27. January 2020 0

While Uber made its highly anticipated arrival in British Columbia last week, the leading ridesharing company is awaiting a decision from the Supreme Court of Canada on the validity of an arbitration clause in their contracts with drivers.

Uber is a Netherland based company but operates worldwide treating their drivers as Independent Contractors. When an individual signs up to be a driver with Uber, they enter into a contract which contains a clause requiring driver’s to take any dispute under the contract to an arbitrator in the Netherlands (the “Arbitration Clause”) rather than accessing the Courts.

The Arbitration Clause has recently come under the spotlight in the face of a class action initiated by Uber drivers in Ontario. The class action claims that drivers are actually employees, not Independent Contractors, and so should be paid employee benefits such as vacation and sick pay. Uber applied to have the class action stayed on the basis that it should have been pursued through the Arbitration Clause. Uber succeeded at the trial court level and the class action was stayed, however, the Ontario Court of Appeal disagreed and reversed the decision.

The Ontario Court of Appeal explained that if Uber drivers are considered employees, the standards set out in the Ontario Employment Standards Act (the “Act”) apply, and Uber is not allowed to contract out of those standards. Specifically, the Act provides a complaint process, where employees have a legal right to make a complaint and have it investigated by the Ministry of Labour. Since the Arbitration Clause prohibits drivers from using the complaint process protected under the Act, it equates to “contracting out” and is therefore invalid.

Secondly, the Ontario Court of Appeal also deemed the Arbitration Clause invalid because it is unconscionable. There is a significant inequality of bargaining power between Uber and their drivers, which the court found Uber took advantage of when drafting the Arbitration Clause. Overall, the Court considered the Arbitration Clause an unfair bargain because:

  • It requires drivers with a small claim to incur significant costs of arbitrating that are out of proportion to the amount involved. Uber is in a much better position to incur those costs but chose to impose the burden on the drivers.
  • It requires each claimant to individually arbitrate their claim in the Netherlands, which is unconnected to where the drivers live or perform their duties.
  • It requires the rights of the drivers to be determined in accordance with the laws of the Netherlands, but no information is given as to what those laws are.

Accordingly, the Ontario Court of Appeal found the Arbitration Clause to be invalid and lifted the stay of proceedings. However, Uber is not giving up without a fight.  They have appealed to the Supreme Court of Canada and presented their arguments on November 6, 2019.

The impending decision from the Supreme Court of Canada may affect the driver contracts that Uber puts in place in other provinces. British Columbia is governed by a similar employment standards legislation as Ontario, and the Supreme Court of Canada’s decision is indicative of how things might play out in British Columbia if this same issue were to arise.

This article was co-authored by Scott Marcinkow and articling student, Nicola Virk.

Want more useful updates on changes in legislation? Contact Scott Marcinkow at smarcinkow@harpergrey.com, Rose Keith, QC at rkeith@harpergrey.com, or anyone else from our team listed on the Authors page.

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