Class Actions in Employment Law – Current Developments and Upcoming Issues

Class actions in the realm of employment law are a relatively new but growing field. Class actions in employment law are an ideal way for workers to have access to justice. Not only do they allow employees to maintain anonymity and prevent reprisals from their employer, but they also allow recovery of small amounts for employees, for claims that would not be financially viable for individuals to bring on their own.

This article explores a few changes and trends being seen in employment law class actions.

Recent Changes To The Class Proceedings Act

In October 2020, a number of major amendments to the Class Proceedings Act, 2002 (“CPA”) came into effect in Ontario. The goal of these amendments was to make Ontario’s class actions regime more efficient and fair for both plaintiffs and defendants.

One of the most significant changes to the CPA in the 2020 amendment was an addition to the certification test. For a claim to proceed as a class action, the Court must first determine whether it meets the requirements for certification. One of these requirements is that a class action be the “preferable procedure” for the resolution of the common issues for the class.

The 2020 amendment added the requirement that not only a class action is the preferable procedure, but that a class action is “superior to all reasonably available means of determining the entitlement of the class members to relief or addressing the impugned conduct of the defendant” and that the questions of law or fact that are common to the class outweigh the individual issues. This requirement is a heightened hurdle for plaintiffs to overcome for their action to be certified. In the employment context, this factor requires the employee to show that a class action is superior to bringing an individual action, complaint to the Ministry of Labour or a Canada Revenue Agency assessment.

Other important changes to the CPA include:

  • Plaintiffs are now required to register class proceedings;
  • Plaintiffs must now bear the costs of providing notice to the class of certification;
  • The Court must approve third-party funding agreements; and,
  • Plaintiffs are required to deliver a motion record for certification within one year of issuing the action, or the proposed class action can be dismissed for delay.

The Courts have only just begun to apply these changes, so the full impacts of these amendments on access to justice and judicial economy have yet to be seen.

Vacation Pay and Holiday Pay Class Actions

Numerous class actions against Canadian employers are alleging systemic failures to provide the correct statutory entitlements for vacation pay and statutory holiday pay to their employees.

Employers are required under employment standards legislation to pay employees vacation pay of between 4 and 8% on overall compensation, depending on the jurisdiction and tenure of the employee. This is to ensure that employees do not suffer a loss of income when taking time off from work.

Employers are required to pay employees holiday pay for statutory holidays, to similarly ensure employees are able to take time off without suffering a loss of income. Holiday pay is normally an average day’s wages calculated as a portion of the wages earned by the employee in the weeks leading up to the holiday.

Where some employers have run into trouble is determining what is included in the compensation used to calculate vacation pay and holiday pay. Employees can receive compensation in different ways: as a set salary, as a base salary with bonuses or commissions on top of the base, or as just commissions, to name a few. If an employee is paid a small base salary and makes most of their income through commissions, and their vacation and holiday pay is only being calculated on their base pay and not their total compensation, they are being denied a significant amount of money from their employer. Employees have begun to bring class actions for recovery of these unpaid amounts of statutory entitlements.

Claims for vacation and holiday pay also arise out of employee misclassification class actions, where workers bring claims seeking statutory entitlements because they allege they were wrongly classified as independent contractors when the facts point to an employer-employee relationship. In cases such as these, the workers have also been denied vacation and holiday pay, in addition to entitlements such as overtime, minimum wage and termination pay.

Supreme Court of Canada’s Decision in Uber v. Heller

In a much-anticipated decision from the Supreme Court of Canada, an arbitration clause in Uber’s standard form service agreement was found to be unconscionable, therefore allowing a misclassification class action by Ontario Uber drivers to proceed.

Mr. Heller, an Uber driver, launched a proposed class action for misclassification on behalf of Uber drivers in Ontario. However, the contract he had signed with Uber required any disputes under the contract to be resolved through arbitration in the Netherlands, under Dutch law and with significant upfront fees. Uber brought a motion to stay the class action in favour of arbitration in the Netherlands, as per the service agreement.

The motion went all the way to the Supreme Court of Canada, with the Court ultimately deciding in favour of Mr. Heller. The Court invoked the doctrine of unconscionability, which allows for the setting aside of unfair agreements that do not conform to fair and equal bargaining. This allows the Courts to protect the vulnerable in the contracting process.

This decision not only redefined the doctrine of unconscionability in Canada, but also allowed Mr. Heller’s proposed class action to continue on the merits. This misclassification decision, concerning one of the most successful gig economy companies in the world, will likely set a precedent for future misclassification class actions in Canada.

This article was written by Andrew Monkhouse and Lexa Cutler and was originally published in the Ontario Bar Association. Andrew Monkhouse is the managing partner and founder partner of Monkhouse Law, that specializes in employment law, human rights law, and disability insurance law. Lexa Cutler is an Associate Lawyer on the Class Actions team at Monkhouse Law.

If you have further questions about class actions in employment law please contact Monkhouse Law Employment Lawyers.

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