Uber V. Heller: Supreme Court Throws Out Dutch Arbitration Clause As Unconscionable

• Published date: 13 July 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Aird & Berlis LLP
• Author: Mr Aaron Baer, Fiona Brown, Benjamin Mayer-Goodman (Summer Student) and Steve J. Tenai

Most people would find that a mandatory $14,500 arbitration fee hidden in their employment contract is an unexpected and unfair contractual term. The Supreme Court of Canada agrees. On June 26 2020, the Supreme Court of Canada released its decision in Uber Technologies Inc. v. Heller, ('Heller') settling the elements of the doctrine of unconscionability and clarifying when courts should enforce arbitration clauses. Through this ruling, the Court has allowed a proposed $400 million class action lawsuit by Uber and UberEATS drivers to proceed. This decision will have wider implications to standard form contracts and arbitrations.

Background

David Heller, the plaintiff and a former UberEATs driver, sought a declaration on behalf of the class that Uber and UberEATS drivers are employees under Ontario's Employment Standards Act 2000 ("ESA") and therefore are entitled to ESA benefits.

In their contracts with Uber and UberEats, drivers accepted an arbitration agreement to resolve any grievances though the arbitral jurisdiction of the International Chamber of Commerce in Amsterdam Netherlands.

However, the contract did not mention that this process would cost drivers an up-front fee of US$14,500 plus legal fees to initiate arbitration. Mr. Heller earns less than $30,000 per year.

Before a court could determine whether the drivers were employees under the ESA, Uber brought a motion to stay the proceedings, claiming the matter was arbitrable under its contract The motions judge agreed with Uber, finding that the ESA did not bar parties from using private arbitration. The Ontario Court of Appeal overturned this ruling. It held that the arbitration clause was void under the equitable doctrine of unconscionability and because it illegally contracted out of the ESA.

The Supreme Court of Canada ruled that the arbitration clause could not be enforceable. Seven of the nine justices, in a decision written by Justices Abella and Rowe, ruled that the arbitration clause was unconscionable. In a concurring opinion, Justice Brown alternatively held that the arbitration clause is unenforceable because it is against public policy as it denies access to justice Justice C'té's dissent emphasized the right of two parties to freely negotiate and bind themselves into contractual agreements.

Doctrine of Unconscionability

The majority's decision has settled the elements of the doctrine unconscionability, rejecting the four-part test under prior Ontario appellate jurisprudence¹ and...