The Supreme Court of Canada is set to hear a case that will shape whether workers and customers of Uber Technologies Inc. and other large companies in the digital age can file class-action lawsuits or must take disputes to private arbitrators.
Uber includes clauses in its standard driver agreement that require workers to use private arbitration rather than the public court system, which means the cases remain confidential and can only be pursued individually. It’s a risk-management tactic to give the multinational company predictability in the management of its contracts with millions of drivers.
On Wednesday, the Supreme Court will hear the case of David Heller, an UberEats driver from Ontario, in an appeal that has broad implications for Canada’s arbitration community as well as the treatment of workers in the gig economy. There are major legal issues at play, including the circumstances under which a court should rule on the validity of an arbitration agreement as well as the test for determining whether a contract is so unfair that it should be set aside.
Mr. Heller filed a proposed class action against Uber in 2017, seeking a declaration from the courts that Ontario drivers who have used the Uber app to deliver food or provide transportation to customers are employees of Uber, not independent contractors.
Uber asked a judge to stop the case based on the arbitration clause and won a stay of proceedings. But the Ontario Court of Appeal reversed that decision, stating that it is up to a court, not an arbitrator, to determine the validity of an arbitration agreement and then ruling the clause is so unfair (or unconscionable) that it should be set aside. The Supreme Court granted Uber leave to appeal in May.
The case has attracted 17 interveners – a large number for a case that does not involve constitutional issues – with a range of arbitration organizations and business groups lining up on the side of Uber. Consumer protection, social-justice and workers’ rights groups have aligned with Mr. Heller, and the Ministry of the Attorney-General for Ontario also made submissions on points in support of the driver’s position.
“There is a policy tension between freedom of contract and the company’s need for certainty, predictability and reasonable risk management on one hand, and on the other hand, consumer protection, true consent to the agreement, and customers’ or users’ access to justice in the courts,” says Andrew Little, a partner at Bennett Jones LLP. He represents ADR Chambers, which is intervening only on the issue of the test for when a court should rule on the validity of an arbitration clause.
He said standard-form contracts are common, and often necessary, for companies managing mass-customer relationships or online sales and services, because the contract terms cannot realistically be negotiated individually.
“These [arbitration] clauses have been used in the past as a shield,” said Marina Pavlovic, a law professor at the University of Ottawa who is representing the Canadian Internet Policy and Public Interest Clinic in the appeal.
“It really amplifies that David-versus-Goliath dynamic, because in a lot of these cases the power is in numbers and the only meaningful way to pursue a challenge is through class action.”
In Mr. Heller’s contract with Uber, an arbitration clause requires drivers to take unresolved complaints about the company to an arbitrator in Amsterdam.
The up-front costs of filing an arbitration claim are US$14,500 and an earlier court ruling states Mr. Heller earns between $20,800 and $31,200 a year driving for Uber.
“The unconscionability test is a stringent one. It’s an exceptional remedy, but I would say this is one of the cases where it applies,” said Michael Wright, a lawyer representing Mr. Heller.
He says he believes the agreement is unfair and that the Supreme Court should uphold the Court of Appeal decision to set it aside.
Lawyers representing Uber declined to comment in advance of the Supreme Court hearing this week.
Even among proponents of arbitration, there is debate over the practice of forcing workers into private dispute resolution in cases such as this.
“This type of arbitration clause gives arbitration a bad name with the general public. It makes it look like arbitration is some kind of gimmick that large companies can use to deprive individuals and small businesses of access to justice. That is not what arbitration is about,” says William Horton, a Toronto-based arbitrator of domestic and international business disputes.
Meanwhile, the Montreal Economic Institute, a free-market think tank, states in a court filing that “much of the sharing economy depends on standardized terms and conditions,” and it could be “stifled” if the Supreme Court lowers the threshold for finding that a contract term is unconscionable. If those agreements are undermined, the MEI says, it could put Canadian companies at a competitive disadvantage and limit opportunities for under- or unemployed Canadians to earn income.
If the Supreme Court rules against Uber on the arbitration issue and sends the issue back to the lower court, Mr. Heller and the rest of the proposed class of claimants would still have to persuade a trial judge to certify their class action. Only then would the focus turn to the employment status of the drivers.
“The big lingering question that will not be answered [by the Supreme Court] is whether Uber drivers are ‘employees’ under the Ontario Employment Standards Act,” said David Doorey, professor of work law at York University. If the drivers are deemed to be employees, they can seek wage and other protections under the legislation.
“Uber could lose at the Supreme Court and still ultimately win if the drivers are later found to be independent contractors.” Prof. Doorey said the current case is “part one of a potentially revolutionary development in how Canadian law deals with gig workers.”
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