Arbitration Clauses — Ontario Employment Law

When starting a new job in Ontario, you might encounter an 'arbitration clause' in your employment contract. But what does it mean? In simple terms, it's a contractual term that requires you to resolve certain legal disputes with your employer through a private process called arbitration, rather than through the public court system. Employers often favour these clauses to keep disputes confidential, potentially speed up resolutions, and, in some cases, prevent employees from joining together in class-action lawsuits.

However, signing a contract with an arbitration clause does not mean you've signed away all your rights. The enforceability of these clauses in Ontario is a complex and evolving area of law. A pivotal moment was the Supreme Court of Canada's decision in Uber Technologies Inc. v. Heller. The Court ruled that an arbitration clause can be deemed 'unconscionable'—and therefore invalid—if it is grossly unfair. This can happen when there is a significant inequality of bargaining power and the resulting agreement is improvident. For example, a clause requiring an Ontario employee to pay thousands of dollars to start an arbitration process in another country could be found unenforceable.

Crucially, an arbitration clause cannot prevent you from accessing your minimum statutory rights. You always retain the right to file a complaint with the Ontario Ministry of Labour for violations of the Employment Standards Act, 2000 (ESA), such as unpaid wages, overtime, or termination pay, regardless of what your contract says. The clause may, however, apply to 'common law' claims like wrongful dismissal for additional notice or damages. Because the specific wording of the clause and the circumstances of your employment are critical, understanding your position requires a careful analysis of your unique situation.