An update from our neighbors to the north (with thanks to Chris Burkett, partner in our Toronto office):
In January, the Ontario Court of Appeal (in Canada) overturned the lower court’s decision in Heller v. Uber Technologies Inc., 2019 ONCA 1. The Court of Appeal held that an arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber to be invalid and unenforceable. Based on the presumption that Uber drivers are employees of Uber, the Court of Appeal found that the arbitration clause was a prohibited contracting out of Ontario’s Employment Standards Act, 2000 (ESA).
The case arises from a Toronto-based UberEATS driver’s effort to bring a class action on behalf of Uber and UberEATS drivers in Ontario (collectively, “Uber drivers”) against Uber for allegedly violating the ESA. At issue in the litigation is the requirement that all prospective Uber drivers enter into a service agreement with Uber through the Uber app, which is governed by the law of the Netherlands and includes an arbitration clause selecting the Netherlands as the seat of arbitration. In early 2018, the Ontario Superior Court of Justice stayed the Uber drivers’ proposed class action in favour of arbitration in the Netherlands under the service agreement.
Court of Appeal Decision
It is well established that employers are prohibited from contracting out of any employment standard provided under the ESA, and, likewise, that an employee is not bound by a contractual term that ousts an employment standard. The Court of Appeal found that being forced to arbitrate a complaint against Uber in the Netherlands deprives an employee of the benefit of making a complaint to the Ministry of Labour under section 96(1) of the ESA. Once an employee submits a complaint under s. 96(1), an investigation process is triggered. The Court of Appeal held that this investigative process constitutes an employment standard under the ESA and cannot be circumvented.
The Court of Appeal acknowledged that the appellant had not made a complaint under s. 96(1) of the ESA and had instead chosen to initiate a civil proceeding by way of a proposed class action. The Court held that this fact did not alter the Court’s conclusion that the arbitration clause was a prohibited contracting out of an employment standard. Moreover, the Court reasoned that there were public policy considerations reinforcing its conclusion that the arbitration clause should not be enforced. These public policy considerations include the issue of determining whether persons in the appellant’s position are employees or independent contractors of Uber and whether such persons are entitled to the protections of the ESA, both of which are important issues for Ontarians.
Separately, the Court of Appeal held that the arbitration clause was invalid on the basis of unconscionability in part because Uber drivers have no avenue for resolving disputes in Ontario, and are required to incur significant costs to initiate an arbitration proceeding in the Netherlands. The Court found this to be a substantially improvident or unfair bargain. The Court also noted an inequality of bargaining power between Uber and Uber drivers, and the representative plaintiff’s lack of independent legal advice before entering into the service agreement.
Notwithstanding the Ontario Court of Appeal’s decision, it remains to be determined whether the Uber drivers are employees rather than independent contractors, and whether the proposed class action will be certified.