An über-significant decision by the Ontario Court of Appeal – proposed class action lawsuit against Uber can proceed in Ontario

By: Japreet Lehal

We are living in a time where the gig economy is becoming more prominent and popular. In British Columbia, food delivery apps are being used and many people are driving for these apps. Ride-hailing apps are expected to come to this province in the near future.

In this post, I will be focusing on quite a significant Ontario Court of Appeal decision, Heller v. Uber Technologies Inc., 2019 ONCA 1 (CanLII) [Heller]. This case was an appeal by Mr. David Heller, from a decision of the Ontario Superior Court of Justice, Heller v. Uber Technologies Inc., 2018 ONSC 718 (CanLII). Mr. Heller delivered food through the UberEATS app. This is a proposed class action law suit. The ONSC decision was decided in the favour of Uber Technologies Inc. (“Uber”). In the Court of Appeal decision, Mr. Heller was successful.

In the proposed class action, the appellant wants to put forth the idea that Uber drivers should be considered employees pursuant to the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”), and that Uber has violated the ESA by not considering them employees. Furthermore, it sets out that the arbitration clause should be considered “void and unenforceable”, and the drivers are entitled to $400 million in damages (para. 4).

Mr. Heller entered into the Driver services agreement and the UberEATS services agreement, and there was an arbitration clause in both agreements. This clause stated that the laws of Netherlands are applicable to the Agreement (para. 11). Additionally, UberEATS drivers would be required to pay US$14,500 in the beginning, prior to the mediation-arbitration starting. These were called administrative/filing-related costs (para. 15).

It was decided that the arbitration clause is invalid because it contracted out of the ESA, which is not allowed (paras. 41 and 49). As noted on paragraph 41:

[41] Given my conclusion regarding the meaning of “employment standard”, it follows that the Arbitration Clause constitutes a contracting out of the ESA. It eliminates the right of the appellant (or any other driver) to make a complaint to the Ministry of Labour regarding the actions of Uber and their possible violation of the requirements of the ESA. In doing so, it deprives the appellant of the right to have an ESO investigate his complaint. This is of some importance for, among other reasons, if a complaint is made then the Ministry of Labour bears the burden of investigating the complaint. That burden does not fall on the appellant. Under the Arbitration Clause, of course, the appellant would bear the entire burden of proving his claim.

Even though the appellant did not go through the ESA complaint process route, the arbitration clause is invalid because it contracts out of this legislation, which is a violation of ESA Section 5(1). Under the ESA, the appellant has a right to begin a civil proceeding, instead of the complaint process. The appellant began the civil proceeding because this is a class proceeding. Under arbitration, there would be no class determination, and no public record. Even if the appellant was successful, it remains unknown what sort of remedy he would have received, because the laws of Netherlands apply. If he is considered an employee, as an Ontario resident, he would be entitled to the minimum benefits under the ESA (paras. 42-46).

It was also decided that the arbitration clause is invalid on the basis of unconscionability (para. 52). In Ontario, a contract provision is considered unconscionable if the factors in Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573 (CanLII), 284 D.L.R. (4th) 734, at para. 38, recently affirmed in Phoenix Interactive Design Inc. v. Alterinvest II Fund L.P., 2018 ONCA 98 (CanLII), 420 D.L.R. (4th) 335 are met (cited at para. 60 of Heller):

1.   a grossly unfair and improvident transaction;

2.   a victim’s lack of independent legal advice or other suitable advice;

3.   an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and

4.   the other party’s knowingly taking advantage of this vulnerability.

These factors were applied in this case. The Clause was considered quite unfair because even for a small claim, the driver would have to pay lots of money to initiate the mediation-arbitration. Uber would be better suited to incur these costs, instead of the drivers. Moreover, there is the issue that the driver would have to engage in individual arbitration in the Netherlands, instead of where he/she is living (para. 68, at 1).

Mr. Heller did not receive any legal advice, and he could not negotiate the agreement terms with Uber either (Ibid, at 2). There is also bargaining inequality between Mr. Heller and Uber (Ibid, at 3). It was held that Uber inserted this Arbitration Clause in the agreements because it wanted to take advantage of the driver’s vulnerability, and did so knowingly and intentionally (Ibid, at 4).

It is noted in this case that the appellant and other individuals like him are similar to consumers, and Uber has greater bargaining power. At paragraph 71, it was stated that:

[71] I would add that, for the purposes of this analysis, I do not see any reasonable distinction to be drawn between consumers, on the one hand, and individuals such as the appellant, on the other. Indeed, I would note that, if Uber is correct and their drivers are not employees, then they are very much akin to consumers in terms of their relative bargaining position. Alternatively, if Uber is wrong, and their drivers are employees, we are not speaking of employees who are members of a large union with similar bargaining power and resources available to protect its members. Rather, 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 Judge did not consider the arbitration clause valid from two different aspects. It was considered illegal under the ESA and Arbitration Act, 1991, S.O. 1991, c. 17. At paragraph 74, Nordheimer J.A. stated:

[74] I conclude that the Arbitration Clause amounts to an illegal contracting out of an employment standard, contrary to s. 5(1) of the ESA, if the drivers are found to be employees as alleged by the appellant. I reach the separate and independent conclusion that the Arbitration Clause is unconscionable at common law. On the basis of each finding, the Arbitration Clause is invalid under s. 7(2) of the Arbitration Act, 1991. The remedy of a mandatory stay has no application.

With the introduction of new technologies, it is important that issues relating to employment law are also taken into consideration. In British Columbia, with the popularity of food delivery apps and the imminent introduction of ride-hailing apps, such legal issues may arise in this province as well. Heller can be persuasive case law here too. 

As Ottawa lawyer Paul Willetts notes, we can expect that Uber will seek a leave of appeal to the Supreme Court of Canada (final para., under “So, are Uber Drivers now Employees?”).

Uber is involved in lawsuits in other countries as well. In the UK, the Court of Appeal agreed with the Employment Appeal Tribunal that Uber’s drivers should be considered workers. If a driver is considered a worker, he/she then receives worker rights, such as the national minimum wage and paid holiday entitlement (paras. 2 and 3 of “Court of Appeal confirms that Uber drivers are workers”, by Katie Spearman). To read the full decision, please visit this link.

In France, Paris’ Court of Appeals decided that drivers had a “work contract” with Uber. They were not considered “independent workers” because they could not decide how much they were going to charge customers for the fare nor their working conditions. However, they are not yet considered employees because the driver’s complaint must first go to an employment matters court (paras. 1-2 and 4-5 of “French court: Uber and drivers tied by ‘work contract’”, by Laura Kayali).

The New York State Unemployment Insurance Appeal Board decided that to receive unemployment insurance benefits, Uber drivers can be considered employees, as opposed to independent contractors (NYS UIAB Appeal Decision for case 596725, online: <http://uiappeals.ny.gov/uiappeal-decisions/596722-appeal-decision.pdf>, cited in National Employment Law Project (NELP) link). Uber withdrew its appeal regarding this decision (NELP link).

In this blog post, I have not delved into the distinctions between employee, independent contractors, and dependent contractors. I have instead focused on the arbitration clause. These distinctions are another big topic which is related to the gig economy, and it is likely that in the coming years, there will be new legal developments in Canada in this area as well.  

If you are an employer or an employee seeking advice regarding your employment relationship, the Workplace Law Practice Group at Kane Shannon Weiler LLP would be pleased to speak with you. Please contact us at cdd@ksw.bc.ca or 604-746-4357.