Are Gig Workers Independent Contractors or Employees?

 

On November 3, 2020, Californians approved Proposition 22 exempting gig companies from legislation classifying their workers as employees. The ballot initiative was the most expensive in the State’s history with Uber and its allies spending over $200 million to achieve 58% of the vote. It undermines Assembly Bill 5, which presumes workers to be employees unless the “hiring entity” passes three tests. Uber and Lyft failed the second test, similar to Lord Denning’s integration test, and a preliminary injunction against misclassifying workers was scheduled to take effect by the end of the month.

Over half the state legislatures expressly classify gig workers as independent contractors. “Transportation Network Company” legislation, typically backed by Uber and Lyft, preempts municipal regulations including licensing, vehicle safety, and employment status. Unique to Proposition 22 is a “guaranteed minimum earnings” where a ride request or delivery is undertaken and “health benefits” for drivers who work at least 15 hours per week. Critics observe that the guaranteed amount only covers 28 to 33% of workers’ shifts while the health benefits are stipends towards private insurance as opposed to coverage under an employer’s plan.

Meanwhile, the Tax Court of Canada is broadening the scope of employment insurance (EI) in the taxi industry. Paragraph 6(e) of the EI Regulations extends EI to self-employed taxi drivers who face the same risk of unavailability of work or “involuntary idleness” as their employed counterparts. Interpreting this provision are two categories of cases at the Tax Court: one category, endorsed by the Federal Court of Appeal, uses the four-part Wiebe Door test to excuse EI remittances despite the intent of paragraph 6(e). The other category characterizes the drivers as independent contractors but uses a broader test to deem their earnings as insurable.

 In Royal City Taxi v. MNR, 2019 TCC 105, a “higher court” was invited to reconcile the categories in light of ride-sharing services. Justice Hogan applied the broader test by interpreting “employment” by carrying passengers as an “activity or occupation” rather than applying Wiebe Door. This interpretation departs from Beach Place Ventures v. The Queen, 2019 TCC 24, released six days earlier, where Justice Bocock reaches a different conclusion using Wiebe Door. The uncertainty increased when the Federal Court of Appeal proceedings were discontinued.

In Canada, a referendum on the status of ride-sharing drivers is unnecessary. Although applying the same test ensures administrative efficiency, using a broader test reduces the risk of a shortfall in EI coverage as more employees enter part-time gig work and limit their insurable hours. Requiring remittances complements the recent expansion of GST/HST to the ride-sharing industry. Justice Hogan’s invitation allows future courts to develop the role of insurable employment in an evolving tax base.

 

- Samuel McDonald (LLM Candidate, Osgoode Hall Law School)