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Foodora Is Skipping Town: Union Busting or Bankrupt?

Meal delivery service Foodora has stated it plans to shut down Canadian operations by May 11th, 2020, leaving local restaurants with a $4.7 million bill and thousands of vulnerable couriers out of work.

In short: Foodora says its operations are ceasing due to an inability to turn a profit in the competitive food delivery market. Yet, suspicion has arisen regarding the timing of this exit due to a unionization movement among its couriers and the strong financial position of Foodora’s parent company.

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Who is Foodora? The company started operations in Canada over 5 years ago and now offers delivery services for over 3000 restaurants in 10 Canadian cities. Foodora Inc. is owned by Berlin based multinational Delivery Hero SE which runs online food-delivery services in 45 countries.

The Union timeline: In August 2019, Foodora couriers in Toronto undertook a union certification vote to decide on joining the Canadian Union of Postal Workers (CUPW), a watershed moment which could have led to the first certified bargaining unit for app-based workers in Canada.

  • However, Foodora was quick to oppose the vote, claiming its couriers were independent contractors rather than employees; therefore barred from unionizing.
  • This led to the Ontario Labour Relations Board sealing the vote results to deliberate on issues filed by both sides.
  • If couriers were to be classified as employees under Ontario law, they would be entitled to certain protections such as guaranteed minimum wage, paid vacation and leave.

The decision: On February 25th, 2020, the Ontario Labour Relations Board ruled that Foodora couriers more closely resembled employees than independent contractors removing a major hurdle facing the unionization movement.

What they said:

This victory belongs not just to us, but to many gig workers who have dangerous and precarious conditions, who lack security, who have no voice in their working conditions.” – Ivan Ostos, Foodora Courier

This decision shows that the tide is turning towards justice for thousands of gig workers in Ontario and soon these workers will have the right to their union.” – Jan Simpson, CUPW national president

Until the voter list is confirmed, and the unionization application votes are counted, we cannot speculate at this time as to whether the vote will sway in favour of CUPW and what this might mean for our business moving forward.” – Foodora parent company, Delivery Hero SE

Pulling out of Canada: Seemingly out of nowhere, in late April Foodora announced its intention to end operations in Canada effective May 11th. Managing director David Albert blamed a highly saturated food delivery field for making it difficult to continue operating “without having to continuously absorb losses”.

Suspicious timing: Foodora’s Canadian exit, only two months after the Ontario Labour Relations Board’s ruling, left union leaders shocked. Not only did the announcement precede the impending release of the unionization vote results, but also came at a time when the food delivery market had been seeing an increase in demand due to the COVID-19 pandemic. Finally, Foodora’s announcement came two days before its parent company announced its orders and revenue had nearly doubled year-on-year.

  • According to Statista, online food delivery in Canada, which has a market volume of $1.9 billion is expected to see at least an 8.5% growth rate in 2020.
  • Foodora was in a perfect position to benefit from the COVID-19 market disruption as it already engaged in non-food product delivery through its LCBO and 7-Eleven partnerships.
  • Delivery Hero recently reported strong growth with revenues nearly doubling in the first quarter of 2020 “outperforming growth expectations” while stating that its “financial outlook… [remained] unchanged despite costs associated with COVID-19.”

Union Busting? These factors led various CUPW leaders to speculate that Foodora’s decision was influenced by the ongoing of unionization attempt. Parent company Delivery Hero has operations in 44 countries around the World and a successful unionization movement in one market could lead to others around the world, cutting into their profits.

“It’s suspicious timing, then, for Foodora Canada to claim they can’t survive in this market. Couriers have been working hard to deal with the surge in demand, and now suddenly they don’t know how they’ll make ends meet in two weeks” – Jan Simpson, CUPW National President

The impact on workers: For many Foodora couriers, the company’s exit has brought pain on many levels. Not only has their year-long fight for better benefits been thwarted, they will soon find themselves unemployed in a very uncertain job market and unsure whether they will be able to quality for the Canadian Emergency Response Benefit.

Canadian restaurants, already struggling from the loss of sit-in business have also been dealt a huge blow as they lose a key delivery partner. Furthermore, Foodora’s recent declaring of bankruptcy showed that the company is leaving while owing more than $4.7 million to hundreds of Canadian businesses.

The bottom line: Foodora’s exit from Canada amid a seemingly successful unionization movement deals a huge blow to gig-economy workers around the world. Meanwhile, Foodora’s parent company Delivery Hero, having recently outperformed growth expectations for the 12th consecutive quarter, leaves Canada having dodged the union bullet, while local small businesses and restaurants are left to foot the $4.7 million bill the multinational company has left behind.

Want to learn more about worker’s struggles in these uncertain times?
Read this article on COVID-19’s impact on meat plants and workers.