January 22, 2019
In the Ontario Court of Appeal’s first decision of the year, Heller v Uber, 2019 ONCA 1, the court held that an arbitration clause in the terms that individual drivers are required to “accept” to become drivers for Uber breached the prohibition on contracting out of the Employment Standards Act (ESA), and was otherwise unconscionable at common law.
The appeal arose in the context of a proposed class action. The plaintiff Uber driver sought a declaration that Uber drivers are employees of Uber and therefore governed by the ESA. The claim also sought damages in relation to alleged breaches of the ESA, including with respect to minimum wage, overtime, and vacation pay.
In the decision under appeal, the Superior Court granted a stay of the proceedings due to the arbitration clause. The clause stipulated that the agreement “shall be exclusively governed by and construed in accordance with the laws of The Netherlands”, and required that any “dispute, conflict, or controversy” arising out of or relating to the agreement must be submitted for mediation proceedings in the Netherlands. Justice Perell held that there was a prima facie case that an arbitrator in the Netherlands had jurisdiction over the dispute. Further, he held that the “competence-competence” principle applied, so the arbitrator had the power to rule with respect to his or her jurisdiction. Justice Perell also rejected the plaintiff’s argument that the arbitration clause was unconscionable.
The Court of Appeal overturned the stay. Justice Nordheimer first considered whether the arbitration clause amounted to contracting out of the ESA. Section 5 of the ESA provides that no employee or employer may contract out of or waive an employment standard, unless by a provision or contract that provides a greater right in relation to that employment standard. An employee may contract to earn more than minimum wage, for example, but not less.
Justice Nordheimer held that the arbitration clause amounted to a contracting out of an employees’ right to make a complaint to the Ministry of Labour regarding an alleged breach of the ESA, and to have that complaint investigated by the Ministry. He held that the arbitration process provided for by the arbitration clause did not provide a greater right, and that the clause was therefore a violation of section 5 of the ESA.
With respect to unconscionability, the evidence was that the administrative costs for a driver to participate in arbitration were at least US$14,500. This amount did not include legal fees, or accommodation in the Netherlands. The appellant driver earned approximately $20-30,000 per year, before taxes and expenses. Justice Nordheimer also observed that the clause was not a standard arbitration clause. It also amounted to a forum selection provision and a choice of laws provision.
Justice Nordheimer held that the impugned terms met the four-part test for unconscionability set out in Titus v. William F. Cooke Enterprises Inc.: (1) a grossly unfair and improvident transaction; (2) a party’s lack of independent legal advice or other suitable advice; (3) an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and (4) the other party’s knowingly taking advantage of this vulnerability. The court did not determine whether a two-part test for unconscionability should apply as either version of the test was made out on the record.
Justice Nordheimer concluded by observing that, for the purposes of his analysis, there is no reasonable distinction to be made between the appellant driver and a consumer. He quotes the Supreme Court in Douez v. Facebook, Inc., which held that “foreign selection clauses often operate to defeat consumer claims,” and observes that the same can be said of this clause, “it operates to defeat the very claims it purports to resolve.” Thus, he concludes that if Uber is correct and their drivers are not employees, the relationship may nevertheless attract protection due to the inequality of bargaining power between the parties.
 2007 ONCA 573 (CanLII), 284 D.L.R. (4th) 734, at para. 38, recently affirmed in Phoenix Interactive Design Inc. v. Alterinvest II Fund L.P., 2018 ONCA 98 (CanLII), 420 D.L.R. (4th) 335.
 2017 SCC 33 (CanLII),  1 S.C.R. 751 at para 62.
 para 70.