Written by David Doorey, York University
In a much anticipated decision, the Supreme Court of Canada today struck a blow against Uber’s “unconscionable” mandatory arbitration clause, ruling it void and unlawful. This is a quick review of the decision. We’ll have more detailed analysis from a variety of contributors, including legal counsel for Mr. Heller, in the days to come.
That arbitration clause purported to require an Uber driver to pursue even small claims in an expensive arbitration proceeding in Amsterdam. The arbitration clause was activated the moment a driver clicked “agree” on the Uber app, which is a requirement to drive for Uber. In order to access the arbitration process, a driver would need to pay $14,500 US, even if the claim was for $100 in unpaid wages.
In an 8-1 ruling in which the majority decision was written by Justice Abella, ex-Chair of the Ontario Labour Relations Board, and Justice Rowe, the SCC ruled the arbitration clause was “unconscionable”.
Following upon a long line of employment-related decisions spanning nearly two decades now, the SCC once again emphasized how “inequality of bargaining power” colours contract interpretation, especially in the context of work:
“There was clearly inequality of bargaining power between Uber and Mr. Heller. The arbitration agreement was part of a standard form contract. Mr. Heller was powerless to negotiate any of its terms. His only contractual option was to accept or reject it.”Justices Abella and Rowe, Supreme Court of Canada
The end result is that the arbitration clause was struck as unconscionable, and the Court explains that concept at length. This means that the class action lawsuit filed by Uber drivers alleging violations of the Ontario Employment Standards Act can move forward.
We agree with the Court of Appeal. This is an arbitration agreement that makes it impossible for one party to arbitrate. It is a classic case of unconscionability.Supreme Court of Canada
The next big test will be whether Uber drivers are “employees” for the purposes of that legislation. Unlike the Labour Relations Act, which expressly includes “dependent contractors” within the definition of “employee”, the ESA makes no mention of this middle category. Nevertheless, the Labour Board has interpreted the legislation broadly, as remedial legislation intended to protect as many workers as possible.
The SCC does not address the other argument made by Heller, which was that mandatory arbitration clauses constitute an unlawful contracting out of employment standards legislation, which provides for an extensive enforcement machinery. The Ontario Court of Appeal addressed that issue at length and ruled that mandatory arbitration clauses that block access to the employment standards machinery amount to an illegal contracting out and are therefore void on that basis. This finding strikes out all arbitration clauses that block access to statutory enforcement machinery, not just those with high access fees in foreign countries.
On this point, the majority state simply:
“Given the conclusion that the arbitration agreement is invalid because it is unconscionable, there is no need to decide whether it is also invalid because it has the effect of contracting out of mandatory protections in the ESA.”Justices Abella and Rowe, Supreme Court of Canada
The SCC therefore has left the Court of Appeal ruling on this point undisturbed, meaning that it remains the law of the province. In Ontario at least, a mandatory arbitration clause in an employment contract that prevents an employee from filing an statutory claim is illegal.
That is good news for Ontario employees, who have avoided the crisis in U.S. law in which millions of workers are channeled into private arbitration that favours employer interests. It also means that employers can’t use arbitration clauses to avoid class action lawsuits alleging violations of employment standards legislation (which I discussed in this earlier post).
That’s it for now. Watch Canadian Law of Work Forum for more on this case in the coming days. And if you want to write a comment yourself about this case or any other case, email me at firstname.lastname@example.org
David Doorey, “SCC: Uber’s Mandatory Arbitration Clause is Unconscionable and Void” Canadian Law of Work Forum (June 26 2020): https://lawofwork.ca/?p=12770