Is there an arbitration clause in my contract

Is there an arbitration clause lurking in your contract?

Increasingly, modern employers are including “arbitration clauses” in their employment contracts. Employers like arbitration clauses for the following reasons:

Arbitration is private. If the employer is taken to task by an employee, it will not become public knowledge - unlike in court, where judgment is reported publicly and can be harmful for the employer's reputation.
Arbitration is employer-friendly. The parties can choose their arbitrator, and the process is much more flexible than court. This may sound OK, but...
Arbitration is cost-prohibitive for employees. The parties must pay for the arbitrator themselves, whereas judges are free of charge to litigants. The filing fee alone is often in the thousands of dollars (in court it's $200). The losing party in arbitration is usually required to pay all of the other party’s costs, whereas court-awarded costs are given on a reduced basis. The costs alone are likely to make access to justice impossible for a wrongfully dismissed employee subject an arbitration clause. That's why it's in there.
Arbitrators are judges for hire. In the case of a large employer, they may have the advantage of being a repeat customer for the arbitrator. If that arbitrator's decision is biased or is wrongly made in favour of the employer, it is almost impossible to appeal. The employee is at every disadvantage in the arbitration process.
Arbitration clauses are almost bullet-proof. BC courts have held that if there is a challenge to an arbitration clause, the arbitrator has jurisdiction to determine whether the arbitration clause is valid. This means that historically, dismissed employees have been forced into costly arbitration when their employers have refused to pay severance. It is almost impossible to appeal an arbitration decision, even a legally incorrect one.

You may sign a contract that contains an arbitration clause, without having any idea what arbitration means to you. That’s the bad news.

The good news is that the Ontario Court of Appeal has now ruled that the arbitration clause being used by Uber, the ride-sharing company, is unlawful. Although this is an Ontario case and not yet directly applicable in British Columbia, it may create a crack in a wall that, until now, has been impenetrable.

In the Uber case, some Uber drivers tried to sue Uber in court. The Ontario court initially upheld Uber's arbitration clause, on the basis that the arbitrator had jurisdiction to determine whether it had jurisdiction (yes, you read that right). The case was “stayed” and sent off to arbitration – in Amsterdam, as required by the Uber contract. The drivers appealed to the Ontario Court of Appeal. The ONCA found that the arbitration clause was unlawful for two reasons:

a) It breached the Employment Standards Act by attempting to send all employment disputes to arbitration. The BC Employment Standards Act is similar to the Ontario one, in that it provides as follows:

s. 4: The requirements of this act are minimum requirements and an agreement to waive any of those requirements has no effect.

s. 74(1): An employee, former employee, or other person may complain to the director (of Employment Standards) that a person has contravened this Act.

This wording protects employees by giving every employee the right to complain to the Employment Standards Branch. Uber’s arbitration clause (and most others) tries to subvert the employee’s Employment Standards remedies. The ONCA determined that to do so is unlawful. Because of this, the clause was invalid.

b) It was unconscionable. The court found that Uber had abused its economic power over drivers by taking advantage of their lack of legal knowledge and financial need for work. It also found that the cost of arbitration was prohibitive for most Uber drivers – and it found that this was one reason Uber included the clause in its 14-page Driver Agreement, to deflect most driver claims against it. The court found that, as a matter of public interest, such a clause should not be lawful.

The Uber case is unique in that the arbitration clause attempted to ship all disputes off to Amsterdam. Most arbitration clauses in BC employment contracts refer to a local arbitration centre, the British Columbia International Commercial Arbitration Centre. However, many of the other factors are likely to apply to BC employees with arbitration clauses in their contracts, especially the astronomical cost in comparison with court proceedings.

In our view arbitration clauses have no place in most employees' contracts, and we're happy to see some signs of employee-friendly change in this area of employment law.

If your employer has asked you to sign an employment contract that contains any kind of arbitration clause, you should seek legal advice immediately, before signing anything.

We look forward to helping you enforce your rights as an employee. If you’re being treated unfairly at work or unfairly terminated from your employment, call us today.