On July 27, 2016, an Ontario court certified a class action against Just Energy, a natural gas and electricity retailer, in which 7,000 of its sales agents claimed they were misclassified as independent contractors.

The case, Omarali v. Just Energy, is the first of its kind to be certified in Canada. If the sales agents are successful, the company could face large liabilities relating to unpaid wages (including overtime, vacation and public holiday pay) and unremitted income taxes and other required deductions.

Background

Since 1997, Just Energy has been using independent sales agents to solicit customer contracts in Ontario. These door-to-door sales agents are paid by commission and their sales currently account for 21% of the company’s revenue.

The independent sales agents work in a “crew” under the supervision of a crew coordinator. The crew coordinators report to the regional distributors, who then report to national distributors. The crew members, crew coordinators, and the regional distributors all sign agreements indicating that they are independent contractors and they are all paid by commission. Just Energy recruits and hires its sales agents, who wear Just Energy identification badges.

Mr. Haidar Omarali was employed with Just Energy for 18 months and in his first month worked 288 hours and made only $956.40, roughly $3.32 an hour. As an independent contractor, Mr. Omarali was excluded from the benefits and protections of the Employment Standards Act, 2000 (“ESA“), which guarantees minimum hourly wages, overtime pay, and vacation pay for employees.

The crux of the issue raised by Mr. Omarali is whether Just Energy’s sales agents should be classified as “employees” and “route salespersons”, which would entitle them to minimum wage, overtime pay, vacation pay and public holiday pay under the ESA. Because these terms are ill-defined, courts and tribunals must examine the “economic realities” of the relationship.

Misclassification cases are difficult to certify because the relevant facts and factors may vary significantly from individual to individual. According to the Court, misclassification cases have been certified where:

[T]he issue was job function but the class was carefully defined to ensure class-wide job function similarity; and… where the common issues were focused on the systemic nature of the defendant company’s policies and practices rather than on class member entitlements.

The Decision

The Court certified the class in Omarali because it was satisfied that there was sufficient commonality, meaning that:

  • There was some evidence that the “employee” and “route salesperson” issues existed;
  • There was some evidence that Just Energy exercised a sufficiently similar level of control over all sales agents, which was critical to the “employee” and “route salesperson” issues.

In particular, the Court looked at the fact that all sales agents were required to complete a five-part training program, participate in practice sales presentations and receive feedback from the crew coordinator, adhere to rules about what to say at each door, and operate within specific geographic regions over a set period of time. Additionally, there was evidence of ongoing quality-control supervision by Just Energy and there was an express provision in the independent contractor agreement specifying that every independent contractor must follow the instructions and directions provided by the company.

The Court was satisfied that the proposed class met the certification requirements set out in the Class Proceedings Act:

  • The class had identified at least one cause of action against Just Energy – breach of the ESA, breach of contract and the duty of good faith, negligence, and unjust enrichment;
  • There is an identifiable class of people – individuals who had worked as sales agents for Just Energy under an independent contractor agreement since 2012;
  • There is at least one common issue;
  • A class proceeding is the preferable procedure for resolving the common issues because it allows for a fair, efficient, and manageable method for advancing the claim; and
  • Mr. Omarali is a suitable representative plaintiff.

The overall merits of the sales agents’ claim were not assessed at the certification stage. In fact, the Court remarked that Just Energy could very well prevail on the merits. For now, however, the class action will proceed and we will follow this case with interest.