On June 26, 2020, the Supreme Court of Canada rendered a landmark decision which has opened up the door for an enormous class action lawsuit by Uber drivers for minimum wage.
To become an Uber driver, individuals were required accept a standard services agreement which provided that they were independent contractors and that any dispute was to be resolved by arbitration in the Netherlands. David Heller commenced a class action lawsuit to for alleged violations of the Ontario Employment Standards Act, 2000.
In November 2018, Ontario’s Court of Appeal ruled that Uber’s clause amounted to an attempt to contract out of the Employment Standards Act, 2000, because it required the resolution of any dispute by mediation or arbitration in the Netherlands, which deprived the individual of the right to pursue a complaint to the Ministry of Labour for matters such as vacation pay or unpaid wages. The clause also required an upfront administrative fee of $14,500 USD, just to participate in the arbitration, which the Court considered to be unconscionable, given the inequality of bargaining power between the parties and the improvident cost of arbitration. The Ontario Court of Appeal ruled that the class action could proceed in Ontario because of the unfair arbitration clause.
In rendering this decision, the Supreme Court has modified and arguably watered down the test for unconscionability. The last major decision in Ontario from the Court of Appeal in Phoenix Interactive Design Inc. v. Alterinvest II Fund LP described the test as follows:
- A grossly unfair and improvident transaction;
- A victim’s lack of independent legal advice or other suitable advice;
- An overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language, blindness, deafness, illness, senility, or similar disability; and
- The other party’s knowingly taking advantage of this vulnerability.
The Supreme Court specifically rejected this test after Uber tried to advance it. In doing so, the Court decided that there was no requirement to “knowingly” take advantage of the other person’s vulnerability in order to meet the threshold. The Court stated that there were two elements necessary in order to find unconscionability: (1) an inequality of bargaining power and (2) whether there is a resulting improvident provision.
The Supreme Court determined that there was inequality of bargaining power between Uber and the driver because the clause was part of a standard form contract, there was a significant gap in terms of sophistication between the parties, and the driver could not be expected to appreciate the financial and legal implications of the clause. The Court determined it was improvident because in order to get to arbitration, it required $14,500 USD in administrative fees.
For employers, there are a couple of takeaways. The decision is limited to a determination that the class action can proceed forward in the Ontario Courts because the arbitration clause is not valid. There were no findings in respect of whether or not the driver was an employee or an independent contractor, which is a threshold requirement to make a claim under the Ontario Employment Standards Act, 2000. Moreover, the Supreme Court does not prohibit arbitration clauses in employment agreements, although the decision means that employers must be very careful when including an arbitration clause. Arbitration clauses can be an effective, timely and cost effective means of resolving employment disputes, but it is important that the provisions are balanced and do not take away an employee’s right to advance claims under the Ontario Employment Standards Act, 2000.