Judge stays $400-million class action against Uber

An Ontario judge has stayed a proposed class action lawsuit brought against Uber by its own drivers in favour of arbitration in the Netherlands.

Judge stays $400-million class action against Uber
Lior Samfiru says a recent decision to stay a proposed class action against Uber could “change the face of employment law.”

An Ontario judge has stayed a proposed class action lawsuit brought against Uber by its own drivers in favour of arbitration in the Netherlands.

In Heller v. Uber Technologies, the plaintiff, David Heller, was seeking $400 million in damages for the class as well as a declaration that Uber violated the Employment Standards Act by failing to pay benefits to the putative class members. Heller entered into a service agreement, which included an arbitration clause, when he began working as an Uber driver in 2016.

The clause held that any disputes or conflicts would be resolved by arbitration in the Netherlands, where Uber’s legal team is primarily located.

When Uber moved to have the proceeding stayed in favour of arbitration, Ontario Superior Court Justice Paul Perell found the matter should not proceed as a class action in Ontario as the drivers are bound by the arbitration clause.

The plaintiffs are now appealing Perell’s decision. 

Lior Samfiru, one of the lawyers representing the plaintiff, says the decision, if ultimately upheld, could have “disastrous” implications for employees and could “change the face of employment law.”

He says the decision could mean that employees might not have a way to enforce their rights under the ESA when employers include such arbitration clauses in agreements.

“If all employers have to say is you have to go arbitrate in a foreign country, then all those rights become meaningless,” says Samfiru, who is a partner and co-founding member of Samfiru Tumarkin LLP.

Citing a 2011 Supreme Court of Canada decision in Seidel v. TELUS Communications Inc., Perell said in his decision that absent legislative language to the contrary, courts must enforce arbitration clauses and only refuse to refer such a matter to arbitration “if it is clear that the matter falls outside” of the agreement.

Heller argued that the issue is outside of the jurisdiction of an arbitrator in the Netherlands as the proposed class action is about an alleged employment relationship. Uber countered this by saying it is for the arbitrator to decide whether they have jurisdiction — except for in limited circumstances — according to what is called the competence-competence principle.

Under the International Commercial Arbitration Act, the competence-competence principle holds that courts should defer jurisdiction to an arbitrator when there is an arguable case the arbitrator does indeed have jurisdiction and if it is not clear whether a dispute falls outside of the terms of an arbitration agreement.

Heller maintained that his action falls within the exceptions of when the court has to refer a matter to an arbitrator and that it would be contrary to public policy to enforce such an arbitration agreement in an employment contract as it would deny non-unionized employees their rights under the Employment Standards Act.

Perell found that for this argument to be successful, Heller is assumed to be Uber’s employee. The judge also found that the wording of the ESA does not preclude staying the action in favour of arbitration.

“Further, the issue of whether employment claims are arbitrable is an issue subject to the competence-competence principle,” Perell wrote in the decision. “It is a complex issue of mixed fact and law to be determined in the first instance by the arbitrator; it is not a simple matter of statutory interpretation to be resolved by the court.”

Heller also argued that the arbitration agreement was null and void as it was unconscionable. He contended that it was illegal, as it contracted outside of the ESA.

Perell found that the exceptions to a stay and referral to arbitration, however, did not apply to the action as he did not see a “situation of unconscionability in the circumstances of the immediate case” and that it was not clear that the dispute fell outside the arbitration agreement. Samfiru says that drivers should not be bound by the clause as it is an unfair provision that effectively deprives drivers from the ability to pursue their legal rights.

“Let's face it. No driver is ever going to file for arbitration in the Netherlands,” he says.

He adds that the arbitration clause represents a breach of the ESA, which gives individuals the right to pursue entitlements at the Ontario Labour Relations Board, the Ministry of Labour or in court.

Lauren Tomasich, a partner with Osler Hoskin & Harcourt LLP, who was not involved with the case, says the decision is the latest in what has become a “tsunami” of case law since 2000 in favour of arbitration agreements.

“It really follows along the trend that we’ve been seeing that arbitration clauses are to be enforced absent legislative intention to the contrary,” she says.

Tomasich says there are some pieces of legislation in Ontario, such as the Consumer Protection Act, that hold disputes must be resolved in the courts and that arbitration clauses cannot preclude recourse to the courts. In this case, however, she says there is no such provision in the Employment Standards Act or Class Proceedings Act.

She adds that the decision shows the power of an arbitration clause.

Lisa Talbot, one of the lawyers who represented Uber in the matter, declined to comment.

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