The Ontario Court of Appeal released this week an important unanimous decision dealing with a contract which mandated that all disputes be arbitrated as opposed to proceeding by civil or administrative action under the Employment Standards Act. In so doing, the Court reversed the decision of the motions judge who had upheld this clause.
We had reviewed this initial decision in a prior post and noted that it was seemingly “ridiculous” and called for legislative reform, if proper law. This will no longer be required.
Facts of the Case
The case in question centred on a proposed class action brought by the representative plaintiff. One of the questions to be resolved in the claim was whether the plaintiff was an employee or an independent contractor.
The significant term of the contract signed by the driver stated that all disputes must be resolved by mandatory arbitration in the Netherlands and by the law of this country. In addition, the claimant in this process needed to pay an administrative fee of $14,500 U.S. funds, apart from their travel and legal expenses.
The Legal Issues
The questions to be resolved were:
- Does the arbitration clause in effect amount in law to a contracting out of the Employment Standards Act and hence invalid; or
- Is this same clause “unconscionable” and hence similarly invalid on this independent ground of attack.
Contracting Out Argument
The Court of Appeal concluded that the clause in question constituted a removal of an employment standard as it eliminated the right of the driver to complain to the Ministry of Labour to investigate their complaint. This issue was important even though, in this case, the driver had not made such a complaint but rather had proposed a remedy by a class action civil proceeding.
A further reason was that a determination made by the Ministry on the issue of employment status would be part of the public record and would hence apply to all persons in a similar fact situation. The same would be true of the class action process. This would, however, not be so under the arbitration process.
One of the additional reasons for this finding is that there was no evidence presented of the remedy available under the laws of the Netherlands, the choice of legal forum set out in the clause.
The clause also failed on this second argument that the clause is fundamentally unfair. The Court noted that until certified, the proposed claim is just that, a possible claim by a single driver. The recovery may be modest yet the applicant must pay a significant sum of $14,500 with additional travel and legal costs to pursue the case, all such costs to be born by a driver earning $400 to $600 a week.
Impact of the Decision
This ruling did not define whether the proposed plaintiff was an employee or contractor but rather only that this issue may be determined by the class action process. The decision is nonetheless instructive of the significance of the impact of the Employment Standards Act and its protections afforded to employees.
The employer in this case clearly made fundamental errors in its drafting of this clause. This decision does not deny a company the right to use a mandatory arbitration clause. A properly written term can well accomplish this result.
Employees’ Take Away
Once again, employees will reflect on the fact that a written agreement may not be effective in defining their rights and remedies.
Get Advice and Know Your Rights
A clause such as mandatory arbitration of rights is clearly an important one, particularly where there may be a real dispute as to the status of the relationship. Legal advice is critical to both sides of this dispute. For advice on this issue from either side, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.
Return to Blog →