



COURT OF APPEAL FOR ONTARIO

CITATION: Heller v. Uber Technologies Inc., 2019 ONCA 1

DATE: 20190102

DOCKET: C65073

Feldman, Pardu and Nordheimer JJ.A.

BETWEEN

David Heller

Plaintiff (Appellant)

and

Uber
    Technologies Inc., Uber Canada, Inc., Uber B.V. and Rasier Operations B.V.

Defendants (Respondents)

Michael Wright, Danielle Stampley, Lior
    Samfiru, Stephen Gillman and James Omran, for the appellant

Lisa Talbot and Sarah Whitmore, for the
    respondents

Heard: November 27, 2018

On appeal from the order of
    Justice Paul M. Perell of the Superior Court of Justice, dated January 30, 2018,
    with reasons reported at 2018 ONSC 718.

Nordheimer J.A.:

[1]

The plaintiff appeals from the order of the motion judge that stayed the
    plaintiffs action in favour of arbitration.

I: Background

[2]

The appellant resides in Ontario. He has been licenced to use the Uber Driver
    App since February 2016.
[1]
The appellant has used the Driver App to provide food delivery services to
    people in Toronto. He has never used the Driver App to provide personal transportation
    services. The appellant is 35 years old and has a high school education. He
    earns approximately $400 to $600 per week based on 40 to 50 hours of work delivering
    food for UberEATS driving his own vehicle.

[3]

The appellant commenced this proposed class action on behalf of [a]ny
    person, since 2012, who worked or continues to work for Uber in Ontario as a
    Partner and/or independent contractor, providing any of the services outlined
    in Paragraph 4 of the Statement of Claim pursuant to a Partner and/or
    independent contractor agreement (the Class or Class Members). The Class
    Members provide food delivery services and/or personal transportation services
    using various Uber Apps. For convenience, I will refer to them collectively as
    drivers below.

[4]

In his proposed class action, the appellant seeks a declaration that
    drivers in Ontario, who have used the Driver App to provide food delivery
    and/or personal transportation services to customers, are employees of Uber and
    governed by the provisions of the
Employment Standards Act
, 2000
,
    S.O. 2000, c. 41 (the 
ESA
). The claim seeks declarations that Uber
    has violated the provisions of the
ESA
and that the arbitration provisions
    of the services agreements entered into between the parties are void and
    unenforceable. The action also claims damages of $400 million.

[5]

Uber App users (drivers and customers) download the Uber Apps to their
    smartphones. Uber uses GPS to connect customers seeking personal transportation
    using an App for riders (the Rider App) with drivers using an App developed
    for drivers (the Driver App). The Rider App allows riders to request rides at
    their location, track the driver on the way to the location and then rate the driver
    after the ride is completed.

[6]

The UberEATS App allows customers seeking food delivery to order food
    from restaurants and have it delivered by a nearby driver. The App displays
    each restaurants menu, collects each customers order and transmits the orders
    to the restaurants. The restaurant updates the App as the food is prepared.
    Then the App signals to a nearby driver that a delivery is available. Drivers
    willing to deliver the order accept through the App, which provides his or her
    identifying information to the restaurant and the customer. After delivering
    the food, the driver confirms the delivery in the App, which collects the customers
    payment and remits payment to the restaurant.

[7]

Uber requires drivers to create an account online to access the Apps.
    After downloading the Driver App, Uber requires drivers in Ontario (performing
    services by car) to provide copies of the following documents: (i) a valid
    drivers license; (ii) a valid vehicle registration; (iii) proof of eligibility
    to work in Canada; and (iv) valid insurance. After reviewing and verifying the drivers
    documentation and screening results, Uber activates their account.

[8]

The first time a driver logs into the Uber App, he or she must accept a
    services agreement, which appears on the smartphone screen. Drivers accept by
    clicking YES, I AGREE, and confirming acceptance by again clicking YES, I
    AGREE after reading the following: PLEASE CONFIRM THAT YOU HAVE REVIEWED ALL
    THE DOCUMENTS AND AGREE TO ALL THE NEW CONTRACTS. Ubers January 4, 2016
    Driver service agreement with the appellant is 14 pages. The November 29, 2016
    UberEATS service agreement with the appellant is 15 pages.

[9]

Uber determines the maximum fares drivers receive for their work
    according to a base fare amount plus distance (based on GPS data obtained
    through the App), plus applicable time amounts. Uber collects the fares from customers,
    provides customers with a receipt, and remits payment periodically to drivers,
    less Ubers fees.

[10]

Drivers
    can report complaints to Uber through the Apps. Customer Service
    Representatives (CSRs) in the Philippines first receive the complaints. If
    unresolved, they escalate the complaints to CSRs in Chicago, then to Ubers
    legal team. Drivers may also attend in Ontario at an Uber Greenlight Hub,
    which is a support centre staffed with Uber employees, to ask for assistance,
    although the appellant says that the staff there will likely only refer the
    driver back to the App for assistance.

[11]

The
    appellant entered into a Driver services agreement with Rasier Operations B.V.
    on June 7, 2016, and an UberEATS services agreement on December 15, 2016. Each
    agreement contains the following arbitration clause (the Arbitration Clause):

Governing Law; Arbitration. Except
    as otherwise set forth in this Agreement, this Agreement shall be exclusively
    governed by and construed in accordance with the laws of The Netherlands,
    excluding its rules on conflicts of laws. . . . Any dispute, conflict or
    controversy howsoever arising out of or broadly in connection with or relating
    to this Agreement, including those relating to its validity, its construction
    or its enforceability, shall be first mandatorily submitted to mediation
    proceedings under the International Chamber of Commerce Mediation Rules (ICC
    Mediation Rules). If such dispute has not been settled within sixty (60) days
    after a request for mediation has been submitted under such ICC Mediation
    Rules, such dispute can be referred to and shall be exclusively and finally
    resolved by arbitration under the Rules of Arbitration of the International
    Chamber of Commerce (ICC Arbitration Rules). . . . The dispute shall be
    resolved by one (1) arbitrator appointed in accordance with ICC Rules. The
    place of arbitration shall be Amsterdam, The Netherlands. . . .

[12]

Under
    the ICC Mediation Rules, drivers must pay a US$2,000 non-refundable filing fee
    to initiate mediation proceedings against Uber. For disputes valued under US$200,000,
    drivers must pay an additional administrative fee, which may be as much as US$5,000.
    These fees do not cover the mediators fees or legal fees.

[13]

If
    the parties are unable to resolve their dispute through mediation within 60
    days, they must proceed to arbitration under the ICC Arbitration Rules. A driver,
    and any party wishing to join the arbitration, must each pay a US$5,000 filing
    fee.

[14]

Article
    37 of the ICC Arbitration Rules requires the parties to pay an advance on costs
    in an amount likely to cover the fees and expenses of the arbitrators and the
    ICC administrative expenses for the claims which have been referred to it by
    the parties. The payment must be in cash, unless a partys share of the fees
    and expenses is greater than US$500,000, in which case the party may post a
    bank guarantee. The initial US$5,000 filing fee is credited against the
    claimants portion of this advance but is non-refundable. The administrative
    fee component of this advance is at least US$2,500 per party for disputes
    valued at under US$200,000. These fees do not cover counsel fees, travel or
    other expenses related to participating in the arbitration.

[15]

Accordingly,
    the up-front administrative/filing-related costs for a driver to participate in
    the mediation-arbitration process in the Netherlands prescribed in the
    Arbitration Clause is US$14,500. As an UberEATS driver, the appellant earns
    about $20,800-$31,200 per year, before taxes and expenses.

II: The
    decision below

[16]

The
    motion judge granted Uber's motion to stay the action in favour of arbitration.
    In so doing, the motion judge determined that the dispute is both international
    and commercial, such that the
Int
ernational Commercial Arbitration Act
,
    2017
, S.O. 2017, c. 2, Sched. 5 (the 
ICAA
) and not the
Arbitration
    Act
, 1991
, S.O. 1991, c. 17 (the 
Arbitration Act, 1991
) applied.
    However, the motion judge noted, at para. 35, that "ultimately not much
    turns on this point," because the appellant was unable to demonstrate that
    the exceptions under either Act warranted a denial of Uber's stay motion.

[17]

Applying
    the Supreme Court of Canada's decision in
Seidel v. TELUS Communications Inc.
,
2011 SCC 15, [2011] 1 S.C.R. 531 and this court's decision in
Wellman
    v. TELUS Communications Company
, 2017 ONCA 433, 138 O.R. (3d) 413, the
    motion judge held that courts must enforce arbitration agreements freely
    entered into, even in contracts of adhesion. Any restriction on the parties'
    freedom to arbitrate must be found in the legislation.

[18]

The
    motion judge then concluded that the plain language of the
ESA
does not
    restrict the parties from arbitrating. He also concluded that the arbitrability
    of employment agreements was not a question of pure statutory interpretation
    but instead raised a "complex issue of mixed fact and law," one for
    the arbitrator to decide at first instance under the competence-competence principle.
    Finally, the motion judge rejected the unconscionability exception that the
    appellant advanced under both the
Arbitration Act
, 1991
and the
ICAA
.

III: Analysis

[19]

I
    begin with a brief analysis of the standard of review applicable to the motion
    judges decision. In my view, the standard of correctness applies to his
    decision for two reasons. One is that the central questions raised, including
    the proper application of the provisions of either the

Arbitration A
ct,
    1991
or the
ICAA
are questions of law:
Trade Finance Solutions
    Inc. v. Equinox Global Limited
,
2018 ONCA 12, 420 D.L.R. (4th) 273,
    at para. 31. The other is that the court is being called upon to interpret a
    standard form contract, notably a contract of adhesion, that has ramifications
    beyond just the case at hand and thus the correctness standard also applies:
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Co.
,
2016 SCC
    37, [2016] 2 S.C.R. 23, at para. 46.

[20]

For the reasons that follow, I have concluded that the
    motion judge erred in granting a stay of this action in favour of arbitration. In
    particular, the motion judge erred in principle in his analysis of the existing
    authorities on the issue of when it is appropriate to grant a stay in favour of
    an arbitration provision contained in a contract of adhesion.

[21]

While I have serious reservations about the motion
    judges conclusion that the relationship between the parties here is a
    commercial one, since I agree with the motion judge that nothing much turns on
    whether the
ICAA
or the
Arbitration
    Act, 1991
applies to the Arbitration Clause in issue, I do not intend to
    deal with that issue. I will deal with the other issues in these reasons using
    the
Arbitration Act, 1991
since it is the more commonly referred to
    statute on these matters. I note that neither party suggested that the result
    would differ depending on which statute applies. I add that I would reach the
    same conclusions if I applied the

ICAA
.

[22]

As
    a result, there are two
issues that fall to be
    determined: (i)

whether the Arbitration Clause
    amounts to an illegal contracting out of the
ESA

and is thus invalid and
(ii) whether the Arbitration Clause is unconscionable and thus invalid
    on that separate basis.

(i)
Contracting out


[23]

Section
    7(1) of the
Arbitration Act, 1991
, provides that, if a party to an
    arbitration agreement commences a proceeding in respect of a matter to be
    submitted to arbitration under the agreement, the court shall stay the
    proceeding. However, there are a number of exceptions to that mandatory
    requirement that are found in s. 7(2). One of those exceptions is where the
    arbitration agreement is invalid.
[2]
Here the appellant says that the Arbitration Clause is invalid because it
    amounts to a contracting out of the
ESA
that is, itself, prohibited by
    the
ESA
.

[24]

It
    is not necessary, in deciding the issues raised, to determine whether the
    appellant (and others like him) are employees rather than independent
    contractors. That is the core issue that is to be decided in the action, if it
    proceeds. Rather, what must be decided is whether the Arbitration Clause is
    invalid such that the mandatory stay under s. 7(1) of the
Arbitration Act,
    1991
does not apply.

[25]

In determining that issue, I begin with the structure
    of the
Arbitration Act, 1991
to which I just referred. The
    structure of the statute, on the issue of a stay of proceedings in favour of
    arbitration, is that a court must grant a stay unless one of the five
    exceptions in s. 7(2) applies. If one of those exceptions applies, then the
    court has a discretion whether or not to grant a stay.

[26]

What
    is clear from the structure of the
Arbitration Act, 1991
is that it is
    the court that is charged with making the determination whether one of the
    exceptions in s. 7(2) applies so that the issue of whether to grant a stay
    becomes a discretionary decision, not a mandatory one.
[3]
It is not the arbitrator who makes that call, it is the court  a point that I
    will discuss in more detail below.

[27]

Turning
    to the exceptions then,
it seems to me that one
    must start with the presumption that the appellant can prove that which he
    pleads, that is, that he is an employee of Uber. This is a preliminary motion
    in a proceeding and, like many other preliminary challenges to the courts
    jurisdiction to entertain a claim, the court normally proceeds on the basis
    that the plaintiffs allegations are true or, at least, capable of being
    proven. I note that this is the approach that was taken in
Seidel
where Binnie J. said, at para. 8:

I should flag at the outset two
    issues that this appeal does not decide. Firstly, of course, Ms. Seidels
    complaints against TELUS are taken to be capable of proof only for the purposes
    of this application. We are not assuming the allegations will be proven, let
    alone deciding that TELUS did in fact engage in the conduct complained of.

[28]

The question then
becomes, if the appellant
    (and those like him) is an employee of Uber, does the Arbitration Clause constitute
    a prohibited contracting out of the
ESA
? If it does, then the Arbitration
    Clause is invalid, the mandatory stay under s. 7(1) does not apply, and the court
    may then deny a stay under s. 7(2).

[29]

In
    determining that question, heed must be taken of s.
5 of the
ESA
:

(1) Subject to subsection (2), no employer or agent of an
    employer and no employee or agent of an employee shall contract out of or waive
    an employment standard and any such contracting out or waiver is void.

(2) If one or more provisions in
    an employment contract or in another Act that directly relate to the same
    subject matter as an employment standard provide a greater benefit to an
    employee than the employment standard, the provision or provisions in the
    contract or Act apply and the employment standard does not apply.

[30]

Under
    s. 1(1) of the
ESA
, an employment standard is defined as follows:

employment standard means a
    requirement or prohibition under this Act that applies to an employer for the
    benefit of an employee.

[31]

As
    earlier noted, in his proposed class action, the appellant contends that he and
    his fellow drivers are employees of Uber. If they are employees, then they are
    covered by the
ESA
and are entitled to the benefits provided by the
ESA
.
    Most importantly, for the purposes of this matter, if they are employees, then
    they are not bound by any contractual term that purports to oust those benefits.

[32]

Included
    in the benefits provided by the
ESA
is the right of an employee to
    make a complaint to the Ministry of Labour that his/her employer has
    contravened the
ESA
, pursuant to s. 96(1) of the
ESA
:

A person alleging that this Act has been or is being
    contravened may file a complaint with the Ministry in a written or electronic
    form approved by the Director.

[33]

Only
    two restrictions on that right appear in the
ESA
. One is in s. 98, which
    provides that an employee who commences a civil proceeding may not concurrently
    make a complaint that raises the same issue as the civil proceeding. The other
    is in s. 99(2), which precludes an employee who is a member of a trade union
    from making a complaint. The latter, of course, does not apply to the appellant.
    With respect to the former, I do not accept the submission of Uber that a civil
    proceeding includes an arbitration. There is no reason to interpret the term
    civil proceeding in that fashion. Indeed, the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43, which applies to all civil proceedings in Ontario,
    defines both actions and applications as civil proceedings. Notably it does not
    mention arbitrations. The definitions of actions and applications in the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194 take the same approach.

[34]

Further,
    there is nothing in the
ESA
that suggests that there was any intention
    to include arbitrations within the usual meaning of the term civil
    proceeding. Indeed, certain provisions suggest a contrary conclusion. One is
    s. 8(2) that requires an employee who commences a civil proceeding to give
    notice of that fact to the Director of Employment Standards. It would seem odd that
    notice of an arbitration (which is normally private) would have to be given to
    the Director but that would be the result if arbitrations are included in civil
    proceedings. In fact, s. 8(2), which requires that notice be given to the
    Director before the date the civil proceeding is set down for trial, also
    seemingly equates civil proceedings with actions. Another is s. 101(1) which
    refers specifically to a proceeding before an arbitrator and thus appears to
    draw a distinction between that form of proceeding and what the
ESA
otherwise
    refers to as a civil proceeding. In any event, what is clear is that the
    restriction in s. 98 does not apply to the circumstances of this case.

[35]

If
    an employee makes a s. 96 complaint, then an Employment Standards Officer
    (ESO) must investigate the complaint. The ESO has certain rights and
    authorities when doing so. By way of example, under s. 102(1) of the
ESA
,
the ESO may require the employee and the employer to attend a meeting with
    the ESO. The ESO may also require persons to produce documents under s. 102(4).
    And, in the end result, the ESO may, pursuant to s. 103, issue an order to pay
    wages against the employer if a contravention of the
ESA
has occurred.

[36]

In
    my view, this investigative process constitutes an employment standard as that
    term is defined in the
ESA
. The investigative process, once triggered,
    is mandated by the
ESA
and both the employee and, more importantly the
    employer, are required to participate in that process. The process is thus a
    requirement that applies to an employer for the benefit of an employee and,
    accordingly, meets the definition of an employment standard. In reaching this
    conclusion, I read the words, used in the definition of employment standard, in
    their grammatical and ordinary sense:
Rizzo & Rizzo Shoes Ltd. (Re)
,
[1998] 1 S.C.R. 27, at para. 21.

[37]

Uber
    argued, at the hearing, that s. 96 is not an employment standard because, in
    allowing employees to make a complaint to the Ministry of Labour, it does not
    establish a requirement or prohibitionthat applies to an employer. There are
    two problems with this submission. First, it extracts s. 96 from the relevant
    statutory context and treats it as a stand-alone provision, contrary to the
    modern approach to statutory interpretation adopted by the Supreme Court of
    Canada in
Rizzo
.
Second, it invites an unduly narrow
    interpretation of s. 96 which would, if accepted, authorize employers to
    contract their employees out of s. 96, and thus out of the entire investigative
    process, without offending s. 5(1). That outcome would undermine the protective
    purpose of the
ESA
. It would also run afoul of the Supreme Court of
    Canadas directive regarding the interpretative approach to be taken to the
ESA
.
    As Iacobucci J. said in
Machtinger v. HOJ Industries Ltd.
, [1992] 1
    S.C.R. 986 at p. 1003:

The objective of the Act is to
    protect the interests of employees by requiring employers to comply with
    certain minimum standardsAccordingly, an interpretation of the Act which
    encourages employers to comply with the minimum requirements of the Act, and so
    extends its protections to as many employees as possible, is to be favoured
    over one that does not.

[38]

I
    return then to the point that it is for the court to decide whether the
    exceptions in s. 7(2) of the
Arbitration Act, 1991
apply when an order
    for a stay of a proceeding is sought. Uber argues that this is an issue for the
    arbitrator to determine because it is an issue going to the jurisdiction of the
    arbitrator. Uber invokes the competence-competence principle in support of
    its position.

[39]

I
    do not agree with Ubers position because, in my view, this issue is not about
    jurisdiction. I am aware of the general approach that any dispute over an
    arbitrators jurisdiction should first be determined by the arbitrator but that
    addresses situations where the scope of the arbitration is at issue. That is
    not this case. There does not appear to be any dispute that, if the Arbitration
    Clause is valid, the appellants claim would fall within it. Rather, the issue
    here is the validity of the Arbitration Clause. The answer to that question is
    one for the court to determine as s. 7(2) of the
Arbitration Act, 1991
makes clear.

[40]

In
    light of that conclusion, the competence-competence principle has no
    application to this case and, consequently, I do not need to address the
    arguments made with respect to it.

[41]

Given
    my conclusion regarding the meaning of employment standard, it follows that
    the Arbitration Clause constitutes a contracting out of the
ESA
. It
    eliminates the right of the appellant (or any other driver) to make a complaint
    to the Ministry of Labour regarding the actions of Uber and their possible
    violation of the requirements of the
ESA
. In doing so, it deprives the
    appellant of the right to have an ESO investigate his complaint. This is of
    some importance for, among other reasons, if a complaint is made then the
    Ministry of Labour bears the burden of investigating the complaint. That burden
    does not fall on the appellant. Under the Arbitration Clause, of course, the
    appellant would bear the entire burden of proving his claim.

[42]

I
    am aware that the appellant has not, in fact, chosen to make a complaint under
    the
ESA
but rather has commenced this proposed class action. That fact
    does not alter the analysis, however, for a few reasons. The first reason is
    that, if the Arbitration Clause offends s. 5(1) because it contracts out of the
    investigative process, the provision is invalid, irrespective of what the
    appellant does or does not do.

[43]

A
    second reason is that it is the appellants right, under the
ESA
, to
    avail himself of the civil proceeding exception to the complaint process. It
    is his choice whether to take that route, and he is only barred from making a
    complaint if he chooses to take it. The Arbitration Clause essentially transfers
    that choice to Uber who then forces the appellant (and all other drivers) out
    of the complaints process. I reiterate that, in addressing this issue, we are
    dealing not just with the appellant but with all persons who might be in the
    same position as the appellant. The interpretative process must take that into
    account.

[44]

A
    third reason is that this is a proposed class action. That fact provides the
    obvious reason why the appellant is availing himself of a civil proceeding over
    the complaint process. If the class proceeding is certified, then the central
    issues will be determined, not just for the appellant, but for all persons who
    find themselves in the same position as the appellant. It is well recognized
    that this is one of the central benefits of, and reasons for, the
Class
    Proceedings Act, 1992
, S.O. 1992, c. 6.

[45]

A
    fourth reason flows from the previous two and that is that under the complaints
    process, and also under the proposed class proceeding, the central issues will
    be determined for everyone who finds themselves in the same position as the
    appellant. If the Ministry of Labour were to make a finding regarding the
    appellant, it would be a public finding upon which others could rely. The same
    is true through the class proceeding, if certified, since any decision in that
    proceeding would be binding on the members of the class (except for those who
    opted out). It is clear that there is no ability for a class determination
    under the Arbitration Clause nor is any determination through the arbitration a
    matter of public record upon which others can rely.

[46]

A
    fifth reason is that there is no evidence in this record as to what remedy the
    appellant could expect to obtain if he is successful in the arbitration
    process. The Arbitration Clause requires that the laws of the Netherlands are
    to apply to the arbitration. We do not know how the laws of the Netherlands
    deal with the issues that the appellant has raised. We do not know if the laws
    of the Netherlands would provide greater, lesser, or equal benefits to the
    appellant, if it is determined that he is an employee. If he is an employee,
    then the appellant is entitled to the benefits that are provided by the
ESA
.
    In other words, as an Ontario resident he is statutorily entitled to the minimum
    benefits and protections of Ontarios laws. He should not be left in a
    situation where those benefits and protections are set by the laws of another
    country.

[47]

On
    that latter point, I should address the position taken by Uber that it was the
    appellant who should have, but did not, provide any expert evidence as to the
    laws of the Netherlands and whether an arbitrator there would apply Ontario law
    to the issues raised. I would first point out that Uber also did not provide
    any such expert evidence. It would appear self-evident that it would have been
    a great deal easier for Uber to provide that evidence, if they considered it to
    be important, than it would be for the appellant to do so.

[48]

In
    any event, expert evidence on this point was not required. As the majority in
Douez
    v. Facebook, Inc.
,
2017 SCC 33, [2017] 1 S.C.R. 751 pointed out in
    the context of forum selection clauses, there is no requirement for a party
    trying to avoid a forum selection clause to prove that his/her claim would fail
    in that forum: at para 67. Similarly, I find that in this context, there was no
    requirement for the appellant to prove that his claim would fail, if it was
    arbitrated in the Netherlands, in order to avoid the application of the Arbitration
    Clause.

[49]

I
    conclude, therefore, that the Arbitration Clause is invalid because, based on
    the presumption that drivers are employees of Uber, as pleaded, it constitutes
    a contracting out of the provisions of the
ESA
, a result that is
    prohibited by that statute. I am reinforced in that conclusion when public
    policy considerations are taken into account.

[50]

The
    issue of whether persons, in the position of the appellant, are properly
    considered independent contractors or employees is an important issue for all
    persons in Ontario. The issue of whether such persons are entitled to the
    protections of the
ESA
is equally important. Like the privacy issue
    raised in
Douez
, the characterization of these persons as independent
    contractors or employees for the purposes of Ontario law is an issue that ought
    to be determined by a court in Ontario. As the majority in
Douez
said,
    at para. 37:

After all, the strong cause test
    must ensure that a court's plenary jurisdiction only yields to private
    contracts where appropriate.

[51]

It
    follows from my conclusion on this issue that the mandatory stay provided for
    in s. 7(1) does not apply. Once the Arbitration Clause is found to be invalid
    under s. 7(2), the remedy of a mandatory stay no longer has any application.

(ii)
Unconscionability

[52]

Independent
    of that first conclusion, I would, in any event, find the Arbitration Clause to
    be invalid on the basis of unconscionability. This conclusion would also bring
    the Arbitration Clause within the invalidity exception in s. 7(2).

[53]

The
    motion judge dismissed the unconscionability argument on the basis that there
    was no evidence that Uber preyed or took advantage of Mr. Heller or the other
    Drivers or extracted an improvident agreement by inserting an arbitration
    provision (para. 70). The motion judges conclusion on this issue is flawed
    because, in reaching it, he made palpable and overriding errors of fact.

[54]

Chief
    among those errors is the motion judges finding that most grievances or
    disputes between Drivers and Uber can be dealt with by the dispute resolution
    mechanisms readily available from Ontario and that it will be a substantial
    dispute that entails arbitration in the Netherlands (para. 70).

[55]

What
    the factual record actually shows is that there is no dispute resolution
    mechanism either in Ontario, or elsewhere, short of the Arbitration Clause. The
    other avenues available to a driver, who has a complaint, are located in the Philippines
    or in Chicago. Though accessible from Ontario, they are procedures run by Uber
    personnel and are completely controlled by Uber. They are not, in any way,
    independent grievance or adjudication procedures.

[56]

It
    is also not correct that only a substantial dispute requires arbitration in
    the Netherlands. To the contrary, all disputes require arbitration in the
    Netherlands unless the driver resolves his/her complaint voluntarily with Uber.
    The reason that only a substantial dispute would go to arbitration is a direct result
    of the financial barriers that the arbitration process erects which would
    dissuade drivers with lesser disputes from pursuing that process.

[57]

It
    was also an error for the motion judge to evaluate the impact of the Arbitration
    Clause, in this context, by looking at the collective claim in the proposed
    class action, as opposed to the individual claim of the appellant. The motion
    judge held that there is a significant claim for $400 million, which does not
    make the agreement improvident, in a comparative sense, with the costs of an
    arbitration in the Netherlands.

[58]

However,
    the proposed class action is just that, a proposed class action. It has not yet
    been certified. Until it is certified, it remains, in essence, a single claim
    by the appellant. What makes the Arbitration Clause clearly improvident is the
    fact that any driver with a claim, that might ordinarily amount to nothing more
    than a few hundred dollars, must undertake an arbitration in the Netherlands in
    order to have their rights determined independently. That arbitration must be
    held in Amsterdam, under the law of the Netherlands, and must be conducted in
    accordance with the ICC Rules.

[59]

It
    must be remembered, in this regard, that the evidence shows that the cost of
    initiating the arbitration process alone is US$14,500. This does not include
    the costs of travel, accommodation and, most importantly, counsel to
    participate in the arbitration. These costs are to be contrasted with the
    appellants claim for minimum wage, overtime, vacation pay and the like brought
    by a person earning $400-$600 per week.

[60]

I
    pause at this juncture to address the proper test to be applied in determining
    whether a contractual provision is unconscionable. In Ontario, the existing
    case law establishes that there are four elements to the test. Those elements
    are set out in
Titus v. William F. Cooke Enterprises Inc.
,
2007
    ONCA 573, 284 D.L.R. (4th) 734, at para. 38, recently affirmed in
Phoenix
    Interactive Design Inc. v. Alterinvest II Fund L.P.
,
2018 ONCA 98,
    420 D.L.R. (4th) 335. They are:

1.

a grossly unfair and improvident transaction;

2.

a victim's lack of independent legal advice or other suitable advice;

3.

an overwhelming imbalance in bargaining power caused by the victim's
    ignorance of business, illiteracy, ignorance of the language of the bargain,
    blindness, deafness, illness, senility, or similar disability; and

4.

the other party's knowingly taking advantage of this vulnerability.

[61]

In
    contrast to the Ontario approach, there is some suggestion that the test for
    unconscionability requires only two elements: inequality of bargaining power
    and unfairness. This is the test applied by the British Columbia Court of
    Appeal in
Morrison v. Coast Finance Ltd.
(1965), 55 D.L.R. (2d) 710
    (B.C. C.A). It is also the test applied by Abella J. in her concurring reasons
    in
Douez
,
at para. 115, and appears to be the test applied by
    the dissenting judges in
Douez
, at para. 145. The majority in
Douez
did not address the issue of unconscionability and, consequently, did not
    address the elements of the test.

[62]

I
    do not consider it necessary to resolve the question of whether the decision in
Douez
has changed the proper elements to be applied in determining
    unconscionability in Ontario because, under either test, I find that the Arbitration
    Clause is unconscionable.

[63]

In
    approaching that issue, I start with the approach taken by the majority in
Douez
.
    While I recognize that the clause in question in
Douez
was a forum
    selection clause, I see no reason in principle why the same approach ought not
    to be taken to the Arbitration Clause in this case. I say that because the Arbitration
    Clause here is not, strictly speaking, simply an arbitration provision. It is
    also a forum selection provision and it is a choice of laws provision. It covers
    much more than just the method through which disputes will be resolved. It establishes
    both a foreign forum for the adjudication and a foreign law that will be
    applied in that adjudication. Consequently, the Arbitration Clause should be
    subject to a broader analysis when it comes to the issue of validity,
    especially in a situation where it is part of a contract of adhesion.

[64]

The
    majority in
Douez
set out the approach to determining whether to
    enforce such a clause. The majority applied a two-step approach. At the first
    step, the party relying on the clause must establish that the clause is valid,
    clear, and enforceable, and that it applies to the cause of action before the
    court (para. 28). In this step, the court applies the principles of contract
    law to determine the validity of the clause, including issues such as unconscionability,
    undue influence, and fraud.

[65]

If
    the clause is found to be valid, then, at the second step, the onus shifts to
    the opposing party who must demonstrate strong reasons why the court should not
    enforce the forum selection clause and stay the action. At this stage, the
    court must consider all the circumstances including the "convenience of
    the parties, fairness between the parties and the interests of justice"
    (para. 29).

[66]

Although,
    in my view, the two step approach taken in
Douez
has application to
    this case, that approach has to be adjusted to take into account the statutory
    requirements that flow from the
Arbitration Act, 1991
. One of those requirements
    is found in s. 7(2) which clearly places the onus on the person, who seeks to
    avoid the mandatory stay, to establish that the arbitration provision in issue
    is invalid. So in this case, the onus falls on the appellant to establish
    unconscionability and thus invalidity. It is not Ubers onus to establish
    validity.

[67]

Another
    requirement is that, because the exception in s. 7(2) requires a finding of
    invalidity, there does not appear to be any room for the second step of the
    analysis in
Douez
to apply. That is, if the appellant cannot establish
    that the Arbitration Clause is invalid, the
Arbitration Act, 1991
would
    not allow for a separate finding that the Arbitration Clause is unenforceable
    for other reasons. Indeed, the majority in
Douez
appears to proceed on
    the basis that the forum selection clause was valid but, nonetheless, the majority
    would not enforce it for the reasons they gave. That latter remedy is not
    provided for under the
Arbitration Act, 1991
as a mechanism to avoid
    the mandatory stay.

[68]

In
    any event, in my view, the Arbitration Clause here fails at the first step of
    this analysis. Contrary to the conclusion reached by the motion judge, I find
    that the Arbitration Clause is unconscionable when it is viewed properly and in
    the context in which it is intended to apply. Applying the four elements from
Titus
,
    I conclude as follows:

1.

The Arbitration
    Clause represents a substantially improvident or unfair bargain. It requires an
    individual with a small claim to incur the significant costs of arbitrating
    that claim under the provisions of the ICC Rules, the fees for which are out of
    all proportion to the amount that may be involved. And the individual has to
    incur those costs up-front. Ubers submission that the individual might recover
    those costs, if successful, does not change the impact that flows from the fact
    that these costs must be paid up-front. Further, it should be self-evident that
    Uber is much better positioned to incur the costs associated with the
    arbitration procedure that it has chosen and imposed on its drivers. Additionally,
    the Arbitration Clause requires each claimant to individually arbitrate his/her
    claim and to do so in Ubers home jurisdiction, which is otherwise completely
    unconnected to where the drivers live, and to where they perform their duties. Still
    further, it requires the rights of the drivers to be determined in accordance
    with the laws of the Netherlands, not the laws of Ontario, and the drivers are
    given no information as to what the laws of the Netherlands are.

2.

There is no
    evidence that the appellant had any legal or other advice prior to entering
    into the services agreement nor is it realistic to expect that he would have. In
    addition, there is the reality that the appellant has no reasonable prospect of
    being able to negotiate any of the terms of the services agreement.

3.

There is a
    significant inequality of bargaining power between the appellant and Uber  a
    fact that Uber acknowledges.

4.

Given the
    answers to the first three elements, I believe that it can be safely concluded
    that Uber 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
    Uber. It is a reasonable inference that Uber did so knowingly and
    intentionally. Indeed, Uber appears to admit as much, at least on the point of
    favouring itself when drafting the Arbitration Clause. Its rationale in support
    of that favouring, i.e. that it chose this particular arbitration process in
    order to provide consistency of results, is an unpersuasive one.

[69]

Consequently,
    all four elements of the
Titus
test for unconscionability are present
    in this case. It follows that, if the two-step test found in
Douez
were
    to apply, it would also be met.

[70]

It
    seems to me that the fundamental flaw in the approach adopted by the motion
    judge to this issue is to proceed on the basis that the Arbitration Clause is
    of the type involved in normal commercial contracts where the parties are of
    relatively equal sophistication and strength. That is not this case. As the
    majority in
Douez
noted, forum selection clauses often operate to
    defeat consumer claims (para. 62). The same can be said of the Arbitration Clause
    here  it operates to defeat the very claims it purports to resolve. And I reiterate
    that this Arbitration Clause is much more than just a simple arbitration
    provision.

[71]

I
    would add that, for the purposes of this analysis, I do not see any reasonable
    distinction to be drawn between consumers, on the one hand, and individuals
    such as the appellant, on the other. Indeed, I would note that, if Uber is
    correct and their drivers are not employees, then they are very much akin to
    consumers in terms of their relative bargaining position. Alternatively, if
    Uber is wrong, and their drivers are employees, we are not speaking of
    employees who are members of a large union with similar bargaining power and
    resources available to protect its members. Rather, the drivers are individuals
    who are at the mercy of the terms, conditions and rates of service set by Uber,
    just as are consumers. If they wish to avail themselves of Ubers services,
    they have only one choice and that is to click I agree with the terms of the
    contractual relationship that are presented to them.

[72]

Finally
    on this point, I should mention that the motion judge, in coming to his
    conclusion, relied in part on my decision in
Kanitz v. Rogers Cable Inc.
(2002)
,
58 O.R. (3d) 299 (S.C.).
Kanitz
is entirely
    distinguishable from the situation here. First, in
Kanitz
, there was
    no evidence as to what the costs of initiating the arbitration process would
    be, nor evidence that any particular customer had been dissuaded from
    arbitrating because of the expense. The arbitration provision in
Kanitz
required the arbitration to proceed where the consumer resided and on mutually
    agreeable terms. Consequently, there was no evidence of any significant
    financial or geographic barriers to initiate the arbitration process, as there
    are in this case. I would also note that, subsequent to the decision in
Kanitz
,
    consumer protection legislation in Ontario was amended to preclude arbitration
    in such situations.

[73]

In
    the end result, for the reasons I have given, I conclude that the Arbitration Clause
    is unconscionable and therefore invalid. The invalidity exception in s. 7(2) of
    the
Arbitration Act, 1991
again applies to the Arbitration Clause.

IV: Conclusion

[74]

I
    conclude that the Arbitration Clause amounts to an illegal contracting out of
    an employment standard
,
contrary to s. 5(1) of the
ESA
, if the
    drivers are found to be employees as alleged by the appellant. I reach the separate
    and independent conclusion that the Arbitration Clause is unconscionable at
    common law. On the basis of each finding, the Arbitration Clause is invalid
    under s. 7(2) of the
Arbitration Act, 1991
. The remedy of a mandatory stay
    has no application.

[75]

The
    appeal is therefore allowed and the stay is set aside. The respondent will pay
    to the appellant his costs of the appeal in the agreed amount of $20,000
    inclusive of disbursements and HST.

[76]

The
    parties did not make submissions on what should happen to the costs of the
    motion should the appeal be successful. If the parties cannot resolve that
    issue, they may make brief written submissions. The appellant shall file his
    submissions within 15 days of the date of these reasons and the respondent
    shall file its submissions within 10 days thereafter. No reply submissions are
    to be filed and each partys submissions shall not exceed five pages.

Released: January 2, 2019 K.F.

I.V.B.
    Nordheimer J.A.

I
    agree. K. Feldman J.A.

I
    agree. G. Pardu J.A.





[1]

Since it does not appear necessary, for the purposes of these
    reasons, to differentiate between the various respondents, I will refer to them
    collectively as Uber.



[2]

Similar provisions are found in the
ICAA
.



[3]
The structure of the
ICAA
is essentially the same with the
    result that the approach to the two statutes should be the same:
Ontario
    Medical Association v. Willis Canada Inc
., 2013 ONCA 745, 118 O.R. (3d) 241,
    at para. 26.


