Arbitration agreement prevails: Ontario court stays Uber driver’s proposed class action for employment benefits

When an arbitration agreement and a putative class action collide, the general rule is that the arbitration agreement will prevail. In Heller v Uber Technologies Inc, Justice Perell of the Ontario Superior Court of Justice applied this general rule. The plaintiff argued that his proposed class action should not be stayed because (1) the claim was based on an alleged employment relationship and therefore outside an arbitrator’s jurisdiction, or (2) the arbitration agreement was unconscionable. Justice Perell rejected both arguments and stayed the proposed class action.

Background

The plaintiff commenced a class action alleging that Uber drivers in Ontario are employees of the defendants and entitled to the benefits of Ontario’s Employment Standards Act, 2000. The defendants moved to stay the action as the plaintiff had entered into contracts referring any disputes to an arbitration in the Netherlands.

As a threshold matter, Justice Perell found that the International Commercial Arbitration Act, 2017, applied to the parties’ arbitration agreement because it was an international and commercial arbitration agreement. However, he added that the governing principles and result would have been the same even if the Arbitration Act, 1991 applied. 

Proposed class action stayed   

Justice Perell noted that absent legislative language to the contrary, courts must enforce arbitration agreements and refer a dispute to arbitration unless it is clear that the matter falls outside the agreement. The plaintiff presented two arguments for why his action should not be referred to arbitration, both of which were rejected.

First, the plaintiff argued that the claim was outside an arbitrator’s jurisdiction because it was based on an alleged employment relationship. This argument failed because a challenge to an arbitrator’s jurisdiction must be first resolved by the arbitrator unless the challenge is based solely on a question of law. The Employment Standards Act, 2000 does not explicitly preclude arbitration. The plaintiff’s challenge raised a question of mixed fact and law (i.e., whether the plaintiff and other class members were employees) and, therefore, it had to be determined by the arbitrator.

Second, the plaintiff argued that the arbitration agreement was illegal or void because it was unconscionable. Justice Perell rejected this argument as well. There was no basis for saying that the defendants preyed on class members, and the fact that the agreement referred disputes to arbitration in the Netherlands did not make the parties’ bargain improvident. Justice Perell also rejected the argument that the agreement was unconscionable because it was a standard-form contract where class members had no bargaining power.

Conclusion

As we have previously noted, enforcing arbitration agreements (which favours diverting claims away from the courts) may sometimes be in tension with the policy underlying class actions (which favours providing greater access to the courts). As a result, some provinces have enacted legislation that specifically precludes arbitration agreements that foreclose recourse to the courts in the consumer protection context. However, the decision in Heller is a helpful reminder that, outside such limited circumstances, the general rule is that arbitration agreements must be enforced. Class action plaintiffs will not find it easy to avoid the effect of arbitration agreements that they have agreed to.

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Editors

Deborah Glendinning

Partner, Litigation

Sonia Bjorkquist

Partner, National Chair, Litigation

Éric Préfontaine

Partner, Litigation

Christopher Naudie

Partner, Litigation

Craig Lockwood

Partner, Litigation

Tristram Mallett

Partner, Litigation

Karin Sachar

Partner, Litigation