Employment & Labour

Class action spotlights unreasonable clauses in employment contracts

By AdvocateDaily.com Staff

In rejecting a ride-sharing company’s demand that a case against it be heard in the Netherlands at the expense of the plaintiffs, the Ontario Court of Appeal (OCA) has drawn a line on an “outrageous” clause in the company's contract with drivers, says Toronto labour and employment lawyer John De Vellis.

The OCA gave the plaintiffs the green light to proceed in the Ontario courts with their case against the company, which argues that they are employees, not independent contractors, and entitled to benefits and vacation days under the Employment Standards Act.

The company pushed back against the class action by arguing their contract, which all drivers must sign, expressly states that any conflicts which cannot be resolved within the company must go to third-party arbitration in the Netherlands, which De Vellis, partner with Shibley Righton LLP, says would be an onerous expense for the complainants.

He says the company "argues the arbitration clause applies even if the dispute is over whether the drivers are actually employees entitled to protection under Ontario law. The OCA found the arbitration clause to be invalid as it amounted to an impermissible contracting out of the Employment Standards Act. But the OCA went further and found that independent of the conclusion regarding the ESA, the clause is invalid because it is unconscionable.

“The court called the arbitration clause unconscionable, and I’d call it outrageous,” De Vellis tells AdvocateDaily.com. “These are two parties of unequal bargaining power.”

He says whether or not the plaintiffs are employees has not been decided and won’t be ruled on any time soon, but the court has levelled the playing field between drivers and the company by tossing out the arbitration clause.

As the court notes, there’s a series of nonrefundable fees to engage in mediation or arbitration with the ride-sharing giant, and they escalate, requiring cash deposits of US$500,000 or more depending on the value of the dispute, including a $14,500 fee for the arbitration process itself.

Given that a ride-sharing food driver makes between Cdn$20,000 to $30,000 a year, it’s completely disproportionate, says De Vellis, who is not involved in the case and comments generally.

The plaintiffs were in a catch-22 in that they couldn’t afford the arbitration process, he says. It also thwarted the plaintiffs’ right to have the dispute adjudicated through the Employment Standards Act.

“Even without going to the Netherlands, the fee was a deterrent,” De Vellis says. “A valid contract is between two equal parties but here, one party clearly has unequal bargaining power, and there was no independent legal advice.”

The court was succinct in its assessment: “I believe that it can be safely concluded that [the company] chose this Arbitration Clause in order to favour itself and thus take advantage of its drivers, who are clearly vulnerable to the market strength of [the company]. It is a reasonable inference that [it] did so knowingly and intentionally. Indeed, [the company] appears to admit as much, at least on the point of favouring itself when drafting the Arbitration Clause.”

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