The Ontario Divisional Court has dismissed an appeal seeking to certify a class action against a temporary help agency over alleged worker misclassification and upheld a substantial cost award of more than $330,000 against the plaintiff, finding that individual circumstances varied too widely among workers to allow common issues to be determined as a group.
A.D. challenged T.E.S. Contracting Services’ classification of her as an independent contractor rather than an employee, arguing she should have received benefits under the Employment Standards Act. She sought to represent a class of all workers who had contracts with T.E.S. from November 2009 until class action notice was sent, claiming damages of $72.5 million plus punitive damages.
The court upheld a motion judge’s refusal to certify the action, agreeing that the proposed common issues could not be determined collectively because T.E.S. provided different services to different clients and workers.
Wide range of services created individual circumstances
T.E.S. provides recruitment, payroll and administration services and has applied to be registered as a temporary help agency in Ontario. A.D. had applied directly to Texas Instruments Canada for an IT position from March 2019 to February 2020. After being interviewed and offered the position by the client company, she was directed to T.E.S. to handle contract administration.
A.D. incorporated a personal corporation that entered into an independent contractor agreement with T.E.S. under a template arrangement. T.E.S. signed this agreement pursuant to its obligations under a master professional services agreement with the client company.
The motion judge found that T.E.S. performed various roles depending on the client and individual worker, ranging from recruitment to payroll administration only. Over the proposed class period, T.E.S. worked with 935 client organizations through 21,252 individual contracts.
“In each case, the evidence is that TES’ role depends on the facts of each individual client and each individual worker,” the motion judge found.
Three proposed common issues failed certification test
A.D. proposed three main common issues seeking to establish an employer-employee relationship under different legal frameworks: the temporary help agency provisions of the Employment Standards Act, the general employee definition in the act, and common law principles.
The court examined whether there was “some basis in fact” for determining these issues could be decided in common across all class members.
Temporary help agency provisions
Under section 74.3 of the Employment Standards Act, a temporary help agency becomes an employer when it agrees to “assign or attempt to assign” a person to perform work on a temporary basis for clients.
The motion judge found no evidence that all proposed class members were subject to such agreements. A.D. provided no direct evidence about the commonality of these arrangements among putative class members, and her own experience contradicted the claim since she had applied directly to the client company.
The court noted that template agreements were signed regardless of whether T.E.S. actually placed the worker with the client. Various documents A.D. relied on, including payroll instructions and information booklets, applied to workers in different capacities and “cannot be considered a basis in fact that every putative class member was subject to a s. 74.3 agreement.”
Employee definition under Employment Standards Act
The motion judge also rejected the common issue of whether workers qualified as employees under the general definition in section 1(1) of the Employment Standards Act, which includes persons who perform work for wages or supply services for wages.
A.D. led no evidence that proposed class members held the same job titles or had similar responsibilities. The court found the scope of variability “more pronounced” than in other cases where certification was denied due to differing job functions.
The motion judge examined template agreements, master service agreements, information booklets and payroll instructions that A.D. argued showed systematic treatment of all workers as employees. However, he found these documents were “equally applicable to independent contractors as they were to employees” and contained provisions “unrelated to whether the person is an employee, contractor or consultant.”
Common law employee status
The third proposed common issue sought to establish employee status under common law principles, which focus on factors like control, ownership of tools, chance of profit and risk of loss, and integration into the business.
While A.D. argued there was some basis in fact that all class members were employees based on factors like exclusive service requirements and client control over work location and timing, the court found this analysis missed the key certification requirement.
“The problem with Ms. Davidson’s submissions is that the question was not whether there was some basis in fact for determining that Ms. Davidson was an employee as opposed to an independent contractor. It was whether there was some basis in fact for determining employee status across the putative class,” the court explained.
Fiduciary duty claim also dismissed
A.D. also proposed a common issue about whether T.E.S. owed fiduciary duties to class members and should disgorge any profits from alleged breaches.
The motion judge refused to certify this as a standalone issue since “the commonality of that fiduciary obligation is based on a common finding of employment” under the other proposed common issues.
The court found this reasoning sound, noting that A.D.’s breach of fiduciary duty claim was “dependant on a finding that T.E.S. misclassified the putative class members.”
Substantial costs award upheld
The motion judge awarded T.E.S. costs of $333,114.05 against A.D., which the Divisional Court refused to disturb on appeal.
A.D. argued the costs award would have “a chilling effect on public interest class actions that impact a large segment of vulnerable workers” and should be reduced because she raised novel legal issues.
However, the motion judge found the statutory interpretation questions were not necessary to determine certification and that the inquiry into whether workers were commonly assigned by T.E.S. was “a question of fact” rather than a novel legal issue.
The motion judge noted that given the $72.5 million in general damages sought plus separate claims for punitive damages, it was “reasonable to expect that a defendant (and the plaintiff) will leave no stone unturned on the motion.”
“Costs awards of six or seven figures are not unusual if a motion for certification is unsuccessful. An individual plaintiff cannot risk exposure for costs of that amount, especially when the recovery for an individual class member is usually dramatically smaller than the amounts claimed for the class,” the court said.
“The motion judge questioned whether counsel should be permitted to act as class counsel unless they have obtained funding and are prepared to indemnify the representative plaintiff. According to the motion judge, this is an issue that should be addressed at the outset of the proceedings, not ‘after the fact, when certification has already been denied.'”
It also awarded an additional $25K in costs to TES for this appeal.
For more information, see Davidson v. T.E.S. Contracting Services Inc., 2025 ONSC 3537 (CanLII).
