Appeals court rules Uber Technologies’ driver services agreement 'unconscionable' and 'invalid'

Ontario’s top court has ruled that Uber drivers can turn to Canadian courts to try to resolve disputes with the ride-hailing service, paving the way for those drivers to move forward with a class-action lawsuit seeking to classify themselves as employees.

In a ruling released Wednesday, the Court of Appeal for Ontario concluded that an arbitration clause in Uber Technologies Inc.’s driver services agreement that forced drivers to resolve conflict overseas was “unconscionable” and “invalid.”

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The clause required drivers to resolve any disputes with Uber via mediation or arbitration in the Netherlands, a process with an upfront cost for drivers of US$14,500.

“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,” Justice Ian Nordheimer wrote.

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The proposed class-action lawsuit is seeking a declaration that drivers are employees, not independent contractors, and are therefore entitled to minimum wage, overtime and vacation pay. It claims damages of $400 million.

Uber argued the class-action lawsuit couldn’t proceed in Canada due to the arbitration clause. A lower court agreed, stalling the certification process, but the panel of three appeal court judges reversed the decision.

The appeal court found the clause amounted to an illegal contracting out of an employment standard under the Employment Standards Act, if drivers are found to be employees. In addition, it concluded the clause was unconscionable given the inequality of bargaining power between Uber and its drivers, which must agree to the terms in order to sign up for the service.

This ruling allows the Uber drivers to move forward with their attempt to certify the class-action lawsuit, said Lior Samfiru, the lawyer who represents the proposed class-action plaintiffs and a partner at Samfiru Tumarkin LLP. The lead plaintiff is 35-year-old David Heller, an UberEATS driver who earns between $400 and $600 per week.

… if you’re going to operate in Ontario, if you’re going to operate in Canada, you have to abide by our laws Lior Samfiru, Samfiru Tumarkin LLP

Uber knew, or should have known, that drivers wouldn’t likely be able to pursue legal action in the Netherlands, Samfiru said. Regardless of whether Uber drivers are ultimately found to be employees or contractors, the appeal court’s ruling sends a message that foreign companies operating in Canada cannot simply contract out of rules that give workers an ability to seek recourse, he said.

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“I think the message here is for companies … if you’re going to operate in Ontario, if you’re going to operate in Canada, you have to abide by our laws,” Samfiru said. “You have to play by the same rules as everyone else.”

In statement, Uber Canada said it is reviewing the decision.

“We are proud to offer a flexible earning opportunity to tens of thousands of drivers throughout Ontario,” it stated.

In other jurisdictions, Uber has successfully argued that its drivers are independent contractors that enjoy far more flexibility than a regular employee. In September, the U.S. Court of Appeals for the Ninth Circuit ruled that Uber’s arbitration clause prohibited class actions against the company.