This post is about properly balancing the interests of shareholders and workers in the platform realm. The digital platform realm in Canada, much like that of the US, UK and Europe, currently has a regulatory framework for digital enterprises that strongly tilts towards the interests of shareholders.
That said, things are beginning to change – most notably in the EU but also in Canada, the US and the UK. Recent initiatives in these jurisdictions seek to better balance the interests of workers, consumers and citizens with those of shareholders. As an example of this approach, this post will take a look at some recent developments in Canada and the US in the the platform-based ridesharing sector dominated by Uber and Lyft.
But first, some background on the roots of “internet exceptionalism” as it relates to regulation.
The roots of internet exceptionalism
The USTR (the revised NAFTA agreement) contains the following wording:
This document will limit the civil liability of Internet platforms for third-party content that such platforms host or process, outside of the realm intellectual property enforcement, thereby enhancing the economic viability of these engines of growth that depend on user interaction and user content.
The inclusion of this provision was no surprise. This was one of the United States’ stated objectives for renegotiating NAFTA. It was also heavily lobbied for by Google and other major US platforms and organizations funded by them. In particular, these platforms lobbied to require Canada and Mexico to enact laws similar to the controversial Section 230 of the US Communications Decency Act (CDA).
Section 230 of the CDA was enacted in 1996 for the purpose of enabling online platforms to act responsibly to screen and block offensive materials and to foster free expression online. Yet, the CDA has been broadly interpreted to also immunize the publication of offensive conduct that would never be sanctioned in offline domains.
While it is not objectionable for Internet platforms to have some immunity for damage claims where they act as passive, neutral intermediaries and are not aware that their actions are causing damages, it can be argued that it was contrary to the public interest of Canada and Mexico to grant Internet platforms the types of immunities provided for by the CDA. In fact, even Google and other Internet platforms have recently acknowledged that such protection is not required for them (or the the Internet more generally) to flourish.
A related reason these companies define themselves as platforms is to minimize their exposure to regulatory frameworks that would make them legally responsible for the digital content and services their sites make possible.
For example, social media companies contend they are not broadcasters producing content as digital equivalents to the radio and television industries. Facebook and Google argued this in response to the Australian government’s introduction in February 2021 (and again recently in opposing Canada’s Bill 18) of a law that forced large social media companies to pay news publishers for posting their content. These companies make this argument even though, as discussed above, they facilitate content production and dissemination, and make editorial decisions through technological means such as algorithms, which prioritize specific content to generate advertising revenue.
Ride-hailing firms such as Uber and Lyft argue they are technology companies that engage drivers to work as independent contractors, rather than transportation companies with traditional employees (see below). Multiple courts in the United States and Europe have disagreed, ruling the companies should treat drivers as employees, but the companies continue to protest. Similarly, accommodation firms such as Airbnb lobby policy makers to avoid being subject to zoning, safety and tax laws that govern hotels.
In short, it is the contention of this post that the global platform companies are not protectors of the so-called free and open internet, itself a conceit of internet exceptionalism. The internet is already highly regulated in ways that currently both enable and restrict access. Nor are they guarantors of free expression: they are foreign-owned, for-profit content-distribution (content including car rides and food delivery) companies, often monopolies or near monopolies, that pursue a corporate self-interest that does not necessarily align with Canadian interests. This should be our starting point for any discussion on platform regulation in Canada.
The battle over employment status in the platform-based ride-sharing sector
Again, this post is a discussion of the balance of interests of workers in the platform-based ridesharing sector relative to the interests of platform shareholders. As such, the balance of interests question mainly plays out in the question of the employment status of drivers.
In most jurisdictions in Canada, Uber drivers and their app-based brethren at Lyft and other ridesharing companies, are classified as independent contractors and not employees.
As independent contractors in Canada, drivers of the ridesharing companies are not entitled to minimum wage, tax advantaged employer benefits, Canada Pension Plan or employment insurance. Nor are they entitled to form a union. Their employment status saves platform companies millions of dollars each year — and those companies are keen to keep on saving.
However, many gig drivers and others who work within the platform-based gig economy would prefer to be considered employees (or at least a halfway status called a “dependent contractor”).
Both sides are pursuing two broad-based strategies in pursuit of their objectives: a court based strategy and a legislative reform based strategy.
With respect to the legislative strategy, a few U.S. states have passed laws that effectively classify gig workers as employees. U.S. officials in those states have sued platform companies for breaking those laws by treating gig workers as contractors. The platform companies fiercely defend all lawsuits and have spent millions on ballot initiatives to carve out exceptions for gig workers in classification legislation. In Canada, both government action and platform companies’ responses look a little different.
In the US, California and Massachusetts recently passed laws formalizing the ABC test, under which workers are considered employees unless the hiring company can prove three things: it doesn’t control how the worker performs their work; the worker performs work that is outside the company’s usual course of business; and the worker is customarily engaged in an independent business of the same nature as the work they’re performing for the company.
Most gig workers pass the ABC test and would therefore be classified as employees. So in 2020, platform companies spent $220 million to push a California ballot measure, Proposition 22, which sought to exempt app-based transportation and delivery workers from the ABC test and continue to classify them as independent contractors. Prop 22 also required platform companies to pay 120 per cent of local minimum wage to drivers for time spent driving (but not waiting) and required them to provide a health insurance stipend to drivers who normally work more than 15 hours weekly (again, not including waiting time).
Despite fierce opposition from worker and consumer advocacy groups, Prop 22 passed in November 2020 with 58 per cent support. But in August 2021, the California Superior Court found the ballot initiative was unconstitutional for two technical reasons. First, it infringed on the legislature’s power to regulate workers’ compensation. Second, since Prop 22 prevented the legislature from passing laws permitting app workers to unionize, it violated the requirement that ballot initiatives be limited to one subject. The court also noted the ban on app workers unionizing “appears only to protect the economic interests of the network companies in having a divided, un-unionized workforce.” The platform companies are appealing this decision and on December 13, a California appeals court began began to hear arguments related to the appeal. Uber and other platform based ridesharing companies intend to maintain the independent contractor status of their drivers as long as the as the matter is before the courts.
In Massachusetts, Uber and Lyft Inc. spent $17.8 million backing a similar ballot measure that would have cemented ride-share and delivery gig workers’ status as independent contractors “for all purposes with respect to his or her relationship with the network company.” Like California’s Prop 22, it would have provided a minimum wage based on “engaged time,” as well as a health-care stipend for drivers who meet a weekly minimum of engaged hours.
In January 2022, a labour-backed coalition sued, arguing the proposed ballot measure violated a state law that requires all ballot measures to contain related subjects. In June 2022, the Massachusetts Supreme Judicial Court found the measure violated that law, as it included provisions regarding gig worker classification, as well as provisions that limit platform companies’ liability if a gig worker was injured on the job. It therefore threw out the ballot measure.
Other states, however, are passing pro-platform company employment laws. In March 2022, Washington state established minimum wages for Uber and Lyft drivers, again based on engaged time. The law also provides them with paid sick leave and access to workers’ compensation, but defined them as contractors, not employees.
Ontario — the only Canadian province to pass gig worker-specific employment laws — is following the Washington model, thereby sparing platform companies the trouble of having to lobby to carve out exemptions to the ABC test.
In April 2022, Ontario passed the Digital Platform Workers’ Rights Act
, which guarantees gig workers the provincial minimum wage, but only based on “each work assignment.” Time spent waiting for an assignment remains unpaid. According to a 2021 report from the City of Toronto, rideshare drivers spend 40 per cent of their time available for a trip. As a result, platform companies could effectively pay gig workers just $9 per hour. While this law provides gig workers with benefits not available to other independent contractors, it strips them of many protections granted to employees.
It should be noted that in 2021, before the Digital Platform Workers’ Rights Act was tabled and passed by Ontario’s PC government, the Ontario NDP tabled the Preventing Worker Misclassification Act, 2021
in an unsuccessful attempt to bring the ABC test to Ontario.
One of the Panel’s recommendations is aimed squarely at resolving the ambiguous status of gig workers . They recommended that the federal government amend the Canada Labour Code (the Code) to clarify who is an “employee”, “independent contractor” and “dependent contractor”. The Panel proposed adding definitions to the Code which would:
- presume any person who performs labour or supplies services for monetary compensation is an employee unless the hiring organization can prove otherwise;
- establish an independent contractor test (similar to the factors noted above);
- deem dependent contractors to be employees.
The panel also called for further consultation regarding a portable benefits model to provide certain types of health and retirement benefits to workers regardless of their employment status.
While these are only proposed changes, it is worth noting that at least one of the Panel’s recommendations – to establish a federal minimum wage – has already been implemented by the federal government.
And the federal government revisited the rights of gig workers in 2021, when it launched additional consultations on the topic. No follow-up legislative action has been taken by the federal government although the federal Labour Minister Seamus O’Reagan’s December, 2021 mandate letter from Prime Minister Trudeau calls for the Minister to:
- Work to advance amendments that entitle workers employed by digital platforms to job protections under the Canada Labour Code. This work will also include collaborating with the Minister of Employment, Workforce Development and Disability Inclusion to ensure better benefits and supports for these workers.
At the provincial level, British Columbia is at the very early stages of its review of gig work. The province announced in November, 2022 that it is consulting with gig workers and businesses that hire gig workers regarding employment standards. In particular, the B.C. government indicated that it wants to hear from app-based ride-hailing and delivery workers.
The BC government’s overview of its precarious work strategy also indicates that it is will explore the feasibility of benefit and pension plans for workers who do not otherwise have coverage.
Not surprisingly, the BC Federation of Labour has come out strongly in favour of the ABC test in a policy brief on precarious work.
Efforts to change employment status in the courts
Gig workers throughout the U.S. have sought employment status through individual labour complaints, lawsuits and class action litigation.
For instance, in June 2015, the California labour commissioner considered whether an Uber driver was an employee or independent contractor. This was before California had enshrined the ABC test in law. The commissioner noted Uber had vetted driver Barbara Berwick, controlled what car she could use, monitored her ratings from riders and set prices. The commissioner therefore found Berwick was an employee and ordered Uber to pay her wages, overtime and interest, but this decision wasn’t binding on any other driver.
In February 2022, an employment standards officer in Ontario came to the same conclusion regarding Uber Eats courier Saurabh Sharma. The officer ruled that Uber Eats exercised considerable control over Sharma, including delivery details, routes, timeframes, fees, complaints and suspensions and that he was therefore an employee. The officer ordered Uber to pay Sharma the difference between what he had earned as a courier and the provincial minimum wage. Uber is appealing this decision at the Ontario Labour Relations Board.
There’s some precedent at the Ontario board for finding gig workers aren’t independent contractors. In 2020, the board considered Foodora couriers’ employment status for labour relations purposes. It determined they were dependent contractors — a midway point between employees and independent contractors — and were entitled to unionize. Shortly afterwards, Foodora declared bankruptcy and left the Canadian market. The Canadian Union of Postal Workers alleged this was retaliation for the union drive and an unfair labour practice. The couriers eventually reached a $3.46 million settlement with Foodora.
The California and Massachusetts attorneys general, alongside attorneys general from certain cities within those states, have sued a slate of platform companies for misclassifying gig workers and violating state labour laws.
The attorneys general have won some injunctions and, in Massachusetts, defeated Uber and Lyft’s attempt to get the lawsuits dismissed, but all litigation is still working its way through the courts.
In Canada, attorneys general don’t sue employers for labour violations on behalf of workers. Instead, provincial Ministries of Labour investigate employment standards complaints. On occasion, they’ll proactively investigate problematic industries or employment patterns, such as unpaid internships, can issue compliance orders or fines and will sometimes prosecute an offending employer.
But for the most part, Canadian gig workers must take the reins themselves, either by filing individual complaints, as Sharma did, or through class proceedings.
In August 2021, the Ontario Superior Court of Justice certified Heller v. Uber Technologies, a misclassification class action against Uber on the grounds of breach of contract and violation of Ontario’s employment laws. The certification came after a five-year battle over whether Uber drivers could sue in Ontario or if Uber’s contract, which required gig workers to bring expensive arbitration in the Netherlands, could stand. In 2020, the Supreme Court of Canada found the arbitration clause was unconscionable and the misclassification class action could proceed.
Canadian workers have launched — and won — many employment misclassification class actions, but none have been about gig workers. Whether courts find that Uber drivers and couriers are employees or contractors may take many more years, but will have serious repercussions for all.
On October 31, Uber reported a net loss of $1.2 billion in the third quarter, including $512 million from investing in other ride-hailing services like the Chinese company Didi.
The question that arises, of course, is whether the Uber business model would be viable if it had to pay a minimum wage to their drivers that included the drivers’ 40% down time, offer health and other benefits, and contribute to CPP and EI like any other employer. In other words, does Uber have a viable business model if they have to play by the rules that other employers play by and if they weren’t the beneficiaries of the “internet exceptionalism” described above?
The ridesharing companies frantic efforts to put in place pro-platform legislative frameworks in places like Washington State and Ontario and the $220 million they spent to push through California’s Proposition 22 (only to have it overturned by the state’s courts), suggests not.
All eyes are now on B.C where an NDP government is just beginning to consult on the employment status of platform-based gig workers. While the federal government started its gig sector review earlier than B.C., most gig workers work under provincial jurisdiction. Moreover, the NDP government in B.C. will be under strong pressure from its labour allies to put the ABC test into law and establish a precedent for other center-left provincial governments in Canada. Polls suggest that the NDP has a reasonably good chance of taking power in both Alberta and Manitoba in the coming year. The next Alberta election is scheduled to be held on May 29, 2023 and Manitoba’s on October 2, 2023.
That said, the global ridesharing platforms are fiercely committed to preserving the independent contractor employment status for their drivers and can be counted upon to put up a monumental fight.
The legislative and courtroom battles over the employment status of platform workers currently classified as independent contractors is one of many battles being fought to reign in shareholder rights relative to worker, consumer and citizenship rights.
The next post in this series will focus on the battle between the shareholder rights of the platform owners and the citizenship rights of the public on the issue of online hate.