Ottawa (AFP) - The Supreme Court of Canada cleared the way for a Can$400 million (US$300 million) class action lawsuit to force Uber to recognize drivers as employees, while ruling Friday its arbitration scheme void.
In an eight-to-one decision, the top court found that the ride-share company's costly arbitration process to settle disputes is "unconscionable and therefore invalid."
"Respect for arbitration is based on its being a cost-effective and efficient method of resolving disputes," Chief Justice Richard Wagner wrote in the decision.
"When arbitration is realistically unattainable, it amounts to no dispute resolution mechanism at all."
The case involved David Heller, a delivery driver for UberEats who sought in 2017 to launch a class-action to force Uber to recognize its drivers as employees rather than independent contractors.
He was opposed to a new Uber compensation package, and wanted for drivers a minimum wage, vacation pay and other protections under Canadian labour laws.
Uber, seeking to quash the litigation, insisted that his grievances must be dealt with through arbitration.
It cited a contract clause requiring disputes between drivers and the company to be arbitrated in the Netherlands, at an upfront cost of US$14,500.
But the top court said arbitration was "out of reach for him and other drivers in his position."
"His contractual rights are, as a result, illusory," it said.
The Supreme Court also agreed with the Ontario appeals' court that said the arbitration scheme amounted to an illegal outsourcing of employment standards.
Uber has long argued it is merely a platform linking self-employed drivers with riders, a model which allows for avoidance of certain taxes and social charges as well as paid vacations.
However that practice, which underpins the gig economy that employes 1.7 million Canadians or 8.2 percent of the workforce, has increasingly come under legal attack in many countries.
In March, a French court ruled in a similar case against Uber's appeal of a 2019 decision that a former driver who sued the firm effectively had a work contract.
It found that Uber had control over the driver by his connection to the app which directs him to clients, and thus should not be considered an independent contractor but an employee.
Heller no longer works for Uber.
But his court victory is seen as another step toward recognition of gig economy workers as employees, rather than contractors.