Irwin v. Protiviti, 2022 ONCA 533

Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220718 DOCKET: C69765

Benotto, Miller and Copeland JJ.A.

BETWEEN

Karen Irwin Plaintiff (Appellant)

and

Protiviti, a Division of Robert Half Canada Inc. and Robert Half International Inc. Defendants (Respondents)

Counsel: Chris Foulon, Krista Kais-Prial and Behzad Hassibi, for the appellant James D. Heeney and Julia Burke, for the respondents

Heard: April 29, 2022

On appeal from the order of Justice Audrey P. Ramsay of the Superior Court of Justice, dated July 19, 2021.

Reasons for Decision

[1] The appellant was employed by the respondents as Managing Director in the Risk and Compliance Group. She sued the respondents for constructive dismissal. The terms of the appellant’s employment were governed by a written employment contract, which the appellant negotiated with the assistance of legal counsel. The employment contract contained an arbitration clause. The arbitration clause provided that any claim related to the termination of the appellant’s employment shall be submitted to arbitration. It further provided that awards of costs and punitive damages would not be available in arbitration.

[2] The respondents responded to the appellant’s claim by bringing a motion to stay the action so the dispute could be referred to arbitration. The appellant defended against the motion on the basis that the arbitration clause is invalid due to unconscionability (primarily due to the unavailability of awards of costs and punitive damages), and for inconsistency with the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), and the Human Rights Code, R.S.O. 1990, c. H.19 (“HRC”). The motion judge held the validity of the arbitration clause was itself a matter for arbitration and stayed the action under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17.

[3] The appellant appeals on two bases: (1) that she was denied procedural fairness before the motion judge; and (2) that the motion judge was required to determine the validity of the arbitration clause and erred in not doing so. The appellant asked this court to rule on the validity of the arbitration clause and set aside the stay.

[4] At the hearing of the appeal, we determined that the court did not have jurisdiction, and quashed the appeal with reasons to follow. These are those reasons.

Analysis

[5] With respect to procedural fairness, the appellant argues that she was unaware that the motion judge was contemplating referring the question of the arbitration clause’s validity to arbitration, and therefore was unable to make meaningful submissions on this issue. We reject this argument. The respondents took the position in their factum on the motion that the court should defer to the arbitrator on the issue of the arbitrator’s jurisdiction. The appellant was on notice that jurisdiction was in issue.

[6] The respondents argued that this court lacks jurisdiction to hear the appeal on two bases: (1) the order appealed from is interlocutory, and accordingly the proper appeal route would be to the Divisional Court; and (2) the appeal is statute-barred pursuant to s. 7(6) of the Arbitration Act.

[7] In coming to the decision to grant the stay motion, the motion judge followed s. 7(1) of the Arbitration Act, which provides that a court shall stay proceedings if a party to an arbitration agreement commences proceedings in respect of a matter that the arbitration agreement requires to be submitted to arbitration. She noted, following Lauwers J.A.’s observation in Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 12, that the statutory language is directive, and that the priority granted to arbitration by the legislative scheme is reinforced by s. 17(1), which provides that “[a]n arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.”

[8] The motion judge also noted the exception in s. 7(2)(2) of the Arbitration Act that grants the court the discretion nevertheless to refuse to stay a proceeding where “[t]he arbitration agreement is invalid.” The motion judge did not refuse to stay the proceeding, holding that “the statute and the jurisprudence establish that the determination of the validity of the arbitration clause is within the jurisdiction of the arbitral tribunal.”

[9] The appellant argues that the motion judge erred by leaving the question of the validity of the arbitration clause to be determined in arbitration. The motion judge was required, the appellant argues, to decide whether the arbitration clause was invalid due to unconscionability or inconsistency with the ESA or HRC, as the appellant had argued before her.

[10] We do not agree. As explained below, the motion judge was permitted to leave the issue with the arbitrator as contemplated by s. 17(1) and the common law rule it codified, and was not obligated to provide reasons justifying this decision. This is in keeping with the general rule in Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 84, that “in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.” Uber Technologies Inc. v. Heller, 2020 SCC 16, 447 D.L.R. (4th) 179, at para. 32, further specified that a court should refer all challenges to an arbitrator’s jurisdiction to arbitration, except in two situations: (1) the challenge raises pure questions of law; or (2) the challenge raises questions of mixed fact and law (i) requiring only superficial consideration of the evidence and (ii) where the court is convinced the challenge is not a delaying tactic or will not prejudice recourse to the arbitration.

[11] The rule, then, is that questions of jurisdiction are to be arbitrated. A court has the discretion to decide otherwise, but only where the jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of evidence.

[12] The appellant’s argument from unconscionability is that it is unconscionable for an arbitration clause to exclude potential awards of punitive damages or costs. The determination of unconscionability is a “probing factual inquiry”: Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921, at para. 15. The record assembled on this motion is voluminous, and the interpretation of the arbitration agreement would depend on factual findings, including findings of credibility. It would be necessary to assess the sophistication of the parties, their bargaining power, and other aspects of the factual matrix related to the drafting of the agreement. Whether the arbitration clause ought to be found void for unconscionability could therefore not be determined by a superficial consideration of the evidence. Answering that question would risk turning the motion into a mini-trial: Heller, at para. 45.

[13] The question of the arbitration clause’s consistency with the ESA and the HRC are also questions of mixed fact and law, in that they cannot be decided in the abstract, but require an interpretation of the employment agreement. The motion judge was, inferentially, of the view that these questions could not be decided by undertaking a superficial consideration of the evidence. In any event, given that the unconscionability question needed to be resolved by arbitration, it would make little sense to bifurcate the proceedings and have the remaining questions resolved by the motion judge.

[14] It is worth noting that none of the access to justice concerns that animated Heller are present in this case. The plaintiffs in Heller clicked on a standard form services agreement, were unlikely to have received legal advice, had no opportunity to negotiate the agreement, were made subject to the law of the Netherlands with arbitration to take place in the Netherlands, and required to pay a fee of $14,500 USD just to begin the arbitration. In contrast, the appellant was a professional earning a base salary of $350,000, claiming over $1.5 million, and facing arbitration in Ontario under Ontario law. She had the assistance of legal counsel during the negotiation of the employment agreement. Notwithstanding that the unavailability of a costs award under the arbitration clause makes arbitration potentially less remunerative than it would otherwise be, there is no suggestion that the costs of arbitration are disproportionate to the potential reward, or that barriers to arbitration would effectively leave the appellant without remedy.

[15] In summary, the appellant was not denied procedural fairness, and the motion judge was not required to determine the validity of the arbitration clause as a threshold matter. By the operation of s. 7(6), no appeal from the motion judge’s decision is available. This court is without jurisdiction and the appeal must be quashed. Accordingly, it is unnecessary for us to address the further issue of whether the order appealed from is final or interlocutory.

Disposition

[16] The appeal is quashed. Leave to appeal costs of the motion is refused. The respondents are awarded costs in the amount of $10,000, inclusive of HST and disbursements.

“M.L. Benotto J.A.” “B.W. Miller J.A.” “J. Copeland J.A.”