The case of the vanishing class: Ontario Superior Court decertifies class action after class members overwhelmingly opt out

In Navaratnarajah v FSB Group Ltd.,¹ Justice Morgan of the Ontario Superior Court took the rare step of decertifying an employment class action when more than 95% of the class members opted out of the process. 

Certification motion

The Navaratnarajah class action was certified in 2021. The plaintiff’s central allegation in the class action is that the defendants, an independent brokerage, misclassified their sales agents or “producers” as independent contractors when they were, in fact, employees. According to the plaintiff, class members are owed damages for unpaid benefits and other employment entitlements as a result of this misclassification. The defendants deny the plaintiff’s allegations. 

At certification, the court held that the plaintiff satisfied the bare requirements of s. 5 of the Class Proceedings Act,² but expressed concern regarding whether the remedy sought by the plaintiff (i.e. designation of the class members as employees) would be seen as beneficial by the class members, noting there was a risk that “at some point, the majority of the class may find that their financial interest was hijacked by the claim rather than advanced by the claim.” 

Decertification motion

The court’s concerns were well founded. Sixty-six of the 69 identified class members chose to opt out of the class action. Of the remaining three class members, one could not be located and one was deceased.³ As a result, by the end of the opt-out process, the representative plaintiff himself was arguably the only real class member left.  

In response, the defendants brought a decertification motion under s. 10(1) of the Class Proceedings Act, which empowers the court, on the motion of a party or a class member, to amend a certification order and even decertify the entire proceeding where it appears the requirements of s. 5 of the Act are no longer satisfied. 

The three goals of class actions

The court allowed the defendants’ motion and decertified the class action. The court’s analysis turned on the preferable procedure requirement in s. 5(1)(d) of the Class Proceedings Act. Specifically, relying on the Supreme Court’s decision in AIC Limited v. Fischer,⁴ Morgan J. held that the class action was no longer preferable over an ordinary civil action because the plaintiff’s claim no longer advanced the three principal goals of class actions: namely, (1) access to justice, (2) judicial economy, and (3) behavior modification. 

First, there was no evidence that it would be uneconomical for the plaintiff, or any remaining class members, to pursue an individual claim, likely in the Small Claims Court, under the simplified and streamlined procedures for such claims. Further, the fact that 95% of the class members wanted to opt out of the process indicated that the plaintiff would in fact be “hijacking justice” from those who had opted out if permitted to continue as the representative for the class. 

Second, the goal of judicial economy was “not particularly fostered” by this matter remaining a class proceeding. With at most three class members, the cumbersome diversion of a common issues trial prior to resolving individual claims was not warranted. Hence, the goal of judicial economy was better advanced by permitting the three remaining individuals to proceed with actions at their own pace and on their own terms, should they choose to do so at all. 

Third, Morgan J. found that in light of the high level of opt-outs, there was no pressing call for modifying the defendants’ behaviour. The fact the plaintiff was dissatisfied with the defendants’ classification of him as an independent contractor did not rise to the level of warranting potential behavioral modification through the vehicle of a class action.  

Conclusion

Navaratnarajah provides a number of important lessons for class action plaintiffs and defendants in Ontario: 

• First, employment misclassification class actions have real and perceived risks for class members. These risks may lead class members to “vote with their feet” and leave the class action shortly after certification. 
• Second, the decertification provisions in s. 10(1) of the Class Proceedings Act are an important procedural tool for dealing with certified proceedings that no longer serve the primary goals of class actions. 
• Finally, while the court arguably could have decertified the Navaratnarajah class action under identifiable class requirement of s. 5(1)(b) of the Class Proceedings Act, which requires that the class consist of “two or more persons,” Morgan J.’s decision to decertify on the basis of the preferable procedure requirement in s. 5(1)(d) highlights the growing importance of the concept of preferability in the Ontario class action jurisprudence.