Gillian Round April 24 2019 When are mandatory arbitration clauses unenforceable? Fasken | Employment & Immigration - Canada Gillian Round Employment & Immigration OverviewContracting out of employment standards legislation clauseUnconscionable arbitration clauseImplications for employersThere is currently a proposed class action suit against Uber in Ontario. Uber drivers are asking a court to decide that they are employees not independent contractors, which would subsequently require Uber to comply with employment standards legislation.OverviewIn 2018 a judge temporarily stopped the suit because the service agreement signed by drivers had required that any dispute be submitted to binding mediation or arbitration in the Netherlands. That decision was appealed to the Ontario Court of Appeal.The court of appeal was not deciding whether the drivers were employees or independent contractors; rather, it was deciding whether:the judge's determination that the arbitration clause was enforceable should stand; andthe lawsuit should continue.The court decided that the arbitration clause was not enforceable because it contracted out of employment standards legislation and was unconscionable.Contracting out of employment standards legislation clauseThe court decided that the right to make a complaint and have it investigated by the Ministry of Labour under Ontario's employment standards legislation is an employment standard. The legislation prohibits employers and employees from contracting out of employment standards or agreeing that they do not apply.If the drivers were in fact employees, the court said that the arbitration clause would withdraw their right to make a complaint and have it investigated by the Ministry of Labour. The court decided that this was an impermissible contracting out of employment standards legislation.Unconscionable arbitration clause The court decided that the arbitration clause was also unenforceable because it was unconscionable for the following reasons:The arbitration process was unaffordable for most drivers who had claims for minimum employment standards that often amounted to only a few hundred dollars.The clause required drivers to arbitrate in a different country from where they lived and worked.There was no evidence that drivers received legal or other advice before signing the service agreement and the court thought it was unrealistic to expect that they would have. Further, the service agreement was a standard form contract and drivers had no realistic chance of being able to negotiate it even if legal advice had been received.There was an inequality of bargaining power between the parties.The arbitration clause favoured the company.Implications for employersThis Ontario-based decision creates uncertainty for many Canadian and international employers operating in Canada that include mandatory arbitration clauses in employment or independent contractor agreements, because each province has a similar rule against contracting out of employment standards legislation.Mandatory arbitration clauses should be revisited in light of this decision. If the clauses could be interpreted as limiting the right to file a complaint with the Ministry of Labour or another employment standards regulator, they should be reviewed and revised by the company's lawyers. Employers should also consider implementing measures that may support a finding that the process under arbitration clauses is reasonably accessible to employees and independent contractors by, for example, choosing a lower cost and local venue for proceedings. In addition, employers should ensure that employees and contractors have an opportunity to consider the terms and that those terms are reasonably drafted.For further information on this topic please contact Gillian Round at Fasken by telephone (+1 416 366 8381) or email ([email protected]). The Fasken website can be accessed at www.fasken.com.