian governments should enshrine a new, clear statutory test for employment status that place the burden of proof regarding employee status on putative employers in order to crack down on misclassification.
With respect to the burden of proof in employee misclassification disputes, Canadian governments should adopt provisions similar to former section 5.1(2) of the Ontario ESA, which read as follows:
….if, during the course of an employment standards officer’s investigation or inspection or in any proceeding under this Act, other than a prosecution, an employer or alleged employer claims that a person is not an employee, the burden of proof that the person is not an employee lies upon the employer or alleged employer.
In terms of statutory guidance with respect to determining employee status, Canadian governments should adopt a version of California’s “ABC test”, which became the prevailing approach with the Supreme Court of California’s decision in Dynamex Operations West, Inc. v. Superior Court, and was later codified into state law with California Assembly Bill No. 5 (“AB 5”). The ABC test offers a much simpler, predictable and easy to understand approach to employee classification that creates certainty for workplace parties and prevents employee misclassification.
Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all threeof the following conditions:
•The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
•The worker performs work that is outside the usual course of the hiring entity’s business; and
•The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
This test offers certainty and predictability for workplace parties and properly places the onus on the hiring entity. Coupled with proper enforcement, the adoption of the ABC test would dramatically curb employee misclassification.
Third, we must reform our labour laws to make collective bargaining more accessible for working people. There are some shovel-ready solutions that have been used in various Canadian jurisdictions, such as card-based certification and easily accessible first-contract arbitration, but we also need to seriously consider more proactive and interventionist models to ensure worker voice and decent work. Some examples can be drawn from Canadian models like Quebec’s decree system or the fair wage policies that are well-established in the Canadian construction industry. Others can be gleaned from Europe and elsewhere, such as sectorally bargained industry standards that apply to union and non-union workers alike. Certification procedures must also be streamlined to the greatest extent possible in order to provide expeditious access to the right to collectively bargain.
Regardless of the particular statutory models we adopt, what’s clear is that the only way forward is for workers in the gig economy to continue to organize and demand better. But more importantly, our governments must listen to those workers, enforce the laws already on the books, and strengthen our workplace protection regimes so that these workers can enforce their minimum employment standards and have meaningful access to collective bargaining.
Josh Mandryk, “Foodora Canada Saga Highlights the Failure of Canada’s Workplace Protection Regimes”, Canadian Law of Work Forum (May 1 2020): https://lawofwork.ca/?p=12419
Foodora, “Foodora Canada announces plans to close business while assuring support for employees” (April 27, 2020) (“Foodora”).
Foodora Inc. d.b.a. Foodora, 2020 CanLII 16750 (ON LRB).
Foodora, supra note 1.
Australian Associated Press, “Foodora condemned for closing Australian operation during back pay dispute” (August 2, 2018). David Chau, “Foodora fallout: ATO comes after failed food delivery company for unpaid taxes” (August 27, 2018)
Foodsters United, “Foodsters United Statement on Foodora Closing its Canadian Operations” (April 27, 2020).
Naaman Zhou, Australia’s Fair Work Watchdog takes legal action against Foodora” (June 12, 2018). See also footnote 3 above.
Making Ontario Open for Business Act, 2018, S.O. 2018, c. 14, Schedule 1, s. 1(3).