ONTARIO – An appeal is not barred by s. 7(6) of the Arbitration Act, 1991, where a judge stays an action under s. 7(1) in favour of arbitration of an employment agreement, if there is reason to doubt the legality and enforceability of the arbitration clause.

Leon v. Dealnet Capital Corporation
2021 ONSC 7192 , November 4, 2021
Divisional Court, F. Kristjanson J.

In Case #006E (October 2, 2021), we summarized the decision of Master (now Associate Judge) McAfee, who stayed an action in favour of arbitration in an employment agreement under s. 7(1) of the Arbitration Act, 1991 (“the Act”).

The employee appealed the decision to the Divisional Court. The employer moved to quash the appeal on the basis that s. 7(6) of the Act, which provides that which provides that “[t]here is no appeal from the court’s decision” made under s. 7 of the Arbitration Act.

In this decision, Justice Kristjanson, sitting as a single judge of the Divisional Court, held that that the appeal should not quashed because it was not clear that it was completely devoid of merit: para. 17.

The arbitration clause in the subject employment agreement provided that it was subject to the Employment Standards Act, 2000 (“ESA”) but that the arbitration clause was not rendered invalid if it failed to refer to the ESA: para. 6.

Section 5 of the ESA prohibits “contracting out” or waiving of ESA employment standards. The Court referred to Waksdale v. Swegon North America Inc., 2020 ONCA 391 at para. 14 for the proposition that a severability clause “cannot have any effect on clauses of a contract that have been made void by statute” (para. 15).

The Court also referred to Heller v. Uber Technologies Inc., 2019 ONCA 1, at paras. 32-43, which 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 (para. 16).

In light of this jurisprudence, the Divisional Court held that whether the arbitration clause is rendered illegal or unenforceable by the ESA was important and thus, refused to exercise its discretion to quash the appeal as being devoid of merit.