Forcing Uber driver into international arbitration unfair: SCC
Terry Davidson
Originally published in Law360™ Canada, © LexisNexis Canada Inc.
Workers’ rights mean nothing “if there is no mechanism to enforce those rights,"
says a lawyer following the Supreme Court deciding an Uber driver cannot be forced by the company to take his dispute with it to costly arbitration in another country because the hiring contract’s clause requiring this is unfair and, thus, invalid.
In what is being hailed as a victory for those working in the gig economy, the June 26 Supreme Court of Canada (SCC) decision in Uber Technologies Inc. v. Heller 2020 SCC 16 means Ontario-based UberEats driver David Heller will not have to honour the company’s “unconscionable” contractual demand that he take his fight for worker’s rights to an arbitrator in the Netherlands.
Heller’s hiring contract — a long, standard agreement prospective drivers either accept or reject — stipulated that any legal problem a worker had with the company had to be resolved through mediation and arbitration via the International Chamber of Commerce (ICC), not a court.
But according to the Supreme Court decision, the contract did not make it clear this would cost Heller a $14,500 filing fee (not including legal fees, travel costs and lost wages). The court noted this would have been immensely problematic for Heller, who made between $20,800 and $31,200 per year as a driver.
This ruling is part of a bigger picture: it clears the way for a class action launched by Heller in 2017 in which he seeks an Ontario court to declare him an employee of the company and thus subject to benefits and protections — minimum wage and vacation pay, for example — as laid out in the Ontario’s Employment Standards Act (ESA).
Uber had requested a stay in the class proceeding in favour of arbitration in the Netherlands. Heller argued that the contract’s arbitration clause requiring this was unconscionable and, thus, invalid.
A motion judge stayed Heller’s lawsuit, deciding that the International Commercial Arbitration Act applied here because Uber’s contract with Heller was “international” and “commercial.” Therefore, the arbitrator in the Netherlands must decide if Uber’s arbitration clause was unfair.
But Ontario’s Appeal Court sided with Heller in declaring the clause void because it was unconscionable.
Uber then took its fight to Canada’s highest court — and lost.
In an 8-1 decision, the top court found the company’s arbitration requirement to be so unfair it was invalid. Heller, they stated, would find no remedy without paying most of his yearly income to reach the arbitration stage. As a result, his issue may never have been resolved.
Writing for the majority, Justices Rosalie Silberman Abella and Malcolm Rowe found that Uber’s arbitration clause made it “impossible for one party to arbitrate.”
A “classic case of unconscionability,” they called it.
“The fees impose a brick wall between Mr. Heller and the resolution of any of the claims he has levelled against Uber,” wrote Justices Abella and Rowe. “An arbitrator cannot decide the merits of Mr. Heller’s contention without those — possibly unconscionable — fees first being paid. Ultimately, this would mean that the question of whether Mr. Heller is an employee may never be decided. The way to cut this Gordian Knot is for the court to decide the question of unconscionability.”
The court noted two requirements in deciding unconscionability: inequality of bargaining powers and unfairness.
Both were present here, the majority found.
“There was clearly inequality of bargaining power between Uber and Mr. Heller,” they found, noting Heller “was powerless to negotiate any of [the contract’s] terms.”
The only option “was to accept it or reject it.”
“There was a significant gulf in sophistication between Mr. Heller, a food deliveryman in Toronto, and Uber, a large multinational corporation. The arbitration agreement, moreover, contains no information about the costs of mediation and arbitration in the Netherlands. A person in Mr. Heller’s position could not be expected to appreciate the financial and legal implications of agreeing to arbitrate under ICC Rules or under Dutch law.”
And even if Heller was the “rare fellow” who would have read the whole contract before agreeing to it, “he would have had no reason to suspect that behind an innocuous reference to mandatory mediation ‘under the [ICC] Mediation Rules’ that could be followed by ‘arbitration under the Rules of Arbitration of the [ICC]’”, there would be a $14,500 “hurdle” to clear.
(Justice Suzanne Côté, the lone dissenting judge, felt the courts should respect the agreement into which the parties entered; she would have allowed Uber’s appeal and entered a conditional stay of proceedings.)
Lior Samfiru, one of Heller’s lawyers, said the ruling is significant to Canadian workers because it “reaffirms that it is impossible for a company to deprive employees of the ability to enforce their legal rights.”
Legal rights, legal entitlements have no meaning whatsoever if there’s no mechanism to enforce those rights,
said Samfiru, a partner with Samfiru Tumarkin LLP. “The reality is, a negative decision, or a decision in favour of Uber in this case, would have meant that any company — any employer — could have had a provision in their agreements with their employees saying that if you ever have a problem with us, you have to go to some [other] jurisdiction to deal with that problem. Since no one would actually be able to do that, that would mean a company could do whatever it wanted, without any repercussions. … So, what this … does is it preserves rights and it reaffirms the notion that there is this inequality of bargaining power between companies and its workers. And because of that inequality of power, we’re not going to hold the workers to unconscionable bargains.”
Samfiru saw this as needed justice for those in the gig economy.
“It’s a recognition that, especially in that industry, when you have very sophisticated companies on one end, with a lot of resources and a lot of legal … resources, and [on the other] hand, individuals who are trying to decipher documents on their phones — standard form documents, documents that they couldn’t negotiate — that is not something that you can hold them to. And I think across the gig economy, the same reality is faced by people working for various companies.”
A member of Toronto’s Parkdale Community Legal Services (PCLS), an intervener in the case, said the decision “strengthens protections for workers who may be taken advantage of by the companies that hire them.”
“To show that an agreement was unconscionable and therefore invalid, a worker will no longer be required to prove that their employer knowingly took advantage of the worker’s vulnerable status. This is an important victory for workers,” said PCLS staff lawyer John No in a press release.
Canadian Labour Congress president Hassan Yussuff said it “underscores the message that a worker is a worker.”
“There is an imbalance of power in organizations like Uber, with precarious workers fighting for better job conditions against a behemoth enterprise hiding behind complex international legal loopholes. Given this ruling, provincial governments have a responsibility to examine the misclassification of employees and protect all gig economy workers.”
Uber’s lead counsel, Torys lawyer Linda Plumpton, did not return a request for comment.
