Arbitration Clauses in Employment Contracts
It is important when drafting consumer or employment contracts to consider the
appropriateness and enforceability of dispute resolution provisions. In a recent case brought before the Supreme Court of Canada, an arbitration clause in a service agreement caused a dispute between Uber Technologies Inc. and one of the company’s drivers.
UBER TECHNOLOGIES INC. V. HELLER 2020 SCC 16
In 2016, Mr. Heller entered into an online service agreement through the Uber Driver
App, without negotiation. The agreement contained an arbitration clause which required
any dispute to be settled by arbitration in the Netherlands under the International
Chamber of Commerce’s (ICC) Mediation Rules of arbitration. Heller challenged this
clause on the basis that it forced him to travel at his own expense to the Netherlands,
and the ICC rules of arbitration involve high costs to initiate the dispute resolution
procedure, approximately $19,000. The costs required for the arbitration process would
have represented most of Mr. Heller’s annual income.
Heller claimed that the arbitration clause in Uber’s services agreement was invalid as it
was unconscionable, and breached the provisions of Ontario’s Employment Standards
Act (ESA). The Court noted that it was not required to determine whether Heller is an
employee of Uber or an independent contractor, only that it needed to be determined
whether or not the arbitration clause was valid.
The Supreme Court of Canada found Uber’s arbitration clause to be unconscionable as
it made it impossible for one party to arbitrate, and was therefore invalid. The Court’s
decision was based on both the financial and logistic disadvantages and hardships that
would have been experienced by Heller in attempting to advance a claim against Uber.
In her dissent, the Honourable Justice Côté aimed to reach a compromise by
suggesting that a conditional stay of proceedings be granted, but that a condition be
imposed that Uber agree to hold the arbitration proceedings in Ontario.
It was made clear by the Court that arbitration should remain a valid dispute resolution
process as long as it is a cost-effective and efficient method. However, if the arbitration
process is seemingly unrealistic and unattainable, courts will intervene.
Arbitration is meant to provide an efficient alternative to dispute resolution outside of
judiciary courts. However, it is important that arbitration clauses within service
agreements are realistic. This case addresses the power imbalance between employers
and their employees, and reaffirms the importance of contractual fairness. It is vital that
dispute resolution provisions do not impose unnecessary or excessive burdens and
barriers. The decision by the Court acts as a reminder to contract drafters to focus on
practicality and flexibility when preparing un-negotiated agreements. This case can also
serve as warning to employers to review and potentially amend existing contracts to
ensure their validity.
We recommend that employers seek legal advice when preparing new employment
contracts or reviewing and amending existing contracts. If you have any questions or
concerns or are interested in discussing employment contracts and/or updating existing
employment contracts, please contact us at (604) 736 9791 or email Alex
Disclaimer: This article is not intended to serve as, or should be construed as legal
advice, and is only to provide general information. Should you require legal advice for
your particular situation, please get in touch with us.