ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Monday, June 29, 2020

Supreme Court of Canada Finds Uber's Arbitration Agreement Unconscionable

Supreme_Court_of_Canada_-_LogoDavid Heller, the plaintiff in Uber Technologies, Inc. v. Heller is an Uber driver who provides food delivery services in Toronto.  When he signed up to work for Uber, Mr. Heller was required to sign Uber's services agreement, which provided for dispute resolution through mediation and arbitration in the Netherlands.  We looked it up.  The Netherlands is far away from Toronto.  It's a different country entirely.  In addition, in order to participate in the Dutch arbitration process, Mr. Heller would have to pay administrative and filing fees of US$14,500, plus whatever other costs he would incur in connection with the proceeding.  The fees alone would come to about 2/3 of Mr. Heller's annual income.  The arbitration fee might as well be $1 million.

Dr. EvilIn 2017, Mr. Heller initiated a class action suit against Uber (right), alleging violation of Canadas Employment Standards Act (ESA).  Uber moved to stay the litigation in favor of Dutch Arbitration.  Mr. Heller responded that the arbitration provision was unconscionable and that it attempts to contract around mandatory provisions of the ESA.  The trial court granted Uber's motion, leaving it to the Dutch arbiter to determine the issue of unconscionability.  The Court of Appeal reversed, noting that Mr. Heller would never get such a determination if he could not afford the cost of the arbitration.  By a vote of 8-1, the Supreme Court of Canada agreed wit the Court of Appeal.

The Court's finding of unconscionability focused on two aspects of Uber's services agreement.  First, the agreement imposes prohibitive fees for initiating arbitration.  Second, those fees are hidden in the fine print of a complex contract of adhesion.

Speaking of hidden terms, the Court buries in paragraph 50 of its 100-paragraph majority opinion the following hint to future corporate litigators:

If Uber had adduced evidence of Dutch law, then under the two exceptions to arbitral referral recognized in Dell, this Court would have had to grant the stay in favour of an arbitrator determining the unconscionability argument.

If I am reading this correctly, Uber would have won if it had insisted on its choice of law clause, which specified that its services agreement applicable in Toronto is to be governed by Dutch law.  Welcome to the gig economy, Mr. Heller.

The Court then proceeded to apply Canada's law of unconscionability to the agreement between Uber and Mr. Heller.  The Court found that both elements of the Canadian test for unconscionability were met.  There was a clear inequality of bargaining power, and the arbitration clause was clearly improvident.

The lone dissent sounded in theories of freedom of contract.

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