Case Summary – Uber Technologies Inc v Heller
The Facts
The respondent, David Heller, provided food delivery services in Toronto through UberEats. Before working with Uber, individuals like Heller were forced to accept the terms of the company’s standard form services agreement [the “Agreement”]. There was no opportunity to negotiate its terms – this was a contract of adhesion. The Agreement included an arbitration clause, stating that any disputes would be resolved through arbitration in the Netherlands, with an up-front fee paid by the driver of US$14,500 in addition to all additional costs.
When Heller commenced a class proceeding against Uber for breach of Ontario’s Employment Standards Act, 2000,[1] Uber moved to stay the action on the basis of the mandatory arbitration clause. The company was successful in the first instance, but this decision was overturned at the Ontario Court of Appeal. The Supreme Court of Canada [SCC] heard Uber’s appeal in 2020.
Employment Disputes are Not “Commercial” in Nature
The parties disagreed on the arbitration statute applicable to their dispute: the Arbitration Act, 1991,[2] which applies to domestic arbitration, or the International Commercial Arbitration Act, which applies to agreements that are both “international” and “commercial.”[3] The court agreed that the agreement was international, but carefully considered the meaning of commercial and made two key findings:
- The applicable statute depends upon the nature of the parties’ dispute, not their relationship. Characterizing a dispute requires the decision-maker to examine only the pleadings, not the underlying facts; and
- An employment dispute is not included in the definition of “commercial” in this context. The question of whether a party is an employee is fundamentally an employment dispute, and is therefore excluded from the ICAA.[4]
The SCC held that the AA applied to Uber’s motion, under which the court is directed to stay proceedings in respect of any matter subject to an arbitration agreement.[5] There are five exceptions where a court may exercise its discretion and refuse a stay, including where the arbitration agreement is invalid.[6]
Court Jurisdiction to Consider Bona Fide Challenges to Arbitral Agreements
Before exercising its discretionary jurisdiction to consider the validity of the agreement, the SCC had to determine whether this was an appropriate circumstance to do so. Based on the facts, the court concluded that the matter would never be resolved if the stay of proceeding was granted since the respondent could not afford the cost of arbitration. This “raise[d] obvious practical problems of access to justice that the Ontario legislature could not have intended when giving courts the power to refuse a stay.”[7]
Where staying an action in favor of the arbitrator’s jurisdiction under an agreement is tantamount to denying relief for the claim, the arbitration agreement is, in effect, insulated from any meaningful challenge.[8] The SCC, therefore, determined that “a court should not refer a bona fide challenge to an arbitrator’s jurisdiction to the arbitrator if there is a real prospect that doing so would result in the challenge never being resolved. In these circumstances, a court may resolve whether the arbitrator has jurisdiction over the dispute and, in so doing, may thoroughly analyze the issues and record.”[9]
The SCC set out a two-part test to ascertain whether a claimant has brought a bona fide challenge to arbitral jurisdiction:
- Whether, assuming the facts pleaded to be true, there is a genuine challenge to arbitral jurisdiction; and
- Based on the supporting evidence whether there is a real prospect that, if the stay is granted, the challenge may never be resolved by the arbitrator.[10]
Heller’s challenge to the agreement on the basis that the arbitration clause was unconscionable for imposing prohibitive fees was considered bona fide. The fees were described as a “brick wall” which would prevent Heller’s ESA challenge from ever being heard.[11] The court went on to hold that the clause was unconscionable, and struck it from the contract. If you require an arbitrator to resolve a dispute, please click here to view our roster of arbitrators, or contact us for assistance in selecting an arbitrator.
[1] SO 2000, c 41 [ESA] (https://www.ontario.ca/laws/statute/00e41)
[2] SO 1991, c 17 [AA] (https://www.ontario.ca/laws/statute/91a17)
[3] SO 2017, c 2, Sch 5 [ICAA] (https://www.ontario.ca/laws/statute/17i02b)
[4] Uber Technologies at paras 25-28
[5] AA, s 7(1) (https://www.ontario.ca/laws/statute/91a17#BK10)
[6] AA, s 7(2) 2. (https://www.ontario.ca/laws/statute/91a17#BK10)
[7] Uber Technologies at para 38
[8] Uber Technologies at para 39
[9] Uber Technologies at para 46
[10] Uber Technologies at para 44
[11] Uber Technologies at para 47