Unconscionability at the heart of the SCC Decision to permit the Uber Class Action for ESA infringement to proceed
July 6, 2020
The inequality of bargaining power in the employment relationship has now been a long recognized fact by Canadian Courts. Now, whether or not the Uber drivers forming the ‘class’ pursuing action against Uber are employees or not has yet to be determined. The action seeks to declare them employees and seeks damages for infringement of the Ontario Employment Standards Act, 2000. Uber brought a motion to stay the proceeding on the basis that the Uber drivers are all party to agreements with Uber which includes an “arbitration clause” requiring all disputes be determined by private arbitration in the Netherlands.
The motion wound its way over the past 3 years to the Supreme Court of Canada. In a decision released on June 26, 2020, the SCC held that the action should proceed. The Court distinguished the Uber drivers in this action from prior cases regarding an arbitration clause, in that ‘accessibility’ was an issue in this case. On that basis it declined to follow the established line of cases which held that issues of the jurisdiction of an arbitrator would be determined by arbitral referral. Here it was inappropriate to do so as if the court granted the stay, it could not be said that the matter would ever be decided by arbitral referral given the cost of doing so.
The majority of the court then went on to find the arbitration clause itself to be void on the basis of the doctrine of unconscionability. In particular it held there to be (i) inequality of bargaining power; and (ii) unfairness/an improvident bargain.
The Court held:
[93] There was clearly inequality of bargaining power between Uber and Mr. Heller. The arbitration agreement was part of a standard form contract. Mr. Heller was powerless to negotiate any of its terms. His only contractual option was to accept 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. Even assuming that Mr. Heller was the rare fellow who would have read through the contract in its entirety before signing it, he would have had no reason to suspect that behind an innocuous reference to mandatory mediation “under the International Chamber of Commerce Mediation Rules” that could be followed by “arbitration under the Rules of Arbitration of the International Chamber of Commerce”, there lay a US$14,500 hurdle to relief. Exacerbating this situation is that these Rules were not attached to the contract, and so Mr. Heller would have had to search them out himself.
[94] The improvidence of the arbitration clause is also clear. The mediation and arbitration processes require US$14,500 in up-front administrative fees. This amount is close to Mr. Heller’s annual income and does not include the potential costs of travel, accommodation, legal representation or lost wages. The costs are disproportionate to the size of an arbitration award that could reasonably have been foreseen when the contract was entered into. The arbitration agreement also designates the law of the Netherlands as the governing law and Amsterdam as the “place” of the arbitration. This gives Mr. Heller and other Uber drivers in Ontario the clear impression that they have little choice but to travel at their own expense to the Netherlands to individually pursue claims against Uber through mandatory mediation and arbitration in Uber’s home jurisdiction. Any representations to the arbitrator, including about the location of the hearing, can only be made after the fees have been paid.
[95] The arbitration clause, in effect, modifies every other substantive right in the contract such that all rights that Mr. Heller enjoys are subject to the apparent precondition that he travel to Amsterdam, initiate an arbitration by paying the required fees and receive an arbitral award that establishes a violation of this right. It is only once these preconditions are met that Mr. Heller can get a court order to enforce his substantive rights under the contract. Effectively, the arbitration clause makes the substantive rights given by the contract unenforceable by a driver against Uber. No reasonable person who had understood and appreciated the implications of the arbitration clause would have agreed to it.
The Court went on to say “respect for arbitration is based on it being a cost-effective and efficient method of resolving disputes. When arbitration is realistically unattainable, it amounts to no dispute resolution mechanism at all.”
The class action against Uber will carry-on. It will be interesting to see how the findings of unconscionability here may also influence further decisions in this proceeding.
Uber Technologies Inc. v. Heller, 2020 SCC 16
Expertise
Employment Law
