What does Heller v. Uber mean for employers?
On 26 June 2020, the Supreme Court of Canada (SCC) released a decision for the case of Uber Technologies Inc. v. Heller. The court sided with the employee (Mr. Heller) and is allowing a class action against the company to proceed.
Mr. Heller was a driver for UberEats, a food delivery service. To become a driver, Mr. Heller agreed to a standard contract, making him an independent contractor and not an employee of the company. He was unable to negotiate the contract. And provided within the contract was an “arbitration clause” that said if there should be any legal issue, it would be resolved by the International Chamber of Commerce (ICC) in the Netherlands, not a court.
In 2017, Mr. Heller sued Uber on the basis that: (1) He, and other drivers, were employees of the company; (2) that the arbitration provision was invalid because it was in breach of the Ontario employment law; and (3) that the arbitration clause was an unfair provision, that denied him access to justice.
The SCC declared the arbitration clause unconscionable and therefore invalid. To do so, the SCC used a two-pronged test for determining whether an agreement is unconscionable: (1) inequality of bargaining power; and (2) an improvident bargain.
The SCC said that inequality of bargaining power exists “when one party cannot adequately protect their interests in the contracting process.” The court found a clear inequality of bargaining power because Mr. Heller was unable to negotiate the terms of the standard contract. However, the court also found that there was a “gulf in sophistication”, and that the arbitration agreement included no information about the costs of mediation and arbitration in the Netherlands. Hence, the court saw that it would be unreasonable to expect a person in Mr. Heller’s position to understand the financial and legal implications of the arbitration clause, especially since neither the arbitration fees nor ICC Rules were set out in the service agreement.
A bargain is considered improvident if it disproportionately advantages the stronger party or disproportionately disadvantages the more vulnerable party. The SCC found that the arbitration clause was improvident because the fees associated with initiating an arbitration proceeding with the ICC are in the range of $14,500. To pay such fees Mr. Heller would have to forfeit nearly half his pre-tax income. According to the SCC, no reasonable person would have agreed to such a clause.
When making contracts remember that the courts recognize the imbalance of power at the outset of the employment relationship, that is at the time of signing an employment contract. If you’re using an arbitration clause in a contract, ask yourself: Does this clause disadvantage the employee? Does this clause make claiming difficult for the average person? If so, try to understand how to make claiming a fairer process. Make sure everyone has access to justice.
By requiring individual arbitration, Uber used an American strategy for limiting claims within its global business model. The company was likely trying to set a precedent that it might have been able to use in other common law and United Nations Commission on International Trade Law model arbitration law jurisdictions. While globalization has led to the development of international arbitration norms each jurisdiction has different laws and requirements. When going global take care to understand how your contracts might need to be adjusted to suit different jurisdictions.
Disclaimer: The information in this article is not (and is not intended to be) legal advice. This is legal information only. Reviewing information about the law may help you understand whether you need legal assistance. Whether and how this information applies to your circumstances requires the assistance of legal counsel who can apply the information to your needs. Do not rely on this article to make decisions.