As this New Year arrived, so too did new hope for Toronto Uber drivers seeking certification for their class action alleging they are, in fact, employees of Uber and correspondingly entitled to minimum standards (e.g. minimum wage, benefits, overtime, holiday pay, etc.) under the Employment Standards Act (ESA)
Uber’s position is that it does not employ its drivers and that it merely provides a technology platform that links drivers to potential customers. Uber maintains their relationship to their drivers is a commercial one and any issues arising between the parties is subject to an arbitration clause that each driver must accept on the app prior to beginning work. This mandatory arbitration clause requires all disputes between Uber and its drivers to be referred to a private arbitrator in Amsterdam and subject to the laws of Netherlands.
Alternatively, Heller, the representative plaintiff in the proposed class action on behalf of Toronto Uber drivers and Uber Eats drivers, alleges widespread violations of the Ontario Employment Standards Act as they argue that they are employees of Uber and should enjoy all the rights and privileges afforded them under the ESA.
Uber drivers had suffered a set back last year, when a lower court stayed their attempt to certify their class action and upheld the primacy of the arbitration clause provisions. However, this year, the Ontario Court of Appeal set aside the issue of whether Uber drivers are employees or contractors, and examined the validity of the arbitration clause itself. In doing so, the Court of Appeal reversed the lower court decision determining that the arbitration clause: 1) was invalid, as it sought to contract out of the ESA, and 2) was unconscionable at common law.
The courts observed that the arbitration clause did an “end run” on the provisions of the ESA by forcing them to settle disputes in an expensive and far off location like the Netherlands despite the fact that a more readily available dispute resolution mechanism already existed in the form of the ESA.
The ESA already provides workers with a right to file a complaint and have it investigated by an employment standards officer which constitutes a benefit for employees under the Act. Since the ESA expressly prohibits the waiving of, or contracting out of, a statutory benefit, the Uber arbitration clause, which had the effect of doing just that, was ruled invalid.
The court acknowledged the importance of the issues being raised by the gig economy for all Ontarians. Determining whether individuals, in similar work as the Uber drivers, are properly considered independent contractors or employees, and as such, privy to the protections of the ESA has significant and increasing public policy implications for all Ontarians. Consequently, the Court believes that issues this critical to the lives of all Ontarians should be decided in Ontario.
The Court of Appeal also found Uber’s arbitration clause unconscionable. To dispute even the smallest issue, Uber drivers would be required to pay $14,500 U.S. up front, while shouldering the additional costs of traveling to, and staying in, Amsterdam. The Court concluded the arbitration clause presented circumstances that were: 1) grossly unfair; 2) took advantage of the Uber driver’s lack of legal advice or suitable advice; 3) underscored the overwhelming power imbalance between Uber and its drivers; and 4) permitted Uber to take advantage of this vulnerability. On the basis of this 4-part test, the Court ruled the clause unconscionable.
It is interesting to note that the Court compared the relative bargaining power of Uber drivers, in this case, with consumers. Justice Nordheimer observed that the drivers are individuals who are at the mercy of the terms, conditions and rates of service set by Uber, just as are consumers. If they wish to avail themselves of Uber’s services, they have only one choice and that is to click “I agree” with the terms of the contractual relationship that are presented to them.
The implications of the comparison seem clear. It is unlikely that the Courts are blind to the fact that Consumer laws in Ontario have evolved to expressly prohibit the use of arbitration clauses in consumer agreements designed to block consumer access to the courts. Section 7(2) of the Ontario Consumer Protection Act specifically deters large corporations from injecting mandatory arbitration clauses into consumer agreements out of recognition of the unequal bargaining power possessed by consumers. Now that the courts have recognized this vulnerability parallel between gig workers and consumers, is a parallel remedy far behind?
While the issues in this case are far from fully decided, the Ontario Court of Appeal has signaled to Employees and and Employers a number of important considerations. Employees that have been required to accept arbitration clauses that limit their rights under the ESA may have have a remedy available to them. And employers that seek to use compulsory arbitration clauses will have to ensure that they comply with the strictures of the ESA. Any attempt to contract around, or waive rights under the ESA, is unlikely to be embraced by the courts.