Are Uber drivers “employees”?

uber employees

Uber, a ride-hailing company that operates in over 600 cities and 77 countries, has been operating in Ontario for eight years. It operates using drivers which are treated as independent contractors, without the rights of employees. However, a landmark decision by the Supreme Court of Canada has created hope for gig workers across the country as it allowed a class action to proceed seeking confirmation that Uber drivers are actually employees. Such a ruling would significantly strengthen the rights and protections afforded to gig workers.

Background

The plaintiff, David Heller, is a driver for Uber’s “Uber Eats” food delivery program. In order to become an Uber Eats driver, Heller had to accept, without negotiation, the terms of Uber’s standard form services agreement, which included a clause that required all disputes to be taken to an arbitration court in the Netherlands.

The upfront administrative and filing fees for this process would be US$14,500, in addition to legal fees and, of course, the cost of travelling to the Netherlands. For most drivers, this would mean losing most if not all of their annual income, essentially eradicating their ability to pursue disputes with Uber.

In 2017, Heller started a class proceeding against Uber for violations of the Employment Standards Act, 2000 (ESA). Uber responded by bringing a motion to stay the class proceeding in favour of arbitration in the Netherlands, arguing that the clause in the agreement precluded any other forms of litigation. 

Heller argued that the arbitration clause itself was invalid, for reasons of unconscionability and because it contracts out of mandatory provisions of the ESA. The motion court judge sided with Uber and stayed the proceeding. However, the Court of Appeal reversed this order and ruled that the arbitration agreement was unconscionable based on the inequality of bargaining power and the exorbitant costs of arbitration.

The Supreme Court’s Decision

Eight of the nine judges at the Supreme Court agreed with the Ontario Court of Appeal and found that Uber’s arbitration clause was invalid. Seven of them based their decision on the doctrine of “unconscionability”, an equitable doctrine which is used to set aside unfair agreements that result from an inequality of bargaining power.

As well as a finding of unequal bargaining power, an agreement needs to result in an improvident bargain in order to be held unconscionable. The transaction itself does not have to be grossly unfair, nor does the stronger party need to intend to take advantage of the more vulnerable one.

When the court applied the unconscionability doctrine in this case, they found that “there was clearly inequality of bargaining power between Uber and Heller” because Heller was not in a position to anticipate that the arbitration clause “imposed a US$14,500 hurdle to relief” and would probably be unable to afford arbitration even if he did. The fees were also close to Heller’s annual income and were disproportionate to a potential reward.

The court agreed with Heller’s argument that the Arbitration Act governed in this case, by which all jurisdictional challenges were to be referred to an arbitrator. Some exceptions to this were if there was an issue of accessibility or if the challenge was unlikely to be resolved by an arbitrator.

These were the exceptions that applied here. Given the nature of the claim, arbitration was “realistically unattainable” and therefore amounted to “no dispute mechanism at all”. It was also unlikely that an arbitrator would be able to decide upon the applicable jurisdiction, potentially leaving the issue unresolved.

Justice Brown agreed with most of the majority’s decision but applied the doctrine of public policy instead of that of unconscionability to reach the same conclusion. This is because the arbitration agreement undermined the rule of law by denying access to justice for Uber drivers. Access to justice is a key consideration for courts of all levels as our justice system only works if people are able to seek remedies for their legal issues. Overall, the court sided with Heller and struck down Uber’s arbitration clause.

How will this affect gig workers?

This decision ultimately created an avenue for Uber drivers to seek relief in Ontario courts, allowing for the possibility that Uber drivers will be treated as employees within the meaning of the ESA.

Many are now wondering whether the decision will affect the state of the “gig economy” and has sparked discussions about whether those working in the free market are employees, entitled to additional rights. A huge range of people fall under the category of “gig worker”: from freelance journalists to construction workers. The sector has grown dramatically in recent years, as online culture has made selling goods and services online exponentially easier.

Unfortunately, gig work does not provide the security or legal protection of traditional employment. Many gig workers end up working at below minimum wage and can be arbitrarily terminated.

As the legal system is still built around traditional employer-employee relationships, gig workers are often forgotten in the courts. This makes cases like this incredibly important because they bring gig workers to the attention of the courts and allow them to receive the protections promised to all those who work in Canada.