Draft Dispute Resolution Clauses Conservatively: Uber Technologies Inc. v. Heller (2020 SCC 16)Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII)
Today (June 26, 2020), the Supreme Court of Canada issued a groundbreaking decision in Uber Technologies Inc. v Heller, 2020 SCC 16 ("Uber").
In Uber, the driver previously accepted Uber's standard form agreement. The agreement contained an arbitration clause, which required the Uber driver to resolve any disputes in the Netherlands. The arbitration process would also cost $14,500 USD in administrative/commencement fees, which represented most of the driver's annual income.
In an 8-1 ruling, the Supreme Court found the arbitration clause was unconscionable and, therefore, invalid. The clause rendered the driver's contractual rights "illusory," as it was impossible for the driver to pursue arbitration:
"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... Based on both the disadvantages faced by Mr. Heller in his ability to protect his bargaining interests and on the unfair terms that resulted, the arbitration clause is unconscionable and therefore invalid" [at paras 97-98].
In an interesting concurring opinion, Justice Brown disagreed that unconscionability applied. Instead, he found the clause was contrary to public policy, as it foreclosed access to legally-determined dispute resolution. It thereby undermined the rule of law, as it denied access to justice.
Justice Brown further critiqued the majority's "expansion" of the doctrine of unconscionability, due to concerns of increasing uncertainty in the doctrine (and in contract law, more generally):
"Charting such a course will serve only to compound the uncertainty that already plagues the doctrine, and to introduce uncertainty to the enforcement of contracts generally" [at para 103].
Post-Uber, employers and companies should draft dispute resolution clauses carefully and conservatively. Particular caution should be taken where there are power imbalances between the parties, or the clause mandates dispute resolution in a specific province, country, and/or jurisdiction.