The Supreme Court recently released its reasons in the much anticipated Uber case. In this landmark ruling, the Supreme Court ruled in an 8-1 decision that the arbitration clause found in Uber drivers' contracts was void.
The background to this decision involves a proposed class action where the representative plaintiff, David Heller, sought a declaration that all Uber drivers were Uber employees and not independent contractors, as Uber alleges. As employees, Uber drivers would be entitled to minimum protections found in the Employment Standards Act, 2000 like the right to vacation and overtime pay. Allegedly misclassifying employees as contractors to avoid paying these statutory minimums is an increasingly common practice in many industries.
Uber relied on an arbitration clause found in the drivers' agreements, and argued that the Court did not have the jurisdiction to hear the case. This arbitration clause prohibited drivers from suing Uber, instead requiring the parties to arbitrate disputes using a private (and very expensive) arbitration process in Amsterdam. Ontario’s Superior Court of Justice agreed with Uber and relied on the arbitration clause to stay the lawsuit, forcing Mr. Heller into arbitration. Mr. Heller appealed and was successful at the Ontario Court of Appeal. You can read our post on the Court of Appeal decision by clicking to: HERE.
The Court of Appeal ruled that the arbitration clause could not be enforced for two reasons: (1) it was unconscionable (for instance, it made it impossible for much weaker party to enforce his rights); and, (2) it violated the Employment Standards Act, 2000 because it made employees with rights under this statute have those rights adjudicated in a different country potentially using different legal standards. It was this finding #(2) that could have had a profound impact on other agreements that take away the right to adjudication of employment rights from the courts and place them in the hands of arbitrators.
The Supreme Court's majority decision, authored by Abella J. and Rowe J., dismissed Uber's appeal and found for Mr. Heller, ultimately concluding that the arbitration clause was unconscionable.
In coming to this conclusion, the Court first needed to determine whether or not it could appropriately examine the clause or whether the clause should first be reviewed by the arbitrator. Having found that Ontario’s Arbitration Act applies, the majority spends some time discussing the "competence-competence" principle, also known as the kompetanz-kompetanz principle. This principle stands for the idea that the arbitrator himself or herself is usually best placed to determine the initial question of his or her own jurisdiction. Normally, the Court only reviews the record superficially to see if they should defer to the arbitrator on the jurisdictional issue. Here however, the majority found it was appropriate to fully examine the clause and determine its validity, because the case raised an issue of accessibility. The Court was concerned that Mr. Heller and other putative class members would never be able to afford the expensive private arbitration process, and so to force class members to an arbitration process just to determine whether or not the clause was valid would be to effectively deny Mr. Heller and others their day in court.
Having found the jurisdiction to decide the validity of the clause, the majority then turned to the arbitration clause itself to determine whether or not it was unconscionable. The Court had little trouble concluding that the arbitration clause was unconscionable and therefore void. As has been widely reported, the unconscionability of the clause was based on the significant cost Mr. Heller would have to incur to proceed to arbitration, a cost so huge that he could not effectively have his issues adjudicated. The majority rightly concluded that unconscionability as a doctrine plays an important role in the employment law field because employees often lack knowledge or the power to negotiate agreements, let alone understand and enforce them.
Much to our disappointment, the Court did not rule on whether or not the arbitration clause violated the Employment Standards Act, 2000. The Court found there was no need for it to determine this question, as the clause was void due to unconscionability. This is unfortunate, as it leaves this important issue still undecided by our country's highest court. From our experience, employers are increasingly inserting arbitration clauses into their employment agreements, taking away court jurisdiction (and sometimes Ministry of Labour jurisdiction) to consider a minimum rights claim. Whether employers should be allowed to do that or not was a question worthy of the Court’s attention, yet it attracted no comment.
Overall, this is a positive decision, showing that the Supreme Court is very much alive to issues of unconscionability and the employees' ability to access a remedy. While we do not yet have a firm answer to whether or not arbitration clauses must comply with the Employment Standards Act, 2000, it is nonetheless clear that employers cannot try to avoid their obligations by hiding behind inaccessible dispute resolution processes.