On January 2, 2019, the Ontario Court of Appeal provided important new considerations for employers who wish to use arbitration clauses in contracts with employees and independent contractors. In Heller v. Uber Technologies Inc. the Court held that the arbitration clause imposed on Uber drivers and UberEATS delivery persons constituted an illegal contracting out of the Ontario Employment Standards Act, 2000 (the ‘ESA’), and was unconscionable.
As a result, the Court of Appeal overturned the decision of the lower Court to stay a class action proceeding, which can now proceed to the next stage, on behalf of all Uber and UberEATS drivers and delivery persons.
In its analysis, the Court of Appeal reviewed the arbitration clauses found in both the Driver Services Agreement and an UberEATS Services Agreement, which all Uber and UberEATS drivers and delivery persons were required to review and click ‘yes, I agree’ prior to being allowed to provide their services to Uber.
Both of the agreements contained the same arbitration clause, which set out that any dispute between the parties that could not be resolved between them would be decided by an Arbitrator appointed in accordance with International Chamber of Commerce (‘ICC’) rules, and that the arbitration would take place in the Netherlands based on the laws of the Netherlands.
The Court determined that these requirements amounted to an illegal contracting out of the ESA and that they were unconscionable.
Contracting out of the Employment Standards Act
In determining that the arbitration clauses constituted an illegal contracting out of the ESA, the Court held that the clauses eliminated the right of the Plaintiff, and any other Uber driver or delivery person in Ontario, to make a complaint to the Ministry of Labour regarding the actions of Uber and possible violations of the ESA. The Court explicitly stated that the right to make a complaint to the Ministry of Labour is an ‘employment standard’ which is protected by the ESA and cannot be contracted out of.
The Court also concluded that an arbitration clause does not (and will not) preclude an employee in Ontario from lodging a complaint under the ESA. The illegality of the clause also meant that it did not preclude an individual from (as was the case in Uber) choosing to file a civil claim rather than an ESA complaint to the Ministry of Labour.
Unconscionability
The Court also ruled that the arbitration clauses were unconscionable.
It considered that if a driver or delivery person wanted to pursue a dispute through the arbitration clauses, they would have to undertake an arbitration in the Netherlands and would have to incur up-front costs of at least USD 14,500 (not including travel or legal advice) even for claims relating to substantially smaller amounts.
The Court took particular umbrage with the effective obligation upon drivers and delivery persons to pay these fees up front, particularly when contrasted with the evidence that the Plaintiff, an average UberEATS delivery person, earned approximately CAD 400 to 600 per week before taxes and other work-related expenses.
The Court concluded that the arbitration clauses were unconscionable because they represented a substantially unfair bargain: there was no evidence that the Plaintiff or any other driver or deliver person obtained any legal or other advice prior to entering into the agreements (nor was it a realistic to expect them to do so) and there was a significant inequality in bargaining power between the parties. The Court determined that the arbitration clauses were included in the agreements to favour Uber and to take advantage of the drivers and delivery persons who were vulnerable to Uber’s market strength.
Considerations for Employers
While the Court’s decision was based heavily on the specific factual circumstances in Heller v. Uber Technologies Inc. employers who include arbitration clauses in their contracts with employees and independent contractors should assess whether updating the clause is necessary.
In particular, employers should seek to ensure that their particular arbitration clause does not purport to contract out of any employment-related legislation and does not effectively require independent contractors or employees (especially lower-level employees) to incur undue costs associated with pursing a complaint. In addition, as with any employment-related documents it is important for employers to provide an opportunity for employees and independent contractors to seek legal advice and to make clear, where applicable, that this opportunity has been provided and been refused.
