The ride isn’t over: Uber v Heller certified as a class action
The battle between the ride-sharing company Uber and its Drivers continues, and continues to inform Canadian law. The Driver Class argues that they are Uber employees and entitled to employee protections; Uber argues they are independent contractors. But that is not the main subject of any of the litigation so far. Last year, the initial fight in Uber v Heller over the validity of an arbitration clause landed in the Supreme Court of Canada, prompting a restatement of the doctrine of unconscionability, and a refinement of the law on arbitration.
After clearing the hurdle of the arbitration clause, the plaintiffs sought certification of the class action. In a decision last week, the Ontario court certified the class action in Uber v Heller (2021 ONSC 5518) over Uber’s objections. This decision addressed whether employment status could be treated as a common issue (yes), the impact of a new waiver of class action and arbitration clause, and the availability of aggregate damages.
Facts and procedural history
Uber’s relationship with Drivers and Delivery People (for Uber Eats food delivery) is governed by a much-amended Services Agreement that describes Drivers and Delivery People as “independent contractors.” The plaintiffs allege that they are instead employees, and therefore entitled to statutory insurance, pension, and pay benefits. The plaintiffs initiated a class action on behalf of all Drivers and Delivery People seeking damages for breach of the Ontario Employment Standards Act, breach of contract, negligence, and unjust enrichment.
Uber mounted a multi-stage defence. Initially, Uber argued that an arbitration clause in the Service Agreements displaced Canadian courts’ jurisdiction over the matter. This defence failed when the Supreme Court of Canada ruled that the arbitration clauses were unenforceable because the agreements were unconscionable – in part because the agreement gave the impression that the arbitration had to be conducted in the Netherlands, and it required the payment of a large upfront fee (2020 SCC 16).
With that jurisdictional hurdle cleared (and with a third-party funding agreement in place), the plaintiffs moved for certification before a very experienced class action judge, Perell J. at the Ontario Superior Court of Justice. Uber argued that a new amendment to the Services Agreement – the class action waiver, discussed below – significantly narrowed the class to only those that had opted out of the new amendment. Uber also argued that the proposed class action did not meet the criteria for certification.
Amending the class definition: Uber’s contractual modification
Two months after the Supreme Court declared the original arbitration clause invalid, Uber amended its Service Agreement to add a new arbitration clause and class action waiver. This amendment required that Drivers and Delivery People resolve their disputes with Uber through arbitration – with fees limited to filing fees of local courts. A waiver of rights to participate in a class action was also included. However, Drivers and Delivery People who accepted the class action waiver could subsequently opt out of the class action waiver by sending an email request within 30 days of accepting the waiver. The class action waiver specified that opting out would not terminate their relationship with Uber.
While Uber argued that the class action waiver was responsive to the Supreme Court’s objections to the original arbitration clause, the plaintiffs maintained that it was still unconscionable. If given effect, the class action waiver would exclude from the class definition all Drivers and Delivery People who did not opt out of the waiver – in Perell J.’s words, “it would gut the class action.” (para 132)
Justice Perell declined to rule on the class action waiver’s validity, as substantive determinations are not available on a certification motion. In ultimately deciding to certify the action, Perell J. required that the class members be informed of their right to opt out, of the availability of arbitration to resolve disputes, and the significance of their choice. (para 138) Justice Perell also highlighted a likely future battlefront regarding enforceability, opining in obiter that “the Plaintiffs raise strong arguments that the notifications to the class were insufficient for them to appreciate the significance” of the class action waiver. (para 133). However, it is perhaps worth noting that Perell J. had upheld the earlier arbitration clause, and was overruled on the appeals.
Uber succeeded in knocking out some claims. Perell J. found that only the alleged breaches of contract and of the Employment Standards Act disclosed a cause of action. While the plaintiffs argued that Uber was unjustly enriched by not providing benefits, restitution was not available: their contractual claims could only lead to contractual relief. The negligence claim alleged pure economic loss, but did not fall within that tort’s established categories.
For the common issues criterion, Uber argued unsuccessfully that the legal character of its relationship with each Driver or Delivery Person was too fact-specific to classify on a class-wide basis – and instead, the determination of whether each Driver or Delivery Person was an employee had to be made individually. Justice Perell rejected this argument and found that there was a commonality of evidentiary factors between all class members, including the Uber business model and the Service Agreements. (paras 192-194)
However, Perell J. declined to certify aggregate damages as a common issue. He emphasized that the Class Proceedings Act “is a procedural statute, and it does not create a new type of damages known as aggregate damages”. (para 198) Instead, aggregate damages are only available as a remedy in highly specific circumstances when liability can be determined without proof from individual class members. Punitive damages also were not certified because there was no evidence of Uber’s reprehensible conduct.
- Justice Perell’s reasons suggest that courts will be skeptical about attempts to “interfere with the integrity of [a] class proceeding” once the proceeding has gathered steam. Even though Uber issued its class action waiver before the proceeding was certified, it was not sufficient to persuade Perell J. to narrow the class definition. Instead, he certified a class of more than 360,000 Drivers and Delivery People, leaving the impact of the class action waiver and its enforceability for the class action judge to decide.
- An ounce of prevention is worth a pound of cure. Uber’s Service Agreement had been amended numerous times over the years. In its first incarnation, it was two pages long, but it is now much longer. Without saying so expressly, Perell J.’s reasons suggest that he might have been more prepared to narrow the class definition if the Drivers and Delivery People had received more notice of the significance of the class action waiver in the Services Agreement. However, the evidence as to the notice provided was not detailed in the decision, and will likely be the subject of future debate. Parties wishing to avoid involvement in class actions should promptly seek assistance to draft or amend their agreements with lessons from the Uber decisions in mind.
- Aggregate damages are an exceptional remedy – not a regular common issue. Justice Perell emphasized that aggregate damages are not automatically available in class actions. In this case, there was no statistical sampling that would assist in determining what individual class members were owed, and Uber’s aggregate liability could not be determined without proof by individual class members of their individual claims.
- The Supreme Court’s Uber decision casts a long shadow. Although Perell J. would have enforced Uber’s earlier arbitration clause (his trial decision was overturned on appeal), in this case Perell J. cited the Supreme Court’s decision and opined that the plaintiffs had “reasonably strong arguments” that the class action waiver was “unconscionable”. Courts’ recent pronouncements on unconscionability may hint at an underlying concern about imbalances of bargaining power in the gig economy that might permeate other decisions.