When a class is a class no more

In August 2021, the Superior Court of Justice in Navartnarajah v. FSB Group, 2021 ONSC 5418 certified a proposed class action which sought to have insurance brokers deemed employees rather than independent contractors. However, following the opt out period which saw almost the entire proposed class opt out of the class proceedings, the Court, at the request of the Defendant insurance brokerage, made the decision to decertifying the class.¹

The thrust of the Plaintiff’s claim in the course of the class action was that the Defendant insurance brokerage FSB had misclassified its producers as independent contractors. Specifically, the Plaintiff alleged that the producers should be treated as employees and receive their minimum entitlements under the Ontario Employment Standards Act, 2000.

Following the certification of the class action in August 2021, and consistent with the requirements under the Class Proceedings Act, all members of the proposed class action were given notice of the class proceeding and the opportunity to opt- out of the class action if they did not wish to participate. Following the opt-out deadline, 66 of the 69 proposed class members chose to opt out. Of those that remained in the class, one individual could not be found, one was deceased and the last was the representative Plaintiff.

In response to the mass opt outs, the Defendant made the decision to move to have the class decertified on the basis that it no longer served as the preferred procedure for resolving the outstanding claims.

In arriving at its decision to decertify the class action, the Court was mindful of the three principal goals that class actions are intended to serve:

1. Access to justice
2. Judicial economy
3. Behaviour modification

Ultimately, the court found that none of the three goals would be denied if the class action was decertified as the remaining class members had the ability to pursue individual claims in small claims court and there was little to be gained from an economical perspective by utilizing the class action regime where the majority of affected class members had made the decision to opt out. To this end, the court was critical of the Plaintiff’s motives in choosing to proceed with the class action in the face of the mass opt opts:

Considering the fact that there has been a mass opt-out, continued certification will effectively allow the representative Plaintiff to hijack justice for the vast majority of the putative class. A determination regarding employment on a “class-wide” basis, even if the class is nearly empty, will have tax and property implications on all of the producers, regardless of the fact that none of them other than the Plaintiff wanted that determination to be made.

Of 69 identified independent contractor producers, the Plaintiff is the only one who wants to have his status declared changed; and yet, he and his counsel have fought hard to pursue just that goal even after it has become crystal clear that the class at large want nothing to do with this claim. One has to ask oneself why.

Following the decertification motion, the Court awarded the Defendants $100,000.00 in costs. In the decision, the Court was mindful of the Plaintiff’s conduct in the course of the motion, noting that the Plaintiff pursued the motion with “unnecessary fervor.”²

It should be noted that the cost decision is under appeal by the Plaintiff with the leave to appeal proceedings pending. KPMG’s Employment and Labour Law group will provide continued updates regarding the status of these proceedings.

As one of the first decertification decisions of an employee misclassification case in the Province of Ontario, this case serves as a good reminder of the values underpinning the class action regime and the mechanisms that are available to the parties where those values are no longer being served.

As we are seeing an uptick in employee misclassification litigation, employers should be mindful of the factors to consider when choosing to engage with workers as independent contractors rather than employees.

Richelle Pollard and Kaley Dodds of KPMG Law’s Employment and Labour Law Group served as co- counsel for the Defendant insurance brokerage in the above case. Richelle and Kaley are available to connect with you if you wish to discuss this case or any other employment related matters further.