City of Edmonton Fails to Curb Uber

The recent case of City of Edmonton v. Uber Canada Inc., 2015 ABQB 214 is the latest decision examining whether or not Uber Canada is operating a taxi brokerage business in contravention of local bylaws.

In this case, the City of Edmonton argued that Uber was operating in the City without a valid business licence or taxi broker licence. The City was seeking a statutory injunction against Uber to cease their operations. Uber Canada was not issued any tickets; however, three drivers in the City had been issued a total of six tickets for violating bylaws.

Uber Canada allows people to download an “app” for either a “driver” or a “rider”. A rider can then use their smartphone to request a ride, the server sends the request to the nearest driver, who can choose to accept the request and go pick up the rider, taking them to their destination. The driver gets paid electronically and Uber Canada’s affiliate, Rasier B.V., registered in the Netherlands, receives a fee for the use of the app. The vehicles are not owned by Uber Canada and the drivers are not employed by Uber Canada.

Uber Canada provides support to its affiliates, and advertising and training to drivers on use of the app. The court found that “support, recruitment and advertising do not constitute carrying on business within the definition of the bylaw.”

The City was not able to establish that Uber Canada had a presence in the City in accordance with the legal test discussed by the Supreme Court of Canada in Van Breda v. Village Resorts Ltd., 2012 SCC 17: “The notion of carrying on business in the jurisdiction requires some form of actual, not only virtual, presence in the jurisdiction such as maintaining an office there or regularly visiting the territory of the particular jurisdiction…”

The City was unable to establish a prima facie case that Uber Canada was in fact violating the Bylaws, or that it was even the party that should have been pursued in the action.

Uber argues that they are not providing a taxi or rideshare system, they merely provide an app that allows users to provide or receive a service from other users.

This raises a serious question of how municipalities are going to regulate this type of enterprise. The setup of the business is very clever. One company provides the service of “advertising, support and recruitment”, while another licences the software and collects a fee for the usage. There is no employment relationship between the parties, and the City was unable to establish an ongoing relationship between Uber Canada and the drivers or the other companies involved. Once the initial recruitment and training are done there does not appear to be ongoing contact between Uber Canada and the users of the service.

The City chose to launch the action only against Uber Canada. Had the City joined all of the possible parties, including the drivers, there may have been a different outcome.

This decision demonstrates that legislation has simply not caught up to technology. Uber is an American based company with entities incorporated in the Netherlands and operating in Canada. Each company handles a different part of the transaction, leaving no one party as the “responsible” party and making it much more difficult to pursue an action.

As businesses innovate to operate in the virtual world all levels of government will need to respond with equal innovation. Unfortunately the reality is that business and technology innovate at a much faster pace, therefore the challenge will remain an ongoing one.