March 3, 2020
The British Columbia Supreme Court has ruled that a clause in an employment agreement mandating arbitration as a way of resolving wrongful dismissal disputes doesn’t illegally contract out of provincial employment standards legislation.
The ruling departs from Ontario jurisprudence that’s currently under appeal to the Supreme Court of Canada.
“The B.C. judge was clearly looking for a way to distinguish the Ontario decision and found it by observing that the case before her did not involve an element of unconscionability as it had in the Ontario situation,” says Dianne Rideout, a partner in McMillan LLP’s employment and litigation group in Vancouver.
The B.C. case involved Alex Constandinou, a real estate appraiser who left A-Teck Appraisals Ltd. and allegedly breached the non-solicitation and non-compete clauses in his employment contract.
However, the contract included an arbitration clause that excluded matters relating to non-solicitation and non-competition. When A-Teck took advantage of this exclusion to sue Constandinou in the courts, the former employee responded by counterclaiming for wrongful dismissal.
Although wrongful dismissal matters weren’t excluded by the arbitration clause, Constandinou’s lawyers argued that the clause was unenforceable because it contracted out of the “minimum requirements” of B.C.’s Employment Standards Act; more particularly, because it deprived the employee of a right to file a complaint to the director of employment standards.
Constandinou relied on the Ontario Court of Appeal’s 2019 decision in Heller v. Uber Technologies Inc., which was appealed to the SCC and is currently under reserve. In that case, involving Uber drivers, the Ontario Court of Appeal concluded that arbitration clauses in employment contracts are unenforceable because they contract out of the complaint and investigative process found in Ontario’s legislation — a process that the court ruled was a “minimum standard.”
But in her ruling, Justice Mary Humphries of the B.C. Supreme Court, observed that the wording of the legislation in the two provinces differed. “The British Columbia legislation states that the requirements of the Act and regulations are ‘minimum requirements’ which cannot be waived. This wording, which, unlike the Ontario legislation, does not refer to an employment standard, cannot easily be read to include a complaint/investigative procedure used to enforce those minimum requirements as itself a ‘minimum requirement.’”
As Humphries saw it, the reasoning in the Uber case “was informed by the unfairness of requiring the parties in Canada to resolve disputes in the Netherlands.”
Overall, then, Humphries wasn’t prepared to adopt the Ontario approach as the law in B.C. “The statutory provisions in Ontario and British Columbia are different,” she wrote. “The important and, in my view, overriding concern of the Ontario court as to the ‘inoperative’ aspect of the clause requiring resolution of disputes in the Netherlands is not applicable to the case before me; and the logic of the reasoning in Heller on the issue of the dispute mechanism as an employment standard is not of such persuasive effect that it should prevail in the context of the British Columbia legislation.”
But Ridout notes Humphries’ observation that the reasoning of the SCC in Uber might produce a different result. “We’ll see what happens when the Uber case is decided,” she says. “In the meantime, this case will doubtlessly be appealed so as to keep that avenue open.”
Still, despite the fact that A-Teck has succeeded for the time being, the question of whether employers are better off in court or at arbitration remains an open question. “Arguably, arbitration is faster and less expensive,” says Rideout. “But there are disadvantages, like the lack of comprehensive discovery and the inability to appeal.”