There is a proposed class action lawsuit against Uber in Ontario. Uber drivers are asking a court to decide that they are employees not independent contractors which would require Uber to comply with employment standards legislation.

In 2018, a judge temporarily stopped the lawsuit because the service agreement signed by drivers required that any dispute be submitted to binding mediation/arbitration in The Netherlands. That decision was appealed to the Ontario Court of Appeal.

The Court of Appeal was not deciding if the drivers were employees or independent contractors. It was deciding whether the judge's determination that the arbitration clause was enforceable should stand, and ultimately whether the lawsuit should continue. The court decided the arbitration clause was not enforceable because it contracted out of employment standards legislation and it was "unconscionable".

The Clause was a Contracting Out of Employment Standards Legislation

The court decided 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 the arbitration clause would take away their right to make a complaint and have it investigated by the Ministry of Labour. The court decided this was an impermissible contracting out of employment standards legislation.

The Arbitration Clause Was Unconscionable

The court decided the arbitration clause was also unenforceable because it was "unconscionable" for the following reasons:

• The arbitration process was expensive. It was unaffordable for most drivers with claims for minimum employment standards that may only add up to a few hundred dollars;

• It required drivers to arbitrate in a different country from where they live and work;

• There was no evidence that drivers received legal or other advice before signing the service agreement and the court thought it was not realistic 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; and

• The arbitration clause favoured the company.

What Does the Decision Mean for Ontario Businesses?

This decision is from Ontario but it creates uncertainty for the many Canadian and international businesses operating in Canada who 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. Businesses 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, businesses should ensure that the employee or contractor has an opportunity to consider the terms, and that those terms are reasonably drafted.