In a ground breaking case, the Ontario Court of Appeal has decided that a clause in Uber’s contract with its drivers – which requires them to take legal disputes with the company to the Netherlands to be resolved – is “illegal” and “unconscionable”. This case offers workers some important protections where there may be unfair terms in their contracts.
Background on the Case
In 2017, UberEATS driver David Heller started a lawsuit against Uber in the Ontario Superior Court. He argued that Uber misclassified its drivers as “independent contractors”, which means that they do not get the same workers’ rights protections as employees. For example, independent contractors do not have rights to minimum wage, overtime pay, and other protections under Ontario’s Employment Standards Act (“ESA”). Heller wanted to bring the lawsuit as a “class action”, which would mean that the lawsuit would be on behalf of all Uber and UberEATS drivers in Ontario.
Uber asked the court to put a “stay” – essentially, a pause – on the proposed class action. Uber argued that the contract all Uber and UberEATS drivers agree to requires them to take any legal disputes they may have to an arbitrator in the Netherlands. Arbitration is a way to settle legal disputes outside of court. The Superior Court agreed to Uber’s request and stayed the proposed class action.
Heller appealed to the Ontario Court of Appeal, and won. In Heller v. Uber Technologies Inc., 2019 ONCA 1, the Ontario Court of Appeal reversed the Superior Court’s decision and refused Uber’s request to stay the proposed class action. The Court of Appeal decided that the arbitration clause in the contract is invalid and cannot be enforced.
The Court of Appeal found that the arbitration clause was invalid for two reasons:
First, the arbitration clause illegally sought to bypass the mandatory minimum protections of the ESA. By requiring the drivers to arbitrate their legal disagreements with the company in the Netherlands, the Uber contract denied drivers the rights they may have under the ESA to make a complaint to the Ontario Ministry of Labour.
Second, the arbitration clause was “unconscionable”. The Court recognized that there is a significant power imbalance between the drivers and the company. As a result, drivers were “at the mercy of the terms, conditions and rates of service set by Uber” and had little ability to negotiate or change them. In addition, the clause required drivers to arbitrate their disputes in the Netherlands under the law of the Netherlands instead of Ontario law. To do that, drivers would have to pay $14,500 in US dollars up front just to participate in the arbitration process. Such a large cost would be unaffordable for most drivers, and would effectively prevent most from pursuing a claim against Uber.
In short, the Court found that Uber knowingly “chose this Arbitration Clause in order to favour itself and thus take advantage of its drivers, who are clearly vulnerable to the market strength of Uber.” Uber created a “dispute resolution” process that no driver would ever realistically access.
Because of the Court of Appeal’s decision, Uber and UberEATS drivers can now take the next steps in the class action in Ontario. However, it remains to be seen if Uber will try to appeal the Court of Appeal’s decision to the Supreme Court of Canada.
What this decision means for workers
The Court of Appeal’s decision is an important win for workers, and comes at a time of considerable upheaval in Ontario workplace law. In 2018, the provincial government made a number of positive changes to labour and employment laws in the province, including a raise in the minimum wage, paid sick days, and equal pay for equal work. These protections were meant to address the growing number of workers who have jobs that are short-term and precarious, many of whom work in the so-called “gig economy”.
But many of these important changes were rolled back by the new Conservative government with the passage of the Making Ontario Open for Business Act, 2018, which we wrote about in more detail here. Even more rollbacks have been proposed in a bill called the Restoring Ontario’s Competitiveness Act, 2018.
Against this backdrop, it is very encouraging that the Court of Appeal has recognized the particular vulnerabilities of gig economy workers, and of the power of gig economy companies. The Court’s decision offers some protections when there are unfair terms in contracts that take away worker rights. In particular, companies will not be able to shield themselves from liability by offering workers a disingenuous “right” to challenge them.
While this decision is important, it addresses only a small piece of the barriers that precarious workers face in their fight for decent workplace rights. Stronger and fairer employment standards legislation is critical to improving their conditions of work and quality of life, and we encourage you to visit http://www.15andfairness.org to find out more about how you can support the campaign for decent pay and decent work for all.