Common Ground? Class Action Updates

Ontario Court Approves Settlement in First Volunteer Misclassification Class Action

Common Ground? Class Action Updates

Ontario Court Approves Settlement in First Volunteer Misclassification Class Action

Date: August 23, 2022

In Montaque v. Handa Travel Student Trip Ltd., the Ontario Superior Court recently approved a settlement in what the Court has stated is Canada’s first “volunteer misclassification” class action.

Factual Background

In 2020, a class action was certified against four related companies that operated a travel business selling vacation tours to students. The certified class was comprised of individuals who were Trip Leaders on guided tours for students and performed tasks similar to tour chaperones, organizers and other employees. The corporate defendants considered these Trip Leaders to be volunteers pursuant to volunteer agreements, and paid them a small honorarium that was well under the minimum wage set under the Ontario Employment Standards Act, 2000 (ESA).

The representative plaintiff claimed the class members were misclassified as volunteers when they should have been classified as employees and should therefore receive the protections and benefits of the ESA.

The parties reached a proposed settlement of the class action in the all-inclusive amount of $450,000, which Justice Morgan approved in this decision.

The Court’s Analysis and Decision

Justice Morgan first reviewed the principles that a court is to take into account when assessing the reasonableness of a settlement including, among other things, the likelihood of success on the merits, the future expense and likely duration of the litigation, the nature of the negotiations and communications between the parties, and the recommendation and experience of counsel.

For instance, Justice Morgan took into consideration that the class members were all engaged on short-term trips, usually lasting 4½ to 8½ days, and that each of them had signed a volunteer agreement. Accordingly, in his view, there was “considerable risk” that on the merits, the relationship between the parties would be treated as a genuine volunteer relationship and not an employment relationship, or that class members would in any event be subject to exemptions from minimum wage and overtime pay under the ESA.

With this in mind, Justice Morgan found that the parties’ settlement proposal was reasonable and provided the following benefits based on the relevant factors (at paragraph 6):

(a) it avoided delays associated with trial and appeals;

(b) it achieved behaviour modification, as the defendants agreed to reclassify class members as employees for future trips;

(c) it provided for pro-rata payments based on the length of the trips taken by class members without the requirement that individuals prove their damages, with the estimate that class members whose claims were not presumptively time-barred would receive payments equivalent to working eight hours per day of their trip at the average minimum wage over the class period;

(d) it achieved a benefit for all class members, regardless of when they took a trip or with which company, while also taking into account that some class members took trips during periods that were presumptively time-barred;

(e) it avoided litigation funding costs;

(f) it avoided the risk that some of the defendants would be unable to satisfy a judgment, given solvency concerns with at least one of the defendant’s brands; and

(g) it stipulated that no class member would be required to do anything to prove their trips taken or with which company, as it provided for a simple and user-friendly claim process, and did not require class members to keep track of their working hours (which, as volunteers, they would have had no reason to do).

Justice Morgan further noted that the settlement struck “a balance between individual compensation of class members and an efficient and expeditious overall distribution.”

The Court also approved the class counsel fee award of $100,000 and an honorarium of $5,000 for the representative plaintiff.

Key Takeaways

This decision is significant for employers facing proposed or certified misclassification of employment class actions, as it reflects the type of resolution to a class proceeding that will be viewed as falling within the “zone of reasonableness” required by the Class Proceedings Act, 1992.

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