In considering whether to grant a motion to quash an appeal in Leon v. Dealnet, 2021 ONSC 7192, Justice Kristjanson of the Ontario Divisional Court was faced with two conflicting policy concerns: respect for and giving effect to arbitration agreements and protecting vulnerable workers by ensuring that the arbitration agreement did not constitute a contracting out of an employee’s statutory rights
The appellant/responding party on the motion, Leon, brought an action against his former employer, Dealnet, claiming unpaid wages relating to a transaction-based bonus. In response, Dealnet brought a motion to stay the action under s. 7(1) of the Arbitration Act, 1991, S.O. 1991 c.17 (the “Act”) on the basis that the dispute was subject to an arbitration agreement between the parties.
Contained within Leon’s employment agreement with Dealnet was a fairly broad arbitration clause:
“All disputes arising out of in connection with this contract, or in respect of any legal relationship therewith or derived there from will be referred to mediation and, if unsuccessful, finally resolved by arbitration under the statutes of the Province of Ontario”.
The employment agreement also contained a “governing law” provision, which indicated that, first, the agreement was subject to the Employment Standards Act 2000, S.O. 2000, c.41(“ESA”) and, second, the provisions of that legislation would supersede the provisions of the agreement in the event that the rights and payments under the ESA were greater than those provided in the agreement. Justice Kristjanson noted that s. 5 of the ESA prohibits “contracting out” or waiving of the ESA standards.”
Dealnet’s motion to stay Leon’s action was successful. Leon appealed.
Dealnet moved to quash the appeal, arguing that s. 7(6) of the Act is clear: in respect of a motion for a stay under s. 7(1) “ there is no appeal from the court’s decision”. Dealnet noted that the judge on the stay motion had considered all of the relevant bases to refuse a stay under s. 7(2), including whether “the subject matter of the dispute is capable of being the subject of arbitration under Ontario”. The motion judge held that the arbitration agreement was valid. Dealnet relied upon the jurisprudence and general policy which favours giving effect to arbitration agreements between parties. That policy is articulated in a number of Supreme Court of Canada cases, including Telus Communications Inc. v. Wellman, 2019 SCC 19 and Uber Technologies Inc. v. Heller, 2020 SCC 16.
Leon, supported by the intervener Parkdale Clinic, argued that the arbitration agreement was illegal on its face. Requiring matters be arbitrated was, he argued, a breach of the ESA which could not be remedied by the “governing law” provision. He referred to an  “equally compelling, and competing, public policy, of protecting vulnerable workers by assuring that the statutory rights under the ESA are protected.”
Leon noted that the Court of Appeal for Ontario in Heller v. Uber Technologies Inc., 2019 ONCA 1, held that “an arbitration clause that contracts out of an employee’s ESA rights to access the Ministry of Labour complaints process or the ordinary courts is illegal and unenforceable.” As such, the employment contract is void, as is the arbitration clause. There was no authority for the judge below to render decision under s. 7(1), and therefore Leon argued that he was not barred from bringing an appeal.
Justice Kristjanson did not have to decide how to balance these two policy considerations. Rather, she held that the test to quash an appeal – that the appeal is “completely devoid of merit” – was not met in this case. The issue of the interaction of s. 7(6) of the Act and the public policy concern of the contravention of the ESA was an important one to be determined at a full appeal.
This very short decision is important for a number of reasons.
First, increasingly courts, such as in Uber, are being forced to confront how to balance respect for party autonomy in choosing arbitration with a recognition that arbitration clauses may not be fully negotiated and can be used to circumvent rights and remedies that would be otherwise be available at law. Similar concerns are raised in the field of consumer protection.
Second, this case adds the complicating factor of the legislative direction in s. 7(6) that appeals under s. 7(1) are not permitted. On the appeal, the court will need to consider the implication of that provision which fosters three other important goals of arbitration – limited court intervention; expediency; and finality.
Finally, this case is interesting because of the participation of the intervener. Having an intervener appear on a motion to quash an appeal is unusual. Yet, it is clear that Justice Kristjanson saw the benefit of the intervention, commenting that the interest of the Parkdale Clinic demonstrated the importance of the legal questions to be resolved. Whether this intervention on such a motion will remain an anomaly or will introduce a new trend towards a broader role for intervention is unclear. The new directive on interventions from the Supreme Court of Canada suggests the former but this case would suggest that there will always be room for interveners who add value to the court’s consideration of an issue.
For a previous lower court decision on the same matter in which Master Barbara McAfee found the agreement to arbitrate was not unconscionable in light of the governing law provisions in the employment contract, see earlier Arbitration Matters note #490, Leon v. Dealnet Capital Corp., 2021 ONSC 3636. For other circumstances where a stay will be refused, see note #491, Deluxe Windoors Manufacturing Inc. v. Bruhm, 2021 ONSC 3616. The stay was refused where the party seeking the stay had taken several steps in the action.