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Uber drivers unlikely to be deemed employees by Canadian courts

Uber drivers in Ontario have launched a class-action lawsuit against the ride-sharing company asking the court to find that they are Uber employees rather than independent contractors.

Uber drivers in Ontario have launched a class-action lawsuit against the ride-sharing company asking the court to find that they are Uber employees rather than independent contractors.

One of the cornerstones of Uber’s business model is that drivers are treated as contractors or “partners,” and a finding otherwise could threaten the company’s viability across Canada, at least under its current business model.

A number of similar lawsuits have been launched in other jurisdictions. In the U.K. and California, employment standards decisions found drivers were employees (or, in the U.K., “workers,” an intermediate category) but these were appealed. In Florida, the Third District Court of Appeal upheld a decision that Uber drivers were not employees. The outcome of other U.S. cases on drivers’ contractor status is uncertain.

Here in Canada, if Uber were found to be an employer of its drivers, the company would have to pay Canada Pension Plan, employment insurance and workers’ compensation premiums for each of its drivers. The retroactive liability on fees paid to date would be massive, and the go-forward cost may require Uber to increase its rates.

Complying with employment standards legislation would be even more problematic. Uber would owe minimum wages to drivers plus vacation pay, statutory holiday pay and overtime pay premiums. Collectively, these obligations and associated administrative expense could dramatically undermine Uber’s business model and cost advantage over taxis.

But when the terms Uber offers to drivers are considered in light of Canadian law, it appears unlikely the drivers will be found to be employees. The legal test for employee status in Canada has a lengthy legal history and depends on weighing a number of factors to reach an overall conclusion. The traditional factors, as applied to Uber, are as follows:

•Degree of control over how work done: The more control Uber exercises over how the work is done, the more likely the driver is an employee. Uber argues it exercises very little control. In particular, drivers are free to work the hours they wish, can accept or refuse rides and can drive passengers unsupervised. On the other hand, drivers have to earn positive user reviews, and, according to evidence in other cases, failure to meet average ratings can lead to termination by Uber. Drivers are also expected to follow Uber’s code of conduct, and prospective drivers are subject to background checks. Overall, however, the freedom of drivers to work when they want tends to support contractor status

•Who owns the “tools of production”: Where a worker owns or provides necessary equipment, this fact supports contractor status. It is fair to say that here again Uber’s terms favour contractor status. Uber drivers must provide their own vehicle, which is obviously critical, but also pay all related costs including maintenance and insurance. They must also provide their own smartphone for the Uber app. On the other hand, Uber provides the app and administers the assignment of rides to drivers and collection and payment of fares

•The worker’s “chance of profit/risk of loss”: In true contracting relationships, the compensation is set in such a way that the contractor’s monetary return for work may vary or even be a loss. Again, Uber’s system supports contractor status. Although Uber sets, collects and distributes the fares, drivers have no guarantee on how many rides they will be assigned or the profit they will earn from the fares each time they hit the road. Earnings vary based on demand and are higher during peak rush-hour times, and driver costs such as vehicle maintenance and fuel will affect the driver’s profit (if any). That being said, Uber sets the fare and accepts some risks associated with the fares, including refunding dissatisfied passengers and covering fraudulent charges. Overall, though, the significant upside and downside variables to driver compensation support contractor status

•How “integral” the driver is to Uber’s business: While drivers will argue that they are critical to Uber’s business model since they deliver the service to customers, Uber will argue that its business is just an app that connects passengers to drivers and provides related administrative services. On balance, however, this factor appears to favour a finding of employee status given the public’s sense that Uber provides the ride, and the fact that Uber’s revenues are earned by drivers providing rides.

Recent Canadian case law has focused on whether the contractor is really “carrying on business” in his/her own right or incurring business risks and costs. While many Uber drivers may not have other “clients,” they do carry on a business of driving passengers for fees and incur significant costs relating to their vehicle. According to Uber standard terms summarized in the U.K. case, drivers are free to hire others to actually do the driving – a strong indication of contractor status, although apparently, in practice, most drivers do not hire others. As well, Uber drivers are free to work for other organizations as drivers, including competitive app-based driving services.

Taken together, it would appear likely that Uber drivers are not employees under current Canadian law, although the issue is not clear-cut. The key factors supporting contractor status in Canada are the flexibility drivers enjoy in setting their working hours, their right to work for other services and hire drivers, as well as their ownership of their vehicle and phone, and the chance to earn more or less income from driving for Uber. If this conclusion is upheld in the Ontario litigation, expect Uber to continue its expansion across Canada, including to B.C. A ruling to the contrary may put that expansion on hold. •

Geoffrey Howard is a partner with Vancouver labour and employment law firm Roper Greyell LLP. Chris Munroe is an associate with the firm.