Thoughts on the Foodora Fiasco: Have Labour Laws Been Violated?

Written by David Doorey, York University

There’s a familiar pattern emerging.  Foodora announces its entry into a new country with a flourish, runs into legal problems that question its sketchy business model, and then shuts down claiming that the economics don’t work. 

It happened in Australia in 2018. That’s when Foodora wound up its Australian operations after two legal actions were filed that raised the legal status of its drivers. The first case, filed in Mach 2018 before the Fair Work Commission (FWC), involved the termination of a rider for organizing a campaign for fairer working conditions and working with a union.  The second case was launched in June 2018 by the Fair Work Ombudsman (FWO) and alleged that Foodora was illegally misclassifying the drivers as independent contractors.  Foodora announced it decision to bolt from Australia in August 2018 and immediately entered into voluntary administration (similar to our bankruptcy). 

The FWC went on to rule that the rider was an employee, and that Foodora had unlawfully terminated him for organizing his fellow workers and advocating on behalf of a union.  The rider was awarded damages.  [See Professor Anthony Forsyth’s review of the case here].  The FWO dropped its case against Foodora after it decided that the workers involved would not receive any more money than they had already received. Foodora was found to owe its former drivers some A$8 million, but the workers would only receive 29 cents on the dollar. 

Foodora also had an outstanding tax bill of A$2.1 million, and owed over $28 million to its German parent company Delivery Hero, which no doubt wants to ensure that no pesky national labour law tribunal threatens its business model. This debt to the mother ship provides an excuse to pull out of any troubling situation, permitting a national Foodora subsidiary to claim that it is overburdened with debt despite vastly underpaying its drivers and strong local demand.

Foodora to Leave Canada on May 11 2020

The pattern has now repeated itself in Canada.  This week Foodora announced it would shut down Canadian operations on May 11 2020 and then filed for bankruptcy claiming some $4.7 million in debt.  Foodora entered the Canadian market in 2015 and operates in major Canadian cities.  During COVID19, delivery companies like Foodora have been declared essential and are a lifeline to millions of Canadians stuck at home. Business presumably is booming. However, dark clouds loomed on the horizon that threaten Foodora’s business model which depends on the use of cheap labour toiling outside of the reach of protective employment laws.  

As described on this blog last month, the Ontario Labour Relations Board (OLRB) ruled recently that Foodora drivers were “employees” for the purposes of the Labour Relations Actand therefore protected by the province’s collective bargaining laws.  The drivers’ votes on whether to unionize have already been cast and are sitting in sealed boxes in downtown Toronto pending a variety of legal arguments about whose votes should count.

If the workers voted to unionize, a new and uncharted chapter would begin for Foodora, with potential implications to the platform economy more generally. Foodora would be legally required to sit down with the Canadian Union of Postal Employees and bargain a collective agreement.  If bargaining broke down, the drivers could lawfully strike.  The outcome of that bargaining process is far from clear, and my experience in the 1990s watching early efforts to organize, bargain, and then service collective agreements in the Toronto taxi industry leaves me with a whole host of doubts about whether collective bargaining under the OLRA  model can work in the gig economy.  

However, there is no doubt that the spectre of a legally mandated collective bargaining process is perceived as an existential threat by Foodora and other platform-based companies.  There also remains the possibility that later litigation could find that drivers are also “employees” for the purposes of other statutes (employment standards, tax, workers compensation, etc) and the common law.  Canadian law poses a threat to the platform business model’s dependence on its ability to avoid the employment relationship.  Therefore, while the audacity of a large foreign owned corporation pulling out of an entire country to avoid national employment laws and unionization is always surprising (even to a jaded old hand like myself), yesterday’s announcement by Foodora that it is leaving Canada does not come as a total surprise.  

Has Foodora Committed an Unfair Labour Practice?

When I first posted this piece, I predicted that CUPW would file an unfair labour practice. That has now happened. I haven’t yet seen the pleadings, but presumably the complaint alleges that the decision to leave the Canadian market was influenced at least in part by the company’s desire to avoid having to deal with CUPW or any other union. Labour law students should be able to work through the arguments.

First, you need to consider what section(s) of the LRA have been violated.  The “unfair labour practice” sections begin at Section 70.  Put the allegation into terms that align with the statute. The union would argue that Foodora has “interfered with the formation and selection of a union” (section 70);  terminated, discriminated against, threatened, and imposed a pecuniary penalty on employees (drivers) because they participated in lawful union activities (organizing a union, joining a union, applying for certification, etc) (section 72, 76). 

Foodora will of course argue that the fact that its drivers joined a union and that the OLRB found that the drivers are its “employees” had nothing to do with the decision to leave Canada. It must argue this, because the legal test in unfair labour practice cases requires that the employer demonstrate that its decision was entirely untainted by “antiunion animus”. Even if there are other economic reasons for the decisions, if any part of the decision was to avoid unionization and collective bargaining, the ULP complaint will succeed.  

Moreover, in Ontario, the burden of proof is on the employer to demonstrate that there was no antiunion animus. This reverse onus appears in s. 96(5) of the OLRA, and it means essentially that Foodora would need to proceed first in the hearing and call evidence to persuade the OLRB that its April decision to leave Canada had absolutely nothing to do with the March decision of the OLRB that Foodora drivers are employees. The close timing of the two events is purely a coincidence.

The difficulty Foodora faces is that the OLRB doesn’t like coincidences when it comes to mass termination of employees following closely on the heels of union organizing campaigns. The timing stinks to high hell, and so it is a difficult burden for companies to meet.  Foodora will be ordered to turn over all documents including emails relating to the decision to leave Canada and internal correspondence relating to the unionization drive.  Those documents may not include a “smoking gun” admission that the decision was influenced by the risk of unionization.  However, labour boards will draw inferences from suspicious timing.^[1]  The timing of Foodora’s decision, falling closely on the heels of the OLRB’s decision and during a pandemic when business demand is strong, work strongly against Foodora if an ULP complaint is filed.

What would be the remedy if CUPW won an ULP complaint?

Labour boards are unlikely to order a business to “re-open”. The remedy more likely would be monetary damages to the workers based on some sort of formula and perhaps to the union for “lost organizing expenses”.  Labour Boards don’t order punitive damages because their role is remedial rather than punitive.  We can assume that Foodora is gone, the only question is how much money it will owe to various Canadian stakeholders on the way out.

Final Thoughts

The Foodora fiasco may be the proverbial canary in the coalmine. The extent to which platform gig companies have been prepared to go to avoid being characterized as employers demonstrates that they perceive this issue to pose a fundamental threat to the survival of the industry.  We may find that more of these companies just decide to exit Canada rather than permit their drivers to obtain basic legal rights available to employees.  

We could debate whether that would be a good or bad development.  However, I continue to believe that our existing collective bargaining model, which requires unions to organize a majority of drivers within a defined geographic, win a vote, and then bargain a sustainable collective agreement with a foreign-owned, well-funded corporation intent on never permitting collective bargaining to take hold, is doomed to fail.  The odds are stacked too high against the workers.

Canadian governments need to decide whether to let the Foodoras of the world continue to dictate conditions of work within the still small but growing “gig” work sector of our economy, or whether it is time to get serious about developing new models that ensure workers have collective voice and the means to improve their working conditions.

David Doorey, “Thoughts on the Foodora Fiasco: Have Labour Laws Been Violated?” Canadian Law of Work Forum (April 28 2020): https://lawofwork.ca/?p=12403

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^[1] In my Law of Work text, I cite an often-quoted decision of the B.C. Labour Board called Forana Limited on this point (but I could have cited any number of cases from across the country):  “The crux of an unfair labour practice case is the employer’s motivation…, something which rarely will be disclosed by admissions. Employers don’t ordinarily advertise their anti-union activities. Such intention must be pieced together from a pattern of circumstantial evidence.”