Can a procedural regime designed to foster access to justice become a vehicle for denial of justice? In Navartnarajah v. FSB Group Ltd., 2023 ONSC 2574, Justice Morgan answered “yes” to this question and proceeded to decertify a class action that had asked the Court to rule on whether workers were “employees” or “independent contractors.”
Navartnarajah was an employment misclassification class action commenced on behalf of insurance sales agents. The class claimed that they were employees rather than independent contractors and sought damages relating to an alleged failure to compensate sales agents for benefits prescribed by the Ontario Employment Standards Act, 2000 (the “ESA”).
Each sales agent was paid based on commissions for the number of sales and policy renewals they generated for the defendants, and had their own book of business that could be of considerable value and sellable on the sales agent’s retirement from the industry.
Apart from viewing the class claim as incorrect, the defendants’ overarching opposition to certification was that the claim itself was a detriment to all but a small portion of the class. As they put it, if the Court were to find that the workers were employees and thus entitled to benefits prescribed by the ESA, they might also be liable for back taxes. Additionally, the defendants themselves could bring claims to the value of each sales agent’s book of business making this asset non-transferrable.
Despite acknowledging that the action might not benefit some potential class members, the Court decided to certify the class action.
Following certification, matters developed quickly to the detriment of the representative plaintiff and class counsel. In particular, 66 of a possible 69 class members exercised their right to opt out of the class action. Of the remaining three, one could not be located, and the other is deceased.
On the basis of this new evidence, the defendants brought a motion to decertify the class action arguing that the conditions for certification were no longer met, as the new evidence showed that the class action ceased to be the preferable procedure as required by subsection 5(1)(d) of the Ontario Class Proceedings Act, 1992 (the “CPA”).
Justice Morgan heard the motion and decertified the class action. With respect to the preferable procedure criterion, the Court found as follows:
- Since there was really only one class member, judicial economy would not particularly be fostered by this matter remaining a class proceeding;
- There was no pressing need for behaviour modification because virtually every potential class member opted to remain an independent contractor; and
- There would be no denial of access to justice if the class action was decertified. The three remaining class members had claims that appear to fall within the monetary jurisdiction of the Small Claims Court and the evidence failed to show that it would be uneconomical for the representative plaintiff and the remaining class members (if any) to pursue individual actions.
In deciding to decertify the class action, Justice Morgan further held that continued certification would in effect permit the representative plaintiff to “highjack justice” for the vast majority of the class, and would put him in a position to potentially negotiate a class-wide settlement in which only he and class counsel would benefit. Finally, he stated that if the class action had nothing more to do with access, it had little to do with justice either.
This is a welcome decision for employers faced with proposed or certified misclassification class actions. In this case, the known challenges of misclassification actions played out precisely as the defendants predicted they would. The case also offers some insight into decertification, which remains a rarely litigated provision of the CPA. Finally, the case serves as an excellent reminder to defence counsel to keep decertification on the radar should new evidence or developments occur in the lead up to a common issues trial.
If you have questions about employment law class actions, the employment status of members of your workforce, or other labour and employment matters, please reach out to a member of Miller Thomson’s Labour & Employment Group.
