Having determined that a court should resolve whether the arbitrator has jurisdiction over the dispute between Heller and Uber, the Supreme Court of Canada found that the Arbitration Clause of Uber’s Services Agreement is invalid. This Arbitration Clause is invalidated because it is considered unconscionable and detrimental to access to justice. Hence, this article discusses the unconscionability issue and the accessibility issue of the Arbitration Clause in Uber’s Services Agreement.
Key Facts Related to the Issue
The Uber drivers must accept the standard form services agreement of around 14 pages in order to log on to the Uber App. To accept this agreement, the driver must click “I agree” twice. Once the driver does so, the Uber App is activated and the services agreement is uploaded to a “Driver Portal”, accessible to the drivers through their online accounts. The parties to the services agreement are the drivers and Uber subsidiaries incorporated in the Netherlands with offices in Amsterdam.
The services agreement between Uber and the drivers contained the following arbitration clause:
“Governing Law; Arbitration. Except as otherwise set forth in this Agreement, this Agreement shall be exclusively governed by and construed in accordance with the laws of The Netherlands, excluding its rules on conflicts of laws. … Any dispute, conflict or controversy howsoever arising out of or broadly in connection with or relating to this Agreement, including those relating to its validity, its construction or its enforceability, shall be first mandatorily submitted to mediation proceedings under the International Chamber of Commerce Mediation Rules (“ICC Mediation Rules”). If such dispute has not been settled within sixty (60) days after a request for mediation has been submitted under such ICC Mediation Rules, such dispute can be referred to and shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”). … The dispute shall be resolved by one (1) arbitrator appointed in accordance with the ICC Rules. The place of arbitration shall be Amsterdam, The Netherlands….” (emphasis added)
Since February 2016, David Heller has been licenced to use the Uber Driver App to provide food delivery services to people in Toronto. He is 35 years old and has a high school education. He earns approximately $400 to $600 per week based on 40 to 50 hours of work delivering food for UberEats driving his own vehicle.
In 2017, Mr. Heller started the proposed class action against Uber. Mr. Heller’s position is that he is an employee of Uber according to the ESA. Mr. Heller’s claim seeks declarations that Uber has violated the provisions of Employment Standard Act, 2000, SO 2000, c 41 and that the arbitration provision of the services agreements entered into between the parties are void and unenforceable. The action also claims damages of $400 million.
According to the Arbitration Clause between the parties as well as the ICC Arbitration Rules, the up-front administrative/filing-related costs for a driver to participate in the mediation-arbitration process was USD $14 500. This did not include the costs of travel to Amsterdam, accommodation and retaining counsel to participate in the arbitration.
Applicable Laws and Doctrines (non-exhaustive list)
Doctrine of unconscionability
The Supreme Court of Canada’s decision on TELUS Communications Inc. v. Wellman, [2019] 2 S.C.R. 144 states that “arguments over any potential unfairness resulting from the enforcement of arbitration clauses contained in standard form contracts are better dealt with directly through the doctrine of unconscionability” (Para. 85 of TELUS Communications Inc. v. Wellman, [2019] 2 S.C.R. 144).
Unconscionability is an equitable doctrine that is used to set aside “unfair agreements [that] resulted from an inequality of bargaining power” (John D. McCamus, The Law of Contracts (2012), p. 424).
The purpose of unconscionability is to protect the persons who are vulnerable in the contracting process from loss or improvidence to that person in the transaction was made. The unconscionability doctrine allows courts to “focus expressly on the real grounds for refusing to give force to contractual term said to have been agreed to by the parties”(Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426, at p. 462).
The proof of an unconscionable transaction involves two-step process: “(1) proof of inequality in the positions of the parties, and (2) proof of an improvident bargain” (Norberg v. Wynrib, [1992] 2 SCR 226, p. 256)
Access to Justice and the Rule of Law
The courts may consider issues of public policy on their own motion. “[…] public policy and respect for the rule of law go hand in hand. Courts are the guardians of Canadian constitutional values. They are sometimes bound to raise, proprio motu, issues relating to public policy” (Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, para. 59)
The Court has relied on public policy recently to limit the operation of forum selection clauses and exclusion clauses, which raise concerns relating to the administration of justice, and to limit the operation of restrictive covenants (Douez v. Facebook, Inc., 2017 SCC 33, paras. 51 to 63).
The courts have consistently held that, irrespective of the value placed on freedom of contract, a contracting party’s right to legal recourse is “a right inalienable even by the concurrent will of the parties” (Scott v. Avery (1856), 5 H.L.C. 811, 10 E.R. 1121, p. 1133).
The rule of law should guarantee that Canadians have “a stable, predictable and ordered society in which to conduct their affairs” (Reference re Secession of Quebec, [1998] 2 S.C.R. 217, at para. 70). The rule of law requires that the Canadians and residents have access to a venue to enforce their legal rights (Jonsson v. Lymer, 2020 ABCA 167, at para. 10).
Analysis
1. Is the Arbitration Clause unconscionable?
Yes (Abella and Rowe JJ. wrote for the majority).
First, there is clearly an inequality of bargaining power between Uber and Mr. Heller. As we all know, Uber is a large multinational corporation while Mr. Heller is a food deliveryman who earned approximately $400 to $600 per week. This is his primary source of income. The Arbitration Clause was a part of the standard form services agreement between the two parties. This imbalance impairs Mr. Heller’s ability to contract freely, autonomously and conscionably. Indeed, the clause did not contain any information about the costs of mediation and arbitration in the Netherlands. Obviously, a person in Mr. Heller’s position would not be expected to estimate the financial and legal implications of agreeing to arbitrate under ICC Rules (See para. 93 of Uber v. Heller, 2020 SCC 16). A person in Mr. Heller’s position could not be expected to understand that the clause would impose a US $ 14 500 hurdle to enforce their legal rights before the arbitral tribunal.
Second, the improvidence of the arbitration clause is also clear. The amount of the up-front administrative fees is close to Mr. Heller’s annual income, not to mention the potential costs of travel, accommodation, legal representation fees. Abella and Rowe JJ. wrote that ” Respect for arbitration is based on it being a cost-effective and efficient method of resolving disputes. When arbitration is realistically unattainable, it amounts to no dispute resolution mechanism at all”(See para. 97 of Uber v. Heller, 2020 SCC 16).
As a consequence, the Arbitration Clause is unconscionable and therefore invalid.
2. Does the Arbitration Clause undermine access to justice?
Yes (Brown J. wrote in the concurring reasons). Brown J. pointed out that the Arbitration Clause is invalid not because it is unconscionable, but because it undermines the rule of law by denying access to justice.
To determine if a clause limits access to “legally determined dispute resolution”, the court should decide whether the limitation is reasonable as between the parties, or instead causes undue hardship. The limitation is not reasonable in the present case: it bars Mr. Heller from advancing any claim against Uber at any possible dispute resolution mechanism. In effect, this Arbitration Clause “is not an agreement to arbitrate, but rather not to arbitrate” as the up-front administrative fees are too costly for a person in Mr. Heller’s position to afford. In other words, the cost to pursue the claims under this clause is inherently disproportionate to the quantum of the disputes arising from the transaction between Uber and the drivers (See para. 102 and 129 and 136 of Uber v. Heller, 2020 SCC 16).
Brown J. further wrote that “there is no good reason to distinguish between a clause that expressly blocks access to a legally determined resolution and one that has the ultimate effect of doing so” (See para. 113 of Uber v. Heller, 2020 SCC 16 and p. 548 of Novamaze Pty Ltd. v. Cut Price Deli Pty Ltd. (1995), 128 A.L.R. 540 (F.C.A.))
As a consequence, the Arbitration Clause undermines access to justice and therefore invalid.
My Reflection
Le respect de l’arbitrage ne repose pas seulement sur le fait qu’il s’agit d’un mode rentable et efficace de résolution des différends. Le respect de l’arbitrage repose principalement sur le fait que l’arbitrage s’agite d’un processus autonome, efficace, flexible et confidentiel par lequel les parties conviennent de régler leurs différends en les soumettant à un arbitre et non à un tribunal. La clause d’arbitrage entre Uber et M. Heller est nulle parce que la clause d’arbitrage ne respecte pas le principe de proportionnalité. En effet, une personne dans la même position de M. Heller serait exposée à des contraintes excessives et déraisonnables s’il tentait de présenter une demande contre Uber (Veuillez voir aussi mes notes sur le principe de proportionnalité en arbitrage ici).
(Attention: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention. ?)