Supreme Court of Canada Dismisses Uber Appeal on Grounds that Arbitration Clause “Unconscionable and Therefore Invalid”

On June 26, 2020, the Supreme Court of Canada (the SCC) issued its decision in Uber Technologies Inc v Heller, 2020 SCC 16 and dismissed the appeal brought by Uber Technologies Inc. (Uber) on the grounds that the arbitration clause in the arbitration agreement between Uber and its drivers is “unconscionable and therefore invalid”.

The 8:1 majority held that the arbitration agreement which required the class representative plaintiff, David Heller, to resolve a dispute with Uber through mediation and arbitration in the Netherlands, where the arbitration process required up-front administrative and filing fees of US$14,500 in addition to legal fees and other costs, “makes it impossible for one party to arbitrate” and “it is a classic case of unconscionability.”

Justice Abella and Justice Rowe ruled that “respect for arbitration is based on it being a cost-effective and efficient method of resolving disputes. When arbitration is realistically unattainable, it amounts to no dispute resolution mechanism at all”. The SCC further held that “under the arbitration clause, Mr. Heller, and only Mr. Heller, would experience undue hardship in attempting to advance a claim against Uber, regardless of the claim’s legal merit. The arbitration clause is the only way Mr. Heller can vindicate his rights under the contract, but arbitration is out of reach for him and other drivers in his position. His contractual rights are, as a result, illusory”.

Justice Brown agreed with the majority decision but for differing reasons, holding that “[c]ontractual stipulations that foreclose access to legally determined dispute resolution — that is, to dispute resolution according to law - are unenforceable not because they are unconscionable, but because they undermine the rule of law by denying access to justice, and are therefore contrary to public policy”.

In view of the above findings, the SCC did not find it necessary to answer the issue of whether the arbitration agreement was also invalid because it was contracting out mandatory protections found under the Employment Standards Act, S.O. 2000.

Summary By: Hashim Ghazi