Proposed Class Action Against Uber Stayed: The Court Enforces The Parties' Agreement To Arbitrate

| APRIL 16, 2018
John Buhlman
In Heller v. Uber Technologies Inc. et al., 2018 ONSC 718, the Ontario Superior Court (Perell, J.) stayed a proposed class action against several Uber entities because the agreements between the proposed representative plaintiff and Uber include an agreement to arbitrate disputes in the Netherlands, under the Rules of the International Chamber of Commerce. The motion to stay the class action raised important issues regarding arbitration agreements, and the decision demonstrates that Ontario is an arbitration-friendly jurisdiction.

The plaintiff, a resident of Ontario, signed several contracts with Uber. Using the Uber Apps, he delivers food from restaurants to consumers. The plaintiff alleges in the proposed class action that he and the putative class members are employees of Uber and are entitled to the benefits of Ontario's Employment Standards Act, 2000 ("ESA"). 

The plaintiff seeks $400 million in damages and a declaration that Uber has breached the ESA. In deciding the case, the court had to determine three main issues. The first was whether the Arbitration Act, 1991 or the International Commercial Arbitration Act, 2017 applied, even though the result would have been the same under both acts, since under both acts, subject to certain exceptions, on the request of one of the parties to an arbitration agreement, the court must refer the matter to arbitration.

The International Act only applies to agreements that are both "international" and "commercial". Since the plaintiff's and putative class members' place of business is in Ontario and the Uber entity which is the party to the agreement carries on business in the Netherlands, the agreement meets the definition of "international". The more difficult issue was whether the agreements are "commercial" since the allegation by the plaintiff is that he and the class members are employees and the relationship is not "commercial". The agreement with Uber specifically states that it does not create an employment relationship. The court recognized that whether or not a relationship is one of employer and employee or independent contractor is a fact-based determination and that the parties' characterization may not be determinative of how a court must classify the relationship.

The issue of whether the relationship is one of employment or independent contractor leads to the second issue determined by the court, i.e. who decides the nature of the relationship. Applying the Competence-Competence principle, the court determined that it is for the arbitrator in the Netherlands to determine, first, whether he or she has jurisdiction to decide whether the agreements are employment contracts and whether the dispute is arbitrable. In the first instance, the court took the parties at their word that the agreements are not employment contracts and it is for the plaintiff to challenge the jurisdiction of the arbitrator in the first instance at the outset of the arbitration.

The third important issue the court decided was whether there is any statutory language that precludes arbitration, in particular whether the ESA precludes arbitration. The court held that the plain reading of the ESA does not preclude resort to arbitration. In any event, the determination of whether employment claims are arbitrable is an issue subject to the Competence-Competence Principle to be determined in the first instance by the arbitrator. It is a complex issue of mixed fact and law and not simply a matter of statutory interpretation. 

 The arguments of the plaintiff that the agreement to arbitrate is illegal on the grounds of unconscionability and an illegal contracting out of the ESA were also rejected. 

As noted by Justice Perell in his decision, there is a very strong legislative direction under both the domestic act and the international act and numerous court cases that hold that courts should only refuse to enforce an arbitration agreement if it is clear that the dispute falls outside the agreement. Even then, the arbitral tribunal should determine that in the first instance.

The expense of arbitrating in the Netherlands under the Rules of the International Chamber of Commerce will be significant if the plaintiff pursues his claim. Such expense will be in addition to the $65,000 in costs awarded to Uber by the court.

The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice.