Ontario – Arbitrator to determine jurisdiction/validity of arbitration clause in employment dispute – #654

In Irwin v. Protiviti, 2022 ONCA 533, the Ontario Court of Appeal confirmed that, unless the question is one of pure law or is a question of mixed fact and law requiring only a superficial review of the evidence, questions about the jurisdiction of an arbitrator are to be arbitrated. This includes whether an arbitration clause in an arbitration contract is void for unconscionability, or for inconsistency with the Employment Standards Act, 2000, S. O. 2000, c. 41 (“ESA”) or the Human Rights Code, R.S.O. 1990, c. H. 19 (“the Code”).

The Appellant sued her former employer, alleging constructive dismissal. Her employment was governed by a written employment agreement which provided for arbitration of claims related to the termination of her employment. The arbitration clause specified that any arbitration award would not include costs or punitive damages. The Respondent employer brought a motion to stay the action based on the arbitration clause. The Appellant countered, arguing the clause was void for unconscionability (because it did not allow for punitive damages or a cost award) or was contrary to the ESA and the Code.

The Court of Appeal upheld the motion judge’s decision staying the action under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”) and referring the issue of jurisdiction to the arbitrator. In doing so, the Court first rejected the argument that the Appellant had been denied procedural fairness before the motion judge as she argued she had not been aware that the Court may refer the issue of jurisdiction to the arbitration. The Court of Appeal pointed to the Respondent’s written argument which took that position.

In the balance of the decision, the Court rejected the argument that the motion judge erred in referring the question of validity of the arbitration clause to the arbitrator. Rather, the motion judge’s decision was supported by the combined effect of the statutory directive of s. 7(1) of the Act to stay actions subject to an arbitration clause and s. 17(1) of the Act which provides that “an arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence of validity of the arbitration agreement”. Citing the Supreme Court of Canada in Uber Technologies Inc. v. Heller, 2020 SCC 16 (“Heller”) , the Court of Appeal noted that, unless the “jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of evidence”, jurisdictional questions are to be arbitrated (para 11).

Here, the question of unconscionability could not be determined by a superficial review of the evidence. Nor was it likely that the consistency with the ESA or the Code could be determined without a more thorough review of the evidence and, even if it could, it did not make sense to bifurcate those issues from the arbitration and deal with them separately from the question of unconscionability. The threshold for the Court to determine jurisdiction was not met.

Of interest, the Court also specifically noted that the “access to justice factors that animated Heller” were absent here. The employment contract was negotiated by counsel, the Appellant was a professional facing arbitration in Ontario under Ontario law, and there were no barriers to arbitration that would deprive the Appellant of a remedy. The same concerns in Heller did not arise on these facts.

Having rejected the Appellant’s arguments, the Court of Appeal held that, pursuant to s. 7(6) of the Act, that there was no appeal available from the motion judge. It quashed the appeal.

Contributor’s Notes:

First, the Ontario Court of Appeal has been a consistent defender of arbitration clauses and this is another in this line of jurisprudence, recognizing arbitration as a separate dispute forum and holding parties to their bargain.

Second, the Court’s specific reference to the “access to justice factors” in Heller is an important signal that not all employment cases are the same. Arguing unconscionability or contravention of employment and human rights standards will not be sufficient, on their own, to avoid an arbitration clause. Employment lawyers ought to specifically consider the effect of an arbitration clause, including terms limiting costs and damages, when negotiating and drafting these agreements. Those clauses will not be easily ignored. See earlier Arbitration Matters Case Note summarizing Leon v. Dealnet Capital Corp., 2021 ONSC 3636, Ontario – agreement to arbitrate not unconscionable where governing law preserves executive’s Employment Standards Act rights – #490 and A-Teck Appraisals Ltd. v. Constandinou, 2020 BCSC 135, B.C. – court acknowledges but declines to follow reasoning in Heller v. Uber Technologies Inc. – #271 for additional circumstances where employment actions were stayed in favour of arbitration.

Also, by articulating the issues in Heller as “access to justice factors”, the Court has created a unifying theme as to the types of cases in respect of which a court will be concerned about the strict application of arbitration clauses. These include employment cases like Heller, and also the recent cases involving consumer legislation and possible class actions. Counsel looking to avoid an arbitration clause ought to look to those cases for factors to ground future arguments.