Superior Court ruling good sign for the enforceability of arbitration clauses in employment contract

Bizar Male

Under s. 5(1) of the ESA, no employer, employee, nor their agent, can “contract out of or waive an employment standard.” Section 96(1) states those alleging ESA violations “may file a complaint with the Ministry [of Labour].” The question at issue was whether an arbitration agreement that prevents an employee from pursuing s. 96(1) is in breach of s. 5(1), says David Vaillancourt, who acted for the defendant in Leon v. Dealnet Capital Corp., 2021 ONSC 3636.

“This case resolves any lingering doubts that employment law practitioners may have had that Ontario-governed arbitration clauses in employment agreements will be enforced by the court,” says Vaillancourt.

In Leon v. Dealnet Capital Corp., Vaillancourt’s client moved to stay the proceeding on the basis of the arbitration clause in its employment contract with plaintiff, John Leon. Leon was a senior vice president and had come to the company in a 2014 acquisition. He had signed an employment agreement in 2017, which required any dispute go to mediation and then, if unsuccessful, to arbitration.

In April 2018, Leon submitted a letter of resignation. The next year, he commenced an action, alleging Dealnet owed him $52,000 for a transaction-based bonus, among several other claims. Dealnet made a number of counterclaims and eventually announced its intention to rely on the arbitration clause.

Leon used Heller v. Uber to argue the arbitration clause stripped his right to complain to the Ministry of Labour about ESA violations, which is contrary to s. 5(1) of the Act. But Master Barbara McAfee said Heller v. Uber was distinguishable because the arbitration clause in that case was found unconscionable. The clause also contained a choice of foreign law provision, which ousted the ESA’s jurisdiction entirely. McAfee said she was not satisfied the clause was invalid, nor persuaded by Leon’s other arguments about delay and the arbitrability of the dispute’s subject matter. She granted the stay motion.

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