In A Flash

Supreme Court of Canada Confirms Decision to Strike International Arbitration Clause for Uber and UberEATS Drivers

On June 26, 2020, the Supreme Court of Canada released its decision in the highly publicized case of Heller v Uber Technologies Inc. The decision may be significant for companies in the “gig” economy as it opens the door for individuals engaged with Uber to access the Courts and/or other tribunals to adjudicate any disputes, such as disagreements about the applicability of the Employment Standards Act, 2000 (the “ESA”). 

In this case, an individual engaged as a UberEATS delivery driver filed a class action lawsuit in Ontario seeking a declaration that Uber and UberEATS drivers were employees for the purposes of the ESA, and were therefore entitled to the benefits afforded to employees under the legislation. Among other things, the claim sought declarations that Uber had violated the provisions of the ESA, and that arbitration provisions within the services agreements between Uber and its drivers were void and unenforceable.

Uber argued that the arbitration provisions in its service agreements with drivers required drivers to bring forward any disputes in The Netherlands, which would be subject to the International Chamber of Commerce Mediation Rules, and the Rules of Arbitration of the International Chamber of Commerce. Any arbitration would be required to take place in Amsterdam. Uber argued that this clause effectively precluded Uber drivers from commencing an action against Uber in Canadian courts.

Of significance, the International Chamber of Commerce’s mediation and arbitration rules contemplate that parties engaged in arbitration are required to pay up-front fees, much of which are non-refundable, and which do not include the costs of travel, mediators, or legal fees generally. The total fees amounted to approximately $15,000 USD.

At first instance, the motion judge agreed with Uber and held that the courts were required to respect the terms of the agreement, including the enforcement of the agreement to participate in arbitration.

The Ontario Court of Appeal disagreed and found that the arbitration clause amounted to an illegal contracting out of the ESA. The Court of Appeal also found that the arbitration clause in the service agreements was unconscionable at common law.  The Court of Appeal’s decision was discussed in more detail here.

The majority of the Supreme Court of Canada agreed with the Ontario Court of Appeal and found that the requirement to refer any dispute to international arbitration was fundamentally too costly and inaccessible for drivers.

The Court additionally examined the doctrine of unconscionability, which is used to set aside unfair agreements, resulting from an inequality of bargaining power. The Court noted that the doctrine of unconscionability is particularly important when it comes to reviewing standard form contracts, under which one party generally has little or no bargaining power.  Given the inequality of bargaining power, the fact that the arbitration clause was part of an unnegotiated standard form contract, the significant gulf in sophistication between the parties, and the fact that a driver could not be expected to appreciate the financial and legal implications of the arbitration clause (which approximated the annual income of an Uber driver), the Supreme Court held that the arbitration clauses were clearly inequitable.

This ruling opens the door to drivers to proceed with a class action, individual action, or employment standards complaint for a determination of their status under the ESA.  

Any employer who provides for binding arbitration in the contracts they have with employees or contractors should revisit their agreements, and seek legal advice about whether it would be prudent to update their agreements or eliminate that requirement altogether.

If you have any questions about this topic or any other questions relating to workplace law, please do not hesitate to contact a Mathews Dinsdale lawyer.

Expertise: Employment law

Print article

More insights

COVID-19 Employer Update Webinars

Our complimentary webinars address the practical and legal issues for Canadian employers arising from the current outbreak of the COVID-19 virus.

View our Webinars