Uber Technologies Inc. v. Heller, 2020 SCC 16, a recent Supreme Court of Canada decision may have significant implications for individuals working in the gig economy, as well as for employers with mandatory arbitration or forum selection clauses in their contracts for service.
Mr. Heller, a food delivery driver with Uber Eats had sought leave to file a class action against Uber in Ontario alleging violations of employment standards legislation. To become a delivery driver for Uber Eats, Mr. Heller had accepted the terms of Uber’s standard form services agreement, which set out that any dispute between Uber and Mr. Heller had to be settled through mediation and arbitration in the Netherlands. The administrative and filing fees associated with the mediation and arbitration process were $14,500, and represented a significant portion of Mr. Heller’s annual income.
Uber brought a motion to stay the class proceedings in favour of arbitration, which was allowed by the motion judge. Mr. Heller then appealed the motion judge’s decision to the Ontario Court of Appeal, which allowed Mr. Heller’s appeal and set aside the order to stay the class proceedings. The Ontario Court of Appeal held that an Ontario court could decide on the validity of the arbitration clause, and that the clause requiring arbitration in the Netherlands was unconscionable due to the inequality of bargaining power between Uber and Mr. Heller and the excessive cost of arbitration to Mr. Heller. Uber then appealed the Ontario Court of Appeal’s decision to the Supreme Court of Canada.
Was the dispute resolution clause requiring mediation and arbitration in the Netherlands unconscionable?
An 8-1 majority of the SCC upheld the Ontario Court of Appeal’s decision. The majority found that if the matter were referred to arbitration and not resolved by the court, Mr. Heller’s challenge to the validity of the arbitration agreement would never be resolved due to the cost involved. The majority found that Mr. Heller’s claim that the arbitration clause was unconscionable required a consideration of two elements: (1) whether there was an inequality of bargaining power between the parties and (2) whether there was a resulting improvident bargain.
The SCC held that there was an inequality of bargaining power because the arbitration clause was part of an unnegotiated standard form contract, where there was a significant gulf in sophistication between Mr. Heller and Uber. The SCC found that a person in Mr. Heller’s position could not be expected to appreciate the financial and legal implications of the arbitration clause. The majority of the SCC further held that the arbitration clause was improvident because the arbitration process required $14,500 in administrative fees. As a result the SCC held that the arbitration clause was unconscionable.
Justice Brown agreed with the majority’s holding that the arbitration was unenforceable, however based his reasons on public policy grounds and not unconscionability. Justice Cote (dissenting) found that there was insufficient evidence on the record to support a finding of unconscionability.
Implications for Employers and gig economy workers
The SCC did not rule on the issue at the heart of the class action brought by Mr. Heller (i.e. whether Uber drivers and others with similar positions in the gig economy are employees protected by employment standards legislation). However, the SCC’s decision sets the stage for a court to make a finding on whether individuals in the gig economy, such as Uber drivers, are actually employees in law.
The SCC’s decision also has implications for businesses that use contracts of service to hire independent contractors and especially those businesses with mandatory arbitration or forum selection clauses in their contracts of service for gig workers. Those businesses should re-assess any mandatory arbitration or forum selection clauses and consider whether they might be unconscionable. In light of the SCC’s decision, clauses mandating prohibitively expensive dispute resolution mechanisms as part of an unnegotiated standard form contract may be unenforceable.