Canada: Heller v Uber Technologies Inc: Reconsidering Mandatory Arbitration in Employment and Services Agreements

In Heller v Uber Technologies Inc, 2019 ONCA 1, the Ontario Court of Appeal found that a mandatory arbitration clause—requiring Uber drivers to arbitrate disputes in the Netherlands—was invalid and unenforceable.

The plaintiff was an Uber Eats driver in Toronto. To provide these services, Uber required that the plaintiff enter into a services agreement containing a mandatory arbitration clause. The clause required the arbitration of disputes (related to such services) take place in Amsterdam under the International Chamber of Commerce Rules of Arbitration.

The plaintiff commenced a class action seeking a variety of relief. The relief sought included that the court declare that he, along with other class members (other Uber drivers), was an employee of Uber and not an independent contractor. The result of which would entitle the Uber drivers to benefits such as minimum wage, vacation pay, overtime pay, vacation pay, statutory holidays, termination and severance pay, and common law reasonable notice of termination.

The Ontario Court of Appeal reversed the lower court decision, which stayed the plaintiff’s claim in light of the mandatory arbitration clause. The Court of Appeal further found that if the plaintiff can prove he is an employee and not an independent contractor, the mandatory arbitration clause was an impermissible contracting out of the Employment Standards Act, 2000 (“ESA”).

The Court reasoned that by eliminating the plaintiff’s statutory right to complain to the Ministry of Labour regarding violations of the mandatory arbitration clause, this constituted an act of contracting out of the ESA. As a result, the mandatory arbitration clause was invalid. The Court further noted:

…as an Ontario resident he is statutorily entitled to the minimum benefits and protections of Ontario’s laws. He should not be left in a situation where those benefits and protections are set by the laws of another country.

The Court of Appeal also reasoned that the mandatory arbitration clause was unconscionable and therefore invalid. The Court found that such a clause was a “substantially improvident or unfair bargain” given the costs a driver would be required to incur to recover amounts owed by Uber. It was not realistic that drivers would receive legal advice before entering into services agreement and there was a significant inequality of bargaining power. As a result, mandatory arbitration clauses in similar services agreements are still likely problematic for employers in Ontario.