Foodora initiates bankruptcy proceedings in Canada, leaving $4.7 million in debt

App-based food delivery company Foodora has initiated bankruptcy proceedings in Canada and declared some $4.7 million in debt after announcing an abrupt exit from the country earlier this week.

The departure comes two months after its Toronto-area couriers won a significant battle at the provincial labour board recognizing their right to join a union. Initiating the proceedings does not mean Foodora is formally bankrupt, but it starts an insolvency process to come to an arrangement with creditors owed money.

On Wednesday, the Canadian Union of Postal Workers - which was seeking to represent couriers - filed an unfair labour practice complaint to the board, alleging the company is closing down to "defeat a union organizing drive" in violation of provincial labour laws.

"Foodora may try to cut and run, but they can't hide from their responsibilities," said CUPW's national president Jan Simpson in a statement.

"These couriers don't deserve to be abandoned in the uncertainty of a pandemic. They have rights and we'll stand up for them."

Foodora will cease operations in Canada on May 11.

"We are not leaving the Canadian market because of the ongoing legal dispute with CUPW, which is currently seeking to represent riders in Toronto," the company said in a statement.

"Rather, we have tried different ways of making our business work in major markets across Canada, including trialing logistics as a service, focusing on specific segments and new verticals, and many other tactics. Unfortunately, these strategies have not generated the desired results over time."

The company said creditors will have a chance to vote in the bankruptcy proceedings to "recuperate funds owed."

While the company's couriers had not yet joined a union, they were the first app-based workforce in the country to make significant strides toward it. Liisa Schofield, an organizer with CUPW, called Foodora's bankruptcy proceedings "baffling."

"There's been an uptick in deliveries in the middle of a pandemic," she told the Star. "They have an exclusive contract with the LCBO."

Earlier this week, Foodora's Berlin-based parent company, Delivery Hero, announced quarterly results that showed global revenues and growth doubling.

Creditors listed on Foodora's bankruptcy file include government authorities like the Canada Revenue Agency and the provincial workers' compensation board, as well as company employees who are owed $243,000.

Couriers, who are considered contractors not employees, are not listed as creditors in the document.

Trustees for Foodora said in an emailed statement to couriers that the company's closure, announced Monday, constituted their two-week notice of termination and that final wage payments were scheduled to be made on May 13.

"Therefore, it is the trustee's preliminary view that you will not be a creditor of the estate," the email says.

In 2018, Foodora left Australia with unpaid debts after it was challenged in court over classifying couriers as independent contractors rather than employees. That was the designation challenged by Canadian couriers too and, in February, the Ontario Labour Relations Board ruled Foodora's couriers were dependent contractors - a middle ground between independent contractors and employees that gives workers the right to unionize.

Schofield said despite Foodora's Canadian exit - and its implications for the union drive - couriers had "built an amazing community for themselves."

"We've created a hardship fund for couriers. We've organized personal protective equipment," she said.

"It's this beautiful sense of community amongst couriers. That's what the union has always meant to them."

Sara Mojtehedzadeh is a Toronto-based reporter covering work and wealth for the Star. Follow her on Twitter: @saramojtehedz