On June 3, 2024, the Ontario Superior Court dismissed a motion to certify a class action alleging misclassification of independent contractors on the basis of their assignment by a temporary help agency. The Court found that the issue of whether an individual was subject to an agreement to assign under section 74.3 of the Employment Standards Act, 2000, (“ESA”) could not be determined on a class-wide basis.

In Davidson v. T.E.S. Contract Services Inc., 2024 ONSC 3066, the representative plaintiff, Colleen Ann Davidson (“Davidson”) brought a motion to certify a class action against T.E.S. Contract Services Inc. (“TES”), on behalf of all individuals on contract with TES who were classified as independent contractors. Davidson alleged that they were misclassified and should be entitled to overtime pay, vacation pay and statutory holiday pay, and other benefits owing to employees under the ESA. If certified, the class could have involved thousands of contractors going back to 2009.

No commonality under section 74.3 of the ESA

Under the Class Proceedings Act, 1992, (“CPA”), a person can commence a proceeding on behalf of members of a class, and such proceedings can be certified as a class action, if the claims raise common issues that can be decided on a class-wide basis.

In support of the allegation of misclassification on a class-wide basis, Davidson had argued that if there was an agreement by a temporary help agency to assign any persons, including true independent contractors, to a client, section 74.3 of the ESA would deem them to be employees, and therefore, no individual enquiry would be required to determine employment status, either under section 1(1) of the ESA or at common law.

Section 74.3 of the ESA deems a temporary help agency to be the employer “[w]here a temporary help agency and a person agree, whether or not in writing, that the agency will assign or attempt to assign the person to perform work on a temporary basis for clients or potential clients of the agency”. Section 1(1) of the ESA defines “employee”.

TES opposed this interpretation of section 74.3 of the ESA and argued that, in any case, there was no basis for commonality on the issue of whether TES was the employer of the putative class members, since there was no basis in fact for any agreement to assign Davidson or any member of the class.

Davidson’s own evidence was that she had applied for a job to a client of TES who interviewed her, selected her for the job and offered her a position as a User Experience Designer. She incorporated a company and signed an independent contractor agreement with TES, which provided payroll and contract administration services to the client, pursuant to a Master Professional Services Agreement (“MPSA”). After her contract was terminated by the client, she alleged she was employed by TES, and made a claim for benefits available to employees.

On the facts, the Court found that there had been no agreement to assign, drawing a parallel with the decision in Sondhi v. Deloitte Management Services LP, 2017 ONSC 2122, (“Sondhi”) in which the Plaintiff had made the same argument under s. 74.3 of the ESA against Procom Consultants Group Limited (“Procom”). In Sondhi, the Court had dismissed the certification motion against Procom, finding that they had not acted as a placement agency but only as a payment processor and contract administrator and had nothing to do with the placement of document reviewers to perform work on a temporary basis for a client.

Crucially, in Davidson v. T.E.S. Contract Services Inc., Justice Glustein held that the issue of whether TES and each putative class member had an agreement to assign under s. 74.3 of the ESA could not be decided on a class-wide basis and would need to be determined on an individual basis.

Acknowledging that the issue of whether independent contractors are subject to section 74.3 of the ESA “raises significant consequences to workers and [temporary help agencies]”, the Court declined to decide on the issue, as it was not necessary for the purpose of determining certification, and any conclusion should await determination in a case where it is necessary to address the statutory interpretation issue.

No commonality under section 1(1) of the ESA or at common law

The Court reviewed its prior decisions in proposed misclassification class actions including the requirement that a proposed representative plaintiff must lead evidence to provide a basis in fact to establish systemic commonality between the members of the proposed class, in order to avoid succumbing to an “it depends” reality. The Court reaffirmed that in the absence of evidence establishing commonality on a class-wide basis, there is no basis in fact to find that resolving the proposed common issue would avoid duplication of fact finding or legal analysis.

On the facts, the Court found there was no evidence that there was any similarity in job function amongst the potential class members, nor did they work for the same entity. Further, reviewing all the evidence, including the template independent contractor agreement, the MPSA, a health and safety booklet, and email correspondence, the Court did not find any basis in fact to establish systemic commonality of employment status under the definition of “employee” in section 1(1) of the ESA, or at common law.

Takeaways

Employers can rest assured that even though the “some basis in fact” test for class certification is a low evidentiary threshold, the Superior Court has taken its gatekeeping role seriously, which is critical to ensuring that a claim is appropriately prosecuted as a class action. In this regard, Justice Glustein’s decision strengthens the jurisprudence of the Court, as articulated in Price v. H. Lundbeck A/S, 2022 ONSC 7160 and 2018 ONSC 4333.

For temporary help agencies in particular, this decision provides welcome relief that independent contractors will not automatically be deemed to be employees by statute. While such an argument may be advanced in future cases, the clarity provided by this decision regarding the requirements of an “agreement to assign” will undoubtedly be helpful for class action litigants.

Mathews Dinsdale lawyers Jeffrey E. Goodman, Stephanie M. Ramsay and Prateek Awasthi appeared on behalf of the employer, T.E.S. Contract Services Inc. in this case.

If you have any questions about this topic, or any questions relating to workplace law generally, please do not hesitate to contact a Mathews Dinsdale lawyer.