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mercredi 28 octobre 2020

Chronique du CTI - Uber Technologies Inc. v Heller, a threat to the viability of standard form contracts of adhesion?

Tara Mandjee,



On June 26, 2020, the Supreme Court of Canada rendered a decision against Uber Technologies Inc. (Uber), finding that the arbitration clause in its standard form contract with its drivers was unconscionable and invalid, as it imposed the Netherlands as the place of arbitration and required its drivers to pay US$14,500 in upfront fees, irrespective of the size of the dispute.

Mr. David Heller (Heller), a driver for UberEats, started a class action seeking a declaration that Uber drivers are employees of Uber and are therefore entitled to benefits under the Ontario Employment Standard Act To become a driver, Mr. Heller was required to sign a long, standard contract that it could not negotiate and which included a provision requiring that any legal issue under such contract had to be submitted to the International Chambre of Commerce for resolution. Uber contested the legal proceeding on the basis of that arbitration clause, claiming that the case had to be resolved in arbitration rather than before the Courts.  

This decision is bound to remain the subject of much discussion, as (i) it creates a new exception to the rule of systematic referral to arbitration and (ii) simplifies the test for unconscionability. But beyond its modification of these two tests, Uber Technologies Inc. v Heller is also receiving considerable attention due to its potential impact on the validity of arbitration clauses in standard form contracts as well as on the relationship between gig economy businesses and their workers, since the Supreme Court cleared the way for the representative plaintiff to pursue its proposed class action to claim employee benefits and protections on behalf of Uber drivers.

The competence-competence principle: who decides?

The competence-competence principle adopted by the Supreme Court of Canada in Dell Computer Corp v Union des consommateurs provides that challenges to an arbitrator’s jurisdiction should normally be referred to an arbitrator. This decision recognizes however that the question of competence should be decided by the court in first instance where it involves pure questions or law or questions of mixed fact and law that require only superficial consideration of the evidence in the record.  

In the case at hand, the Court could not rely on this exception but still felt that if a stay of proceeding was granted, Mr. Heller’s challenge would not actually be resolved by an arbitrator due to the prohibitive fees that corresponded to most of its annual income. As a result, the majority created a new exception to the competence-competence principle based on the notion of accessibility.

The new exception requires an assessment of two questions:

1)     Assuming the facts pleaded to be true, is there is a genuine challenge to arbitral jurisdiction?

2)     From the supporting evidence, is there a real prospect that, if the stay is granted, the challenge may never be resolved by the arbitrator?

Based on the fact that the arbitration fees were far too costly, that the plaintiff could not reasonably reach the physical location of the arbitration set out to be in the Netherlands, and that the foreign choice of law clause circumvented domestic employment protections, the Court ruled that its new exception applied, such that it had authority to assess the validity of the arbitration clause in the contract between Uber and Heller.

Doctrine of unconscionability: A simplified two-part test

The Supreme Court in Uber Technologies Inc. v Heller endorsed a flexible two-part test for assessing unconscionability, requiring demonstration of (i) an inequality of bargaining power, and (ii) an improvident bargain. This replaced the test detailed in Titus v William F. Cooke Enterprises Inc, which the Court found to be too formalistic and less equity-focused due to its two additional rigid requirements distracting from the purpose of the unconscionability inquiry.

(a)    An inequality of bargaining power


The first element to demonstrate is an inequality of bargaining power that prevents the weaker party from adequately protecting their interests in the contracting process. Although there is no rigid limitations or trigger for this element of the test, there are circumstances that help recognize a situation of inequality of bargaining power. 


Inequality of bargaining power may arise in circumstances that make it difficult for one party to understand the agreement or fully appreciate the import of the relevant contractual terms, due to a party’s cognitive state or experience, or due to the density and difficulty of the contract terms. Another circumstance that can trigger an inequality of bargaining power is one in which one party cannot help but enter into the agreement due to their situation,  whether it is as a result of being in dire financial need or under threat, or where the weaker party is deeply dependent on a stronger party.

In the case at hand, the Court found an inequality of bargaining power between Uber and Mr. Heller, given that the arbitration clause was part of a standard form contract that was non-negotiable; Uber was more sophisticated than Mr. Heller, and the arbitration clause contained no information about the actual costs of arbitrating in the Netherlands.


(b)   An improvident transaction


Similarly to the first element, “improvidence” cannot be “reduced to an exact science” and is to be assessed contextually. A bargain will be considered improvident if it unduly advantages the stronger party or unduly disadvantages the weaker party, taking into consideration the context of the parties’ agreement to determine if the specific inequality in bargaining power led to an unfair result.

In the case at hand, the Court found the arbitration clause to be improvident, because it required the payment of up-front administrative fees almost equal to the annual income of Mr. Heller from Uber and because the clause created the impression that a driver must travel to the Netherlands in order to pursue a dispute.

(c)    The other Titus factors


Although the SCC did not formally include the other two factors from the Titus decision as part of its flexible two-part test, it noted that these factors remained relevant to consider:


(i)      Independent legal advice is relevant to the evaluation of the imbalance of bargaining power. It can assist a weaker party in understanding the terms of the contract, but it may not completely cure that party's desperation or dependence on a stronger party.


(ii)    Proof that one party knowingly taking advantage of the other is not a requirement of unconscionability because the focus must be on the vulnerability of the weaker party, not the mindset of the stronger one. That said, proof of the stronger party's knowledge of the other's weakness can be strong evidence of an inequality of bargaining power.


Impact of this decision

Threat to standard form of contracts?

The Uber Technologies Inc. v Heller decision is specific to an arbitration clause included in a standard form of contract, but one can expect that the two-part test laid out for assessing unconscionability could be applied to other clauses of standard form of contracts. Indeed, although the Court stressed that a standard form contract, by itself, does not establish an inequality of bargaining power, it acknowledged that it enhances the advantage of the stronger party at the expense of the weaker party, a factor which was definitely taken into consideration in the ruling of this case.

In the society in which we live, we all “click through” standard forms of contract on a regular basis - whether when visiting a website, installing an application on our mobile or using certain software. Moreover, the information technology industry relies heavily on these forms of contracts, such that the commercial certainty of standard forms of contract being enforceable is important to the good functioning of our modern transactional economy. With decisions like this one, the question becomes where do we draw the line between typical and reasonable provisions and unconscionable unenforceable ones?  

It should be noted that the Uber Technologies Inc. v Heller case presented strong facts: the combination of the lack of negotiation with the egregious upfront fees rendered Mr. Heller’s rights in effect inexistent and defeated the purpose of arbitration, which is meant “to provide an efficient, commercially reasonable approach to resolving disputes”. Faced with these facts, the Supreme Court’s ruling put particular emphasis on the importance of access to justice, the lack thereof having resulted in a decision favorable to Mr. Heller. Therefore, the guiding principle for companies operating in Canada and navigating this new rule should be that where they have standard form contracts, they must deal with potential unfairness and accessibility issues, as courts will be less likely to close their eyes or defer to arbitration where arbitration is “realistically unattainable” or where the allegedly invalid clause has the effect of denying someone’s right to have access to justice.

Transposability into Quebec law?

While the doctrine of unconscionability is a common law construct, Quebec’s civil law approach is not dissimilar. Article 1437 of the Civil Code of Quebec formalizes the fact that abusive clauses in a consumer contract or contract of adhesion may be invalid. As a result, one could expect Quebec courts to refer to Uber Technologies Inc. v Heller as a precedent – or at the very least as inspiration - to further scrutinize dispute resolution clauses in standard form contracts with regard to their fairness and equity.

Gig economy under scrutiny?

Uber, Airbnb, Etsy, Appen, you name it – we have entered an era referred to as the “gig economy”, where employees are deemed to be contractors or freelancers, working “on demand”. This means more flexibility and a better alignment between offer and demand but over the years, this new construct has shown its weaknesses: these so-called contractors are deprived of employee benefits and as a result they are essentially at the mercy of the demand. This is why we are seeing more and more class actions and disputes seeking to redefine the relationship between gig economy businesses and their workers, as one of “employment” that entitles them to employee benefits and protections. The Supreme Court decision in Uber Technologies Inc. v Heller has now opened the door for Mr. Heller to pursue its class action and there is no doubt that many companies will follow closely the outcome of this decision as it may change the gig economy as we currently know it.

Conclusion: what should YOU do next?

In conclusion, here are a few steps to consider further to the Uber Technologies Inc. v Heller’s decision:

·        If you are a company relying heavily on standard form contracts of adhesion, whether governed by common law or civil law, you might want to revisit your arbitration clause to ensure that it is not drafted in a way that imposes highly burdensome hardships or insurmountable procedural barriers;

·        Irrespective of the above, with the recent decision of Battiston v Microsoft Canada Inc, we see a trend where courts are trying to protect employees from stringent contractual terms that they could not negotiate or that were not sufficiently brought to their attention, demanding more transparency and acknowledging an inherent imbalance of power in the employer-employee relationship. Therefore, you should consider whether or not key terms of your agreements with employees or workers are conspicuous enough;

·        Lastly, if you work in the gig economy, you might want to track the progress of the class action brought by Mr. Heller, as it will inevitably impact you and how you structure your relationship with you “on-demand” workers.

Les chroniques du CTI sont rédigées par un ou plusieurs membres du Comité Technologies de l’information (CTI) dans le but de susciter les discussions et de soulever les réflexions au sein de la communauté juridique à propos des nouvelles technologies et le droit. Les auteurs sont donc seuls responsables du contenu des articles et l’opinion qui y est véhiculée n’est pas celle du JBM, mais bien celle des auteurs. Si vous désirez rédiger une chronique, envoyez un courriel au 

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