This recent case highlights that when a party to an employment contract wants to challenge the validity of an arbitration clause, this issue is typically argued before the arbitrator, and not a judge who, except in rare circumstances, lacks jurisdiction once the contract stipulates that all disputes will be resolved through arbitration.
In this instance, the fired employee brought a claim and a motion before the court to quash the arbitration clause on the grounds that it was unconscionable because it denied a claim for costs and for punitive damages, and because it was inconsistent with the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), and the Human Rights Code, R.S.O. 1990, c. H.19 (“HRC”).
The motion judge held the validity of the arbitration clause was itself a matter for arbitration and stayed the action under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17. The Ontario Court of Appeal agreed, citing that the ruling was consistent with the general rule in Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 84, that “in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.”
The appellate court did recognize that there are exceptions as laid out in Uber Technologies Inc. v. Heller, 2020 SCC 16, 447 D.L.R. (4th) 179 (“Uber Technologies”), where the court at para. 32 pointed out that there were two exceptions to the general rule that the court should refer all challenges to an arbitrator’s jurisdiction to arbitration, as follows: (1) the challenge raises pure questions of law; or (2) the challenge raises questions of mixed fact and law (i) requiring only superficial consideration of the evidence and (ii) where the court is convinced the challenge is not a delaying tactic or will not prejudice recourse to the arbitration.
The appellate court concluded that nothing about the plaintiff’s challenge required a “superficial consideration of the evidence.” Indeed, it was the exact opposite. The plaintiff’s argument regarding unconscionability was a “probing factual inquiry” that would depend on factual findings, including findings of credibility, effectively turning the motion before the court into a mini-trial, all of which is the antithesis of a “superficial consideration.”
Although the Uber Technologies case enumerated an exception that would allow the courts to intervene, it is clear that the underlying facts in Uber Technologies was the driving force. In Uber Technologies, the plaintiffs were arguably very disadvantaged: they had to click on a standard form services agreement, they didn’t receive legal advice, they had no opportunity to negotiate the agreement, they were made subject to the law of the Netherlands with arbitration to take place in the Netherlands, and they were required to pay a fee of $14,500 USD just to begin the arbitration. In contrast, the plaintiff in this recent case was a professional earning a base salary of $350,000, claiming over $1.5 million in damages, facing arbitration in Ontario under Ontario law, and she had the assistance of legal counsel during the negotiation of the employment agreement. It is not surprising that the appellate court would resist the invitation to accept jurisdiction over a case governed by an arbitration clause in these circumstances.
Irwin v. Protiviti, 2022 ONCA 533
https://www.canlii.org/en/on/onca/doc/2022/2022onca533/2022onca533.html