Arbitration Clause in Uber: 2020 Year-in-Review

The SCC, in Uber Technologies Inc. v. Heller, 2020, struck down an arbitration clause that would have barred a group of Ontario workers from proceeding with a class action regarding the terms and conditions of their work. In so doing, the court gave important guidance on the enforceability of arbitration agreements as well as the doctrine of unconscionability.

The Uber decision is helpful to workers seeking to challenge standard form contracts that are shielded from civil litigation by arbitration clauses or other onerous dispute resolution provisions.

The majority’s rejection of the four-part Titus test for unconscionability is significant, as that test had been adopted by many Canadian courts and has been frequently applied in the employment context. The Titus test required:

1. A grossly unfair and improvident transaction;
2. The victim’s lack of independent legal advice or other suitable advice;
3. An overwhelming imbalance in bargaining power; and
4. The other party’s knowingly taking advantage

The majority in Uber outlined a flexible, context-dependent approach to the doctrine of unconscionability, consisting of only two elements:

1. An inequality of bargaining power; and
2. An improvident transaction

By holding that the Titus test was too formalistic and less equity-focused, the SCC applied a more flexible, purposive approach to the doctrine of unconscionability. The impact of the revised doctrine will no longer require workers to demonstrate a lack of legal advice or the mindset of their employer—which, in turn, will make unconscionability arguments more prevalent and arbitration clauses subject to increased scrutiny/challenge. On the other hand, the revised unconscionability doctrine could also bring more chaos as courts entertain unconscionability arguments based on an employee’s circumstances rather than the obvious efforts of an employer to take advantage.

Going Forward

Uber is essential for any lawyer drafting or reviewing dispute resolution provisions of a contract, including arbitration clauses, choice of law clauses, and forum selection clauses. Contracts with arbitration clauses will need to be reviewed in light of the above to ensure their enforceability and reduce the likelihood of future challenges.