By Alyssa King,
The Supreme Court heard argument in Uber v. Heller on November 6. The case pits the ride-sharing and food-delivery behemouth against an UberEats driver, David Heller who used its app to deliver food in Toronto. If Uber gets its way, Heller’s only option will be an individual International Chamber of Commerce (ICC) arbitration with the seat in the Netherlands. If Heller gets his way, the arbitration clause will be void and he will bring his case as a class action in court.
The case was a demonstration of the globalization of civil procedure. Uber brought a US strategy for limiting claims, requiring individual arbitration, to its global business. The company likely hopes to set a precedent that it might be able to use in other common law and UNCITRAL model arbitration law jurisdictions (Ontario’s International Commercial Arbitration Act (ICAA) uses the model law). Many of the seventeen interveners also put the case in an in international context. They discussed the importance of Canada following international arbitration norms and referenced the class arbitration debate in the United States.
Arguments centered around three main issues: whether the court should be hearing the other two issues at all or if they should go to the arbitrator, whether the arbitration clause was unconscionable, and whether the Employment Standards Act (ESA) would apply and prevent arbitration.
Under the ICAA, a court must refer the parties to arbitration “unless it finds that the agreement is null and void, inoperative or incapable of being performed.” (art. 8(1)). The arbitrator has competence-competence: jurisdiction to decide on her own jurisdiction. Uber argued that all disputes about the application of the arbitration clause should go to the arbitrator. The Justices responded by immediately peppering counsel with questions about the merits of Heller’s claim that the agreement made it essentially impossible to arbitrate, taking the discussion beyond the scope of what she contended that they could consider. They wanted to know about ICC fees, which are substantial, and whether Heller would really have to go to the Netherlands.
These questions go to whether the agreement was “incapable of being performed” because it was unconscionable or for some other reason. Justice Abella seemed interested in getting Ontario to adopt a test for unconscionability similar to the two-pronged test from Douez v. Facebook instead of its current four-pronged test. The Ontario test requires not only unfairness and imbalance in bargaining power, but also the stronger party’s knowingly taking advantage of its position. Abella seemed to be alone in her approach and it may not make a difference in this case. If the court agrees with Heller’s argument that Uber designed its arbitration clause to make claiming difficult, Heller may meet either test.
Some Justices hesitated to stretch unconscionability to cover the kinds of inequalities in bargaining here. Justice Brown suggested that “the right framework” for thinking about claim defeating clauses was instead the “rule of law.” This approach might be an alternate route to dealing with the problem of arbitration clauses that seem designed to defeat even resort to arbitration, as Heller claims is the case here.
The final issue in the case was whether the Employment Standards Act (ESA) would bar arbitration. Section 5 of the Act says that “employees” can’t contract out of its standards, and Section 96 gives a “person” the ability to file a claim with the Ministry of Labour, which might consider whether employees are misclassified during its investigation. Heller also argued that the clause violated the ESA because the arbitrator would apply Dutch law, amounting to contracting out of all ESA standards. It was not clear that section 96 is an employment standard within section 5. The Justices also seemed quick to reject Heller’s contention that they should assume he was an employee because he pleaded that he was one, however the argument that arbitrating misclassification claims would defeat the purposes of the Act might have more legs.
The scope of competence-competence and the question of how to deal with arbitration clauses that seemed designed to avoid arbitration will likely determine the outcome of the case. Madam Justice Cot’s question to both parties about the possibility of reforming the arbitration clause suggests discomfort with the clause as written. Competence-compentence assumes that there will be an arbitration and asks the courts can defer to the arbitrator’s jurisdiction. Clauses such as the one here may set up scenarios in which there is no arbitration at all. Even if the arbitration were decided on the papers or heard by conference call, the fees Heller would have to pay to begin an arbitration are high enough the claiming does not make financial sense. As the ICC’s counsel was quick to say, the ICC is not the appropriate institution for all arbitrations. Its procedural designers typically imagine businesses as claimants, not individuals like Heller (for instance, the small claims procedure is for disputes under 2 million USD). Whether it uses unconscionability or some other framework such as “rule of law” it seems clear that the court cannot easily set issues of access to arbitration aside.
Alyssa King is an Assistant Professor at Queen’s University. Thanks to my colleague, Kevin Banks, who helped with the ESA issue.