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Uber unconscionable

Uber’s arbitration clause denied its drivers access to courts, the top court ruled. But the question on everyone's mind was left unanswered.

Uber driver

The Canadian justice system edged a little closer to a reckoning with the “gig economy” last week. The Supreme Court’s decision in Uber v. Heller didn’t answer the big question — whether so-called gig workers are “employees” under the law — but it did set the stage.


You could even argue last week’s SCC decision upholding an Ontario Court of Appeal ruling that opened the door to a class-action lawsuit against Uber didn’t settle much of anything. The question at the heart of David Heller’s $400 million lawsuit is whether Uber’s drivers are Uber employees, with the same wage and benefits rights afforded other employees under Ontario law.


In its ruling, the SCC didn’t say whether Heller had any right to expect Uber to treat him as an employee — which is the question labour lawyers like Ronni Nordal very much want to see answered.


“In the grand scheme of things, this decision isn’t much,” she said. “And it’s worth asking whether we’d even be talking about this if that arbitration clause hadn’t been so ludicrous.”


That “ludicrous” arbitration clause, now declared invalid by Canada’s highest court, required that disputes with drivers be settled through a process based in the Netherlands. Add up all the non-refundable fees and administrative costs and bringing a dispute with Uber to arbitration could cost a driver about US $14,500, not counting airfare to and from Amsterdam and living expenses. (Heller was earning between $20,800 and $31,200 per year as an UberEATS driver, before taxes.)


In its decision, the SCC majority found Uber’s arbitration process to be “unconscionable” — an improvident bargain between two parties of unequal bargaining power. Employees have rights under Canadian law; as an “independent contractor,” Heller had the right to refuse to agree to the arbitration agreement — the right to not work as an Uber driver, in other words.


The status of those “independent contractors” in law is a hot topic now, thanks in part to the pandemic’s effects on full-time employment.


“It’s worth remembering that services like Uber were originally supposed to be sources of side income — not full-time jobs,” said employment and human rights lawyer Christopher Achkar. “But a lot of people are using these services for full-time work now. I have clients who have lost full-time jobs who are using things like Uber to make a living.”


The SCC majority cited the lopsided nature of Uber’s arbitration process as proof of its unconscionability: “It is a matter of common sense that parties do not often enter a substantively improvident bargain when they have equal bargaining power.”


Justice Russell Brown concurred on the court’s conclusions but split on the reasons. He said the court was expanding the scope of the “unconscionability” doctrine unnecessarily when all it had to do was point out that Uber’s arbitration process was designed to “foreclose access to legally determined dispute resolution” — to prevent claimants from both using the arbitration system and from seeking redress in a court of law.


“At a minimum, the rule of law guarantees Canadian citizens and residents a stable, predictable and ordered society in which to conduct their affairs. Such a guarantee is meaningless without access to an independent judiciary that can vindicate legal rights,” Brown wrote.


“There is therefore no good reason to distinguish between a clause that expressly blocks access to a legally determined resolution and one that has the ultimate effect of doing so.”


The difference between the majority’s reasons and Justice Brown’s appeal to the “public policy doctrine” shows a judiciary struggling to adapt domestic law to govern the behaviour of online corporations, said Karen Eltis, a University of Ottawa law professor who studies technology and regulation.


“The fact that it’s relatively easy for such companies to just opt out of the jurisdiction of Canadian courts is something that has been gnawing away at the legal system for years,” she said. “The digital economy requires some re-thinking of established legal paradigms.


“Arbitration is a useful mechanism for avoiding the court system where the parties are equal in sophistication and power, not for when one party is vulnerable and essentially has no choice but to consent.”


Nordal said she’ll be watching closely to see what Uber comes up with to replace its Amsterdam-based arbitration process. Uber drivers don’t make a lot of money, which means the company will be expected to come up with a process that is affordable — unless it wants to go back to court.


“Even if the fee is as low as $1,000 — well, that’s an awful lot of money to an Uber driver,” she said.


“I think Uber will see an increase in complaints. What recourse will complainants have? The SCC doesn’t go there, but it has to be a process that has a reasonable chance of determining an outcome. It actually has to provide drivers with the ability to be heard.


“It’s clear that the SCC is saying the two parties to such agreements have to be on equal ground. It’s an important, valuable ruling, but it’s only a stepping stone for Mr. Heller.”