As most people who have been through a lawsuit are aware, litigation can be time consuming and expensive. For that reason, the Rules of Civil Procedure encourage parties to seek settlements, through provisions that require mandatory mediation in certain cases and through provisions that incentivize making settlement offers.
Another alternative to the litigation process is arbitration. Arbitration provides that the parties will hire a neutral third-party arbitrator to hear the case and make a binding decision. An arbitration hearing takes place outside of Court, but the decision can be enforced by the Court if necessary.
Stuart has advocated for more widespread use of arbitration in employment law disputes. Among other things, arbitration allows parties to choose a subject-matter expert to be the decision maker, allows the parties to craft an appropriate process for the case in question, is often more efficient and timelier, and allows for confidentiality. His ADR practice offers mediation, arbitration, and a combination of the two known as med-arb.
When a dispute arises, arbitration can be voluntarily agreed to by the parties as an alternative to litigation. An agreement to arbitrate can also be a clause to a contract, providing that any future disputes about the must be referred to arbitration rather than litigation. In either case, such an agreement or clause is referred to as an “Arbitration Agreement” under the Arbitration Act, 1991. Subject to certain exceptions, the Courts in Ontario will enforce an Arbitration Agreement, and will not allow parties with an Arbitration Agreement in place to commence litigation in the Courts.
If you are presented with a contract that provides for mandatory arbitration, it is important to speak to a lawyer to understand how such a clause could affect your rights in the future.
Mandatory Stay under the Arbitration Act
Section 7 of the Arbitration Act, 1991 provides that the Court will “stay” (i.e., suspend) any Court proceedings commenced by a party to an Arbitration Agreement, and in respect of a matter covered by the t Arbitration Agreement. This means that once an Arbitration Agreement is entered into, a party cannot choose to avoid arbitration by going through the Courts with litigation.
Furthermore, a party cannot avoid arbitration by commencing a broader Court proceeding that also deals with matters outside of the scope of the Arbitration Agreement. The Supreme Court of Canada found that in such a scenario, the Court proceeding must be stayed with respect to the matters that are subject to the Arbitration Agreement, and the rest of the Court proceeding may be allowed to continue if the Court finds that it is reasonable to separate the matters into multiple proceedings.
Arbitration of Employment Law Matters
As the law currently stands, there is some uncertainty as to how the above provisions apply to employment law matters.
In the Supreme Court of Canada decision of Uber Technologies Inc. v. Heller, the Court declined to enforce an Arbitration Agreement contained in a services agreement that all Uber drivers were subject to, which provided that all disputes were to be submitted to arbitration in the Netherlands. The Court found the Arbitration Agreement was unconscionable and was therefore unenforceable, due in part to the high economic barriers it placed on drivers in bringing their claims in the Netherlands. The Court considered, but did not determine, an argument that the Arbitration Agreement was contrary to the Employment Standards Act, 2000 (the “ESA”) in that it prevented bringing complaints to the Ministry of Labour under the ESA.
On the other hand, in the decision of Leon v. Dealnet Capital Corp., the Court enforced an Arbitration Agreement that was a part of an employment contract. The Court found that the Arbitration Agreement did not violate the ESA, in that it did not foreclose the employee from making complaints to the Ministry of Labour, but only prevented him from commencing Court proceedings.
The decision in Leon is currently under appeal in the Divisional Court, and we expect that the appeal decision as well as other Court decisions will bring more clarity to this area of law.
Conclusion
In certain situations, arbitration can be an attractive alternative to litigation. However, an Arbitration Agreement can have a significant effect on your rights and your ability to commence Court proceedings. If you are an employee and you are asked to sign a contract that contains an arbitration clause, we strongly recommend speaking to a lawyer in order to understand how this may affect your rights in the future.
If you are an employer, we can assist you in enforcing arbitration clauses and staying Court proceedings that violate such clauses.
If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.
