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By Richard Stobbe

One of Uber’s drivers, an Ontario resident named David Heller, sued Uber under a class action claim seeking $400 million in damages. What did poor Uber do to deserve this? According to the claim, drivers should be considered employees of Uber and entitled to the benefits of Ontario’s Employment Standards Act (See: Heller v. Uber Technologies Inc., 2018 ONSC 718 (CanLII)).

As the court phrased it, while “millions of businesses and persons use Uber’s software Apps, there is a fierce debate about whether the users are customers, independent contractors, or employees.” If all of the drivers are to be treated as employees, the costs to Uber would skyrocket. Uber, of course, resisted this lawsuit, arguing that according to the app terms of service, the drivers actually enter into an agreement with Uber B.V., an entity incorporated under the laws of the Netherlands. By clicking or tapping “I agree” in the app terms of service, the drivers also accept a certain dispute resolution clause: by contract, the parties pick arbitration in Amsterdam to resolve any disputes.

Really, at this stage Uber’s defence was not to say “this claim should not proceed because all of the drivers are independent contractors, not employees”. Rather, Uber argued that “this claim should not proceed because all of the drivers agreed to settle disputes with us by arbitration in the Netherlands.”

So the court had to wrestle with this question:  Should the dispute resolution clause in the click-through terms be upheld? Or should the drivers be entitled to have their day in court in Canada? 

The law in this area is very interesting and frankly, a bit muddled. This is because there are two distinct issues in this legal thicket: a forum-selection clause (the laws of the Netherlands govern any interpretation of the agreement), and a dispute resolution clause (here, arbitration is the parties’ chosen method to resolve any disputes under the agreement). For these two different issues, Canadian courts have applied different tests to determine whether such clauses should be upheld:

1. In the case of forum selection clause, the Supreme Court of Canada (SCC) tells us that the rule from Z.I. Pompey Industries is that a forum selection clause should be enforced unless there is “strong cause” not to enforce it.  In the context of a consumer contract (as opposed to a “commercial agreement”), the SCC says there may be strong reasons to refrain from enforcing a forum selection clause (such as unequal bargaining power between the parties, the convenience and expense of litigation in another jurisdiction, public policy reasons, and the interests of justice). In the commercial context (as opposed to a consumer agreement), forum selection clauses are generally upheld.
2. In the case of upholding arbitration clauses, the courts have applied a different analysis: arbitration is generally favoured as a means to settle disputes, using the “competence-competence principle”. Again, it’s an SCC decision that gives us guidance on this: unless there is clear legislative language to the contrary, or the dispute falls outside the scope of the arbitration agreement, courts must enforce arbitration agreements.

The court said this case “is not about a discretionary court jurisdiction where there is a forum selection clause to refuse to stay proceedings where a strong cause might justify refusing a stay; rather, it is about a very strong legislative direction under the Arbitration Act, 1991 or the International Commercial Arbitration Act, 2017 and numerous cases that hold that courts should only refuse a reference to arbitration if it is clear that the dispute falls outside the arbitration agreement.”

Applying the competence-competence analysis, the court (in my view) properly ruled in favour of Uber, upheld the app terms of service, and deferred this dispute to the arbitrator in the Netherlands.  This class action, as a result, must hit the brakes.

The decision is reportedly under appeal.

Calgary – 07:00 MST