Supreme Court Rules in Favour of Contractual Fairness and Access to Justice in Uber v Heller

The Supreme Court of Canada’s decision in Uber Technologies Inc. v. Heller, 2020 SCC 16, Spromises to improve the fairness of standard form contracts and promote access to justice for Canadians. In an 8-1 decision, the Supreme Court of Canada ruled that Uber’s arbitration agreement denying drivers access to Canadian courts was unconscionable, exploiting an inequality of bargaining power to impose unfair terms on drivers.

The case began as a class proceeding brought by Mr. Heller against Uber for wrongfully classifying Uber drivers as independent contractors instead of employees, and in doing so depriving drivers of the protections and benefits of Ontario’s Employment Standards Act, 2000.

Uber filed a motion requesting the court to stay the class proceeding, arguing that the arbitration agreement in Uber’s standard form driver service agreement prohibited the issue from being determined in an Ontario court. In order to become a driver, one must agree to Uber’s non-negotiable standard terms. These terms require any dispute resolution to occur through alternative dispute resolution in the Netherlands at a cost to a complaining driver of at least US$14,500 for up-front administrative and filing fees, plus legal fees and other costs of participation. These costs swallow up most of the average Uber driver’s annual income. Mr. Heller argued that these costs bar access to a remedy as they are far too high for any driver to reasonably bear in order to access their rights.

At first instance, the court granted Uber’s motion, ruling that the arbitration agreement was valid and requiring Mr. Heller’s complaint to be resolved in Holland (Heller v. Uber Technologies Inc., 2018 ONSC 718). The Ontario Court of Appeal unanimously overturned that decision, finding Uber’s arbitration agreement both unconscionable and an impermissible contracting out of mandatory terms of the Employment Standards Act, 2000 (Heller v. Uber Technologies Inc., 2019 ONCA 1). Uber appealed to the Supreme Court of Canada.

CIPPIC intervened before the Supreme Court of Canada, inviting the Court to adopt a robust approach to the unconscionability analysis where dispute resolution clauses have the effect of rendering illusory the availability of any dispute resolution mechanism. CIPPIC cautioned that “contractual terms that have the effect of denying access to justice deny justice itself”.

The Supreme Court of Canada affirmed the result in the Court of Appeal, finding Uber’s arbitration agreement invalid. Justices Rowe and Abella, writing for a 7-judge majority, found Uber’s arbitration agreement invalid on the basis of unconscionability. Justice Brown, concurring in the result but disagreeing with the majority’s unconscionability analysis, found Uber’s arbitration agreement invalid on public policy grounds, essentially contracting out from under the rule of law. Justice Côté in dissent would have found Uber’s arbitration agreement valid.

The majority judgement by Justice Abella and Justice Rowe simplified and broadened the scope of the unconscionability doctrine. Justice Rowe and Justice Abella adopted the two-part test for unconscionability endorsed by Justice Abella in Douez v Facebook, Inc., 2017 SCC 33.

(1) unequal bargaining power between the parties; and

(2) an improvident bargain that “unduly advantages the stronger party or unduly disadvantages the more vulnerable.”

The majority clarified that this test does not require the transaction between the two parties to be “grossly unfair” or for the exploitation to be deliberate. The majority rejected the more restrictive test put forward by Uber because it did not reflect modern conditions in which unconscionability may arise, and so have the effect of protecting unfair and improvident contracts of adhesion where the parties did not interact or negotiate.

The majority’s broader approach reflects an explicit concern with unfair standard form contracts (sometimes called “contracts of adhesion”, or boilerplate”). In its discussion of the first element of the test, inequality of bargaining power, the majority wrote (at para. 71, cites omitted):

The second common example of an inequality of bargaining power is where, as a practical matter, only one party could understand and appreciate the full import of the contractual terms, creating a type of “cognitive asymmetry”. This may occur because of personal vulnerability or because of disadvantages specific to the contracting process, such as the presence of dense or difficult to understand terms in the parties’ agreement.

In its discussion of the kinds of contracts that will run afoul of unconscionability’s “improvident bargain” requirement, the majority wrote (at para. 77, cites omitted):

Where the weaker party did not understand or appreciate the meaning and significance of important contractual terms, the focus is on whether they have been unduly disadvantaged by the terms they did not understand or appreciate. These terms are unfair when, given the context, they flout the “reasonable expectation” of the weaker party or cause an “unfair surprise”.

The majority emphasized (at para. 87) that its approach to unconscionability will have consequences for contracts of adhesion—and, indeed, for all contracts. Consider consumer contracts: consumers understand that an agreement will include terms setting out the essential exchange—the money paid and the goods or services sold—which they understand, and boilerplate terms—the “fine print”—which they generally do not, but expect not to undermine the essential exchange. Where the “fine print” does, in fact, undermine the fair meaning of the essential exchange, or is unfair or unreasonable, unconscionability will offer a remedy.

Justice Brown’s concurring opinion agreed in the result but focused on the rule of law and access to justice. Justice Brown could not endorse the majority’s sweeping approach to unconscionability, fearing that a lack of meaningful guidance will create uncertainty in contractual enforcement. Instead, Justice Brown found that contractual terms that bar access to dispute resolution are unenforceable because they undermine the rule of law by denying access to justice. They are, therefore, contrary to public policy.

Justice Côté in her dissent raised issues with the Court’s interference in freedom of contract. She disagreed with both the majority’s unconscionability analysis and Justice Brown’s public policy analysis, and would have overturned the decision in the Court of Appeal and stayed Mr. Heller’s class proceeding in favour of Uber’s arbitration agreement.

Uber v. Heller follows the pattern of decisions, beginning with Douez v Facebook, reining in contractual provisions that override Canadians’ protections or deny access to workable dispute resolution mechanisms. These decisions offer both a realistic view of how Canadians approach contracting and robust protection of Canadians’ procedural and substantive contractual rights. Uber v Heller is rightly being seen as a defence of Canadian workers’ rights. It will also prove a champion of contractual fairness and, ultimately, access to justice.