Supreme Court of Canada Refuses to Enforce Uber Contract Requiring Arbitration in Holland

A Canadian Uber driver, Heller, brought a class action against Uber, actually several Uber entities, alleging violations of Canada’s Employment Standards Act. According to the motion judge in the Ontario Superior Court of Justice, Uber “[d]rivers in Ontario do not enter into contracts with Uber Technologies Inc. [incorporated in Delaware] or Uber Canada Inc. The Drivers rather create an internet account and a contractual relationship with Uber B.V. and with Rasier Operations B.V. and, or Uber Portier B.V.” Each of those Uber entities is incorporated under the laws of the Netherlands. Uber’s form contract for drivers says it shall be governed by the laws of the Netherlands, and that any dispute not resolved in mediation:

“shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”) …. The Place of the arbitration shall be Amsterdam, The Netherlands.” 

The motion judge granted Uber’s motion to stay the class proceedings in favor of arbitration in the Netherlands, relying on Canada’s International Commercial Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  

The Court of Appeal of Ontario set aside the lower court’s order, and allowed Heller to litigate, rather than arbitrate, the class action. The Court of Appeal emphasized that the ICC’s “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.” The Court of Appeal held that the arbitration agreement “constitutes a contracting out of the Employment Standards Act “ which permits a driver to make a complaint the Ministry of Labour regarding the actions of Uber and their possible violation of the requirements of the ESA.” The arbitration agreement “deprives [the driver] of the right to have an ESO investigate his complaint.” The Court of Appeal noted that the driver “has not, in fact, chosen to make a complaint under the ESA but rather has commenced this proposed class action”, but held that this did not under the court’s conclusion that the arbitration agreement impermissibly contracted out of the ESA.

As an independent ground for denying enforcement to the arbitration clause, the Court of Appeal held the clause unconscionable.

The Supreme Court of Canada agreed with the Court of Appeal that the arbitration clause is unenforceable: “This is an arbitration agreement that makes it impossible for one party to arbitrate. It is a classic case of unconscionability.” The Supreme Court’s opinion contains a lengthy discussion of the unconscionability doctrine, featuring some differences of opinion among the justices.

Earlier Canadian cases include Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, and Seidel v. TELUS Communications Inc., [2011] 1 S.C.R. 531. 

House Passes Bill to Ban Consumer and Employment Pre-Dispute Arbitration Agreements

The U.S. House of Representatives approved the Forced Arbitration Injustice Repeal (FAIR) Act, 225-186, last Friday, September 20, 2019. The FAIR Act would amend the Federal Arbitration Act to state that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to an employment dispute, consumer dispute, or civil rights dispute.” In effect, this act bans adhesive arbitration agreements in many employment and consumer transactions.  The act would also invalidate similar current arbitration agreements for disputes that arise after the law goes into effect. 

The White House has issued a statement opposing the passage of the FAIR Act. Alan Kaplinsky writes "The Senate currently consists of 51 Republicans, 47 Democrats, and 2 independents who caucus with the Democrats.  Given that there are at least two Republican Senators who would likely support the FAIR Act (Senators Graham and Kennedy), there could be enough votes in the Senate to pass the FAIR Act.  For that reason,  it is comforting to know that President Trump would veto the FAIR Act.  Should he do so, it is very doubtful that there would be enough votes in the Senate to override the veto."

Opposition to the FAIR Act by Jennifer Braceras in The Hill. Support for it in HuffPo and Vox

The Centrist Case for Enforcing Adhesive Arbitration Agreements

My latest article, The Centrist Case for Enforcing Adhesive Arbitration Agreements, was just published at 23 Harvard Negotiation Law Review 29 (2017)

The Abstract:

"The Politics of Arbitration Law and Centrist Proposals for Reform", 53 Harvard J. on Legislation 711 (2016), explained how issues surrounding consumer, and other adhesive,  arbitration agreements became divisive along predictable political lines (progressive vs. conservative) and proposed an intermediate (centrist) position to resolve those issues. However, "The Politics of Arbitration Law" did not argue the case for this centrist position. It left those arguments for two more articles: (1) "The Centrist Case against Current (Conservative) Arbitration Law", 68 Florida Law Review 1227 (2016), which argued against the overly-conservative parts of current arbitration law; and (2) this Article, which argues against progressive proposals to repeal, not only the overly-conservative parts of current arbitration law, but also the parts of current arbitration law that should be retained. While progressives would prohibit enforcement of individuals’ adhesive arbitration agreements, this Article argues that such agreements generally should be enforced.

Are Adhesive Arbitration Agreements are "Corporate America's Oily Trick"?

Salon Magazine says yes.  I take a more positive view of them.  Salon says:

These hidden forced arbitration clauses lurk behind many of the most brutal injustices facing consumers and workers.  For example, a court in Texas recently held that a woman who washed dishes at a fast food restaurant could not sue in court for damages from personal injuries she sustained on the job.  The problem had nothing to do with her argument that she’d been treated unfairly; the problem was that her employee handbook had contained a forced arbitration agreement that dictated that her claims were to be decided by a private arbitrator.

This sort of thing makes me wonder: (1) Could she bring her claim in arbitration or does "could not sue in court" mean for some reason "could not bring her claim at all"? (2) If she could bring her claim in arbitration, did she, and to what result?

Consumer and Employment Arbitration Law in Comparative Perspective: The Importance of the Civil Jury

This article argues that much of what makes civil litigation in the United States materially different from civil litigation elsewhere in the world can plausibly be traced back to the jury. By contrast, enforcement of consumer and employment arbitration agreements affects only a few categories of cases and, within those categories, affects only those cases in which an enforceable arbitration agreement has been formed. The civil jury is a mountain; enforcement of consumer and employment arbitration agreements is a molehill. Those who value uniformity across nations and seek to bring U.S. law into the international mainstream should be far more troubled by the civil jury than by enforcement of consumer and employment arbitration agreements. Bringing the United States into the mainstream on the civil jury might even bring it into the mainstream on arbitration. It may not be a coincidence that the only nation with the civil jury is the only nation that enforces consumer and employment arbitration agreements.

Arbitration and Unconscionability

Wake Forest Law Review.

This article advocates the contractual approach over competing approaches to issues of unconscionability in arbitration.

Employment Arbitration and Voluntary Consent

Ware, Stephen J., Employment Arbitration and Voluntary Consent. Hofstra Law Review, Vol. 25, No. 83, 1996. Available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=10318