Common Ground? Class Action Updates

Court Stays Employee Misclassification Class Action in Favour of Arbitration

Common Ground? Class Action Updates

Court Stays Employee Misclassification Class Action in Favour of Arbitration

Date: May 31, 2024

In Wasylyk v. Lyft, the Ontario Superior Court of Justice issued a stay of a proposed employee misclassification class action in favour of private arbitration. The case provides an illustration of the factors that may support the enforceability of an arbitration clause in disputes related to the Employment Standards Act, 2000 (ESA).

The plaintiff filed a class proceeding claim against Lyft Inc. and Lyft Canada Inc. (collectively, Lyft). The proposed class action related to allegations that the plaintiff, a Lyft driver, and other class members were employees under the ESA and, as such, were entitled to minimum wage, overtime, vacation, holiday pay and other ESA entitlements.

There was no dispute the plaintiff had agreed to Lyft’s terms of service and its arbitration agreement (Arbitration Provisions) as a condition of becoming a Lyft driver.

Some of the key Arbitration Provisions included:

  • Arbitration is the exclusive mechanism for dispute resolution “except as otherwise provided in the agreement or required by applicable law.”
  • Dispute resolution proceedings on a class, collective or representative basis are prohibited.
  • A driver may opt out of the Arbitration Provisions by contacting Lyft’s lawyers in Vancouver within 30 days of executing the agreement. A driver, however, may not opt out of the class action waiver.
  • The arbitration would take place in the nearest municipality to the driver’s billing address.
  • The substance of any claim would be decided in accordance with Ontario law. Arbitrations would be procedurally governed by the American Arbitration Association, which offers rules and procedures for a variety of types of arbitrations, and in several different languages.
  • Lyft would bear the cost of arbitration for any driver claim that alleged the individual was an employee of Lyft (in addition to other types of claims). The driver would need only pay a contribution equivalent to the filing fees that would otherwise be paid to a court in that jurisdiction to commence a claim.
  • A claim could be heard in writing or on the telephone if the claim is for $10,000 or less.

Pursuant to s. 7 of the Arbitration Act, when a party commences an action, their opponent may bring an action to have the action stayed on the ground that the parties have agreed to arbitration of the dispute. Section 7(2) of the Arbitration Act outlines various exemptions to the granting of a stay. The plaintiff relied on these exemptions and took the position his class action ought to proceed.

In rejecting this argument, the Court held:

  • The Arbitration Provisions were accessible to the plaintiff. In Uber Technologies Inc. v. Heller (Uber), discussed in our Case in Point of June 29, 2020, the Supreme Court of Canada held that an arbitration clause that required a driver to travel to the Netherlands to pursue arbitration was inaccessible and, as such, unenforceable. In the present case, the Court was satisfied the Arbitration Provisions contain no similar geographic or cost barriers to arbitration. Further, the dispute would be determined in accordance with Ontario law and not the laws of a foreign jurisdiction.
  • The Arbitration Provisions were not unenforceable due to uncertainty. The plaintiff alleged there was uncertainty around the procedure for arbitration and this rendered the Arbitration Provisions invalid. The Court rejected this argument, noting that the manner of arbitration is not an essential term, and that modern dispute resolution processes generally favour flexibility and “the flexibility provided by the arbitration agreement can be seen to be an incidental virtue not a vice.…”
  • The Arbitration Provisions were not unenforceable due to unconscionability. The plaintiff, again relying on the Uber decision, claimed the Arbitration Provisions were unconscionable due to the inequality of bargaining power and its associated impact on the bargaining process. While the Court accepted the assumption there would be an inequality of bargaining power, the Court held this did not give rise to a substantially “improvident or unfair bargain,” where the stronger party was unduly advantaged. In this case, arbitration was an “accessible, feasible, and a fair dispute resolution system.”
  • The Arbitration Provisions were not unenforceable on the grounds of public policy. The Court held that, absent legislation to the contrary, courts must enforce arbitration agreements. Public policy favours the use of these agreements as an “acceptable, preferable, and generally available alternative to court actions.” With respect to ESA claims specifically, the Court held that if the Legislature wished, it could prohibit the use of arbitration as a mechanism to resolve such claims but had not done so.
  • The Arbitration Provisions were not an unlawful contracting out of the ESA. The Court held the language used in the Arbitration Provisions did not contract out of the ESA. While there was repeated reference to the use of arbitration as the exclusive dispute mechanism, this was consistently subject to the caveat that this was “to the extent permitted by law.” The Court held this qualification “means that resort to the enforcement provisions of the Employment Standards Act, 2000 is permitted because the Employment Standards Act, 2000 is a law permitting employees access to the services of an administrative agency to decide disputes.”
  • The matter was not appropriate for summary judgment. The Court noted this specific statutory exemption should be exercised only in the “simplest and clearest of cases where a summary judgment would demonstrably be the most just and expeditious way to resolve the dispute.” As this was a class action related to allegations of employee misclassification, there would still need to be an assessment of individual issues and, as such, liability could not be determined class-wide on a summary judgment motion.

Key Takeaways

While this is certainly not the last we will hear from the courts on this topic, this decision provides an illustration of some of the key features of an arbitration clause that a court may consider in determining its enforceability. Organizations which use arbitration as a dispute mechanism tool for ESA-related disputes should review their own agreements with counsel, taking into account this case and the Uber decision.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©