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Arbitration Clauses in Employment Contracts Live to Fight Another Day in B.C.

In A-Teck Appraisals Ltd. v Constandinou, 2020 BCSC 135 (“Constandinou”), the B.C. Supreme Court stayed a wrongful dismissal action on the basis that it was precluded by the arbitration clause in the former employee’s employment contract. The B.C. court took a different approach than the Ontario Court of Appeal in Heller v. Uber Technologies Inc. et al, 2019 ONCA 1 (“Heller”), which did not enforce an arbitration clause.

Constandinou is good news for those seeking to enforce arbitration clauses in employment agreements in British Columbia. Some arbitration clauses will still be enforceable in B.C., however, the future of the law in this area remains uncertain as we are still awaiting the decision of the Supreme Court of Canada in the appeal of Heller.

Background

Mr. Constandinou resigned from A-Teck Appraisals Ltd. (“A-Teck”). A-Teck subsequently commenced an action in which it alleged that Mr. Constandinou was doing real estate appraisals in breach of the non-solicitation and non-competition provisions in his employment contract. Mr. Constandinou counterclaimed for wrongful dismissal.

In response to the counterclaim, A-Teck filed an application to stay the wrongful dismissal action on the basis the issue should go to arbitration. Mr. Constandinou’s employment contract included a clause that stated that disputes about the employment contract (except for those relating to confidential information and restrictive covenants) would be referred to arbitration. This prompted Mr. Constandinou to apply for summary judgment and ask the court to find that the arbitration clause was void and unenforceable. Relying on Heller, Mr. Constandinou argued that the arbitration clause was void because it contracted out of the B.C. Employment Standards Act (the “ESA”) by forfeiting his right to access the complaint, investigation and hearing process provided for by the ESA.

The Heller Decision

Heller is a class action brought on behalf of Uber drivers in Ontario. Mr. Heller sought a declaration that Uber drivers are employees and not independent contractors, and so are covered by the Ontario Employment Standards Act 2000 (the “Ontario ESA”). Uber applied to stay the action on the basis that the arbitration clause in the parties’ service agreement required disputes to be arbitrated in the Netherlands. The Ontario Court of Appeal found that the investigative process set out in the Ontario ESA is an “employment standard” that parties cannot contract out of. Because the arbitration clause eliminated an Uber driver’s right to make a complaint to the Ontario Ministry of Labour regarding Ontario ESA violations, the court found that it was contracting out of the Ontario ESA and thus invalid. In the alternative, even if the arbitration clause was not invalid on this basis, the court held that it was still unenforceable because requiring an Uber driver to travel to the Netherlands to mediate and/or arbitrate any dispute was unconscionable in the circumstances. The Supreme Court of Canada heard Uber’s appeal of this decision on November 6, 2019 and has reserved its judgment.

The B.C. Supreme Court provided the following reasons for not following Heller in Constandinou:

  1. The statutory “contracting out” provision is different in Ontario and British Columbia employment standards legislation.[1] The B.C. statute states that the statutory requirements are “minimum requirements” that cannot be waived. Unlike in Ontario, there is no reference to an “employment standard”. According to the B.C. Supreme Court, it is not obvious that a statutory complaint/investigative process becomes an employment standard in itself (as opposed to a procedure for enforcing employment standards).
  2. There was no obvious “unfairness” in the A-Teck arbitration clause. Unlike in Heller, it did not require the parties to travel to another jurisdiction and the arbitration was to be conducted in accordance with the B.C. law.
  3. Constandinou did not allege breaches of the ESA in his claim against A-Teck. A wrongful dismissal claim is a common law cause of action, which fell squarely within the arbitration clause.

The B.C. Supreme Court distinguished Heller and granted the stay of Mr. Constandinou’s counterclaim and summary judgment application, allowing the arbitration to proceed.

Takeaways

As noted by the B.C. Supreme Court in Constandinou, applying the Ontario Court of Appeal’s approach in Heller in British Columbia could have the effect of rendering most arbitration clauses in employment agreements unenforceable. The Supreme Court of Canada is expected to provide some clarity on the issue in the appeal of Heller and we expect its decision will prompt both employers and employees to scrutinize the arbitration clauses in their employment contracts, particularly where the arbitration clause contemplates arbitration of all disputes or dispute resolution in a foreign jurisdiction.

There are pros and cons to including arbitration clauses in employment contracts. As with all clauses in employment contracts, enforceability could be challenging depending on the application of the circumstances to the state of the law.

If you have any questions about arbitration clauses in the employment context, please contact any member of Lawson Lundell’s Labour, Employment, and Human Rights Group.

[1] BC: The requirements of this Act and the regulations are minimum requirements and an agreement to waive any of those requirements, not being an agreement referred to in section 3 (2) [dealing with collective agreements], has no effect (ESA, s. 4). 

Ontario: (1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.
(2) If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply. (Ontario ESA, s. 5).

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  • Cory  Sully
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    Cory Sully is an associate in our Labour, Employment and Human Rights Group and Privacy and Data Management Group in Vancouver. She advises and represents clients in all areas of workplace law. Cory provides practical and strategic ...

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    Ryan Berger is a partner in the Privacy Group and Labour, Employment and Human Rights Group in Vancouver. He has practiced commercial and employment litigation for 19 years, with a growing emphasis on data, privacy and business ...

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Lawson Lundell's Labour and Employment Law Blog provides updates on the most recent legal developments impacting the Canadian workplace and offers practical tips for employers. We cover a range of topics, including labour relations, employment law, collective bargaining, human rights, employment standards, employment equity, workers' compensation, business immigration, privacy, occupational health and safety and pensions and employee benefits. 

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