To print this article, all you need is to be registered or login on Mondaq.com.
On June 26, 2020, the Supreme Court of Canada released its
much-anticipated decision in Heller v. Uber Technologies Inc.
The Supreme Court upheld the Ontario Court of Appeal’s
January 2019 finding that an arbitration clause contained in
Uber’s standard Ontario driver contracts was unconscionable.
As we discussed in a summary of the Court of Appeal’s
decision, the plaintiff sought a declaration that Ontario Uber
drivers are subject to the Employment Standards Act,
2000 (“ESA”) and that arbitration
provisions contained in Uber’s service agreements are void
and unenforceable. The plaintiff also sought $400 million in
damages on behalf of the class.
Uber’s agreements contain identical arbitration clauses,
which require drivers to submit to the arbitral jurisdiction of the
International Chamber of Commerce in Amsterdam, Netherlands to
resolve any dispute with Uber. ICC rules require parties initiating
proceedings to pay approximately $14,500 in administrative fees.
By way of contrast, the plaintiff earns $400 to $600 per week
based on 40 to 50 hours of work.
Uber’s initial motion to stay the proposed class action in
favour of arbitration succeeded. The Ontario Court of Appeal
overturned the motion judge’s decision, finding that the
arbitration clause was both unconscionable and an unlawful attempt
to contract out of the ESA.
What Employers Should Know
Robert Wisner and Paola Ramirez of McMillan LLP have written a
detailed overview of the Supreme Court’s decision and its
ramifications for the law of arbitration and doctrine of
Employers should consider two key implications of the decision
A Supreme Court majority agreed with the Court of Appeal that
Uber’s arbitration clause is unconscionable. The majority
wrote that unconscionability requires examining a two-part test:
First, whether there is an inequality of bargaining power between
the parties and, second, whether that inequality led to the weaker
party accepting an “improvident bargain.” The majority
found that there was an inequality in bargaining power because Uber
used a standard form “contract of adhesion” that could
not be modified and because the plaintiff would not appreciate the
implications of the arbitration clause. The majority then found
that the plaintiff had accepted an improvident bargain because the
cost of arbitration – at least $14,500 in fees simply to
initiate an arbitration claim – would make enforcing the
contract all but impossible.
The Supreme Court’s application of the doctrine of
unconscionability may make enforcing arbitration clauses more
challenging. Employees who prefer to claim against an employer in
court are likely to allege that the clause in question is
unconscionable by applying the Supreme Court’s test to their
circumstances. While ensuring that an employee has a chance to
obtain independent legal advice before signing an employment
agreement may help, the Supreme Court noted that a clause can be
unconscionable even if the stronger party is not willingly taking
advantage of its position. Employers seeking to include an
arbitration clause in an employment agreement should consider
whether doing so risks binding an employee to a so-called
2. Contracting out of the Employment
Standards Act, 2000
The Supreme Court determined that because the impugned
arbitration clause was unconscionable, there was no need to decide
whether or not it was also invalid because it has the effect of
contracting out of the mandatory protections of the ESA.
The Ontario Court of Appeal had previously found that the
arbitration clause was invalid and unenforceable because it was an
unlawful attempt to contract out of the ESA’s protections.
Specifically, the Court of Appeal held that, if the arbitration
clause applied, it would deprive Uber employees of their ability to
file a complaint about an ESA breach with the Ontario Ministry of
Labour under section 96(1) of the ESA.
Although the Supreme Court declined to comment on whether or not
the clause had the effect of contracting out of the ESA, employers
should continue to bear the Court of Appeal’s decision in
mind when crafting or relying on arbitration clauses. Employers
should be leery of blanket clauses that risk denying an employee
the right to pursue remedies afforded by the ESA, such as
complaints about unpaid wages or overtime.
Originally published by McMillan, July 2020
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
© McMillan LLP 2020
POPULAR ARTICLES ON: Litigation, Mediation & Arbitration from Canada