CITATION: Leon v. Dealnet Capital Corporation, 2021 ONSC 7192

DIVISIONAL COURT FILE NO.: 432/21 DATE: 2021-11-04

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

JOHN LEON Appellant/Responding Party

– and –

DEALNET CAPITAL CORPORATION Respondent/Moving Party

-and-

PARKDALE COMMUNITY LEGAL CLINIC Intervener

COUNSEL: Craig Colraine and Nick Habets, for the Appellant/Responding Party on Motion David Vaillancourt and Alyssa Hall, for the Respondent/Moving Party on Motion Gregory Ko, Ruth Wellen and John No for the Intervener

HEARD at Toronto by videoconference: October 27, 2021

Endorsement

Kristjanson J.

[1] This is a motion to quash an appeal as clearly devoid of merit.

[2] John Leon sued his former employer, Dealnet Capital Corporation (“Dealnet”), claiming unpaid wages relating to an unpaid transaction-based bonus. Dealnet brought a motion under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 (“Arbitration Act”) to stay the action because the dispute is subject to an arbitration agreement between the parties.

[3] Associate Judge B. McAfee granted Dealnet’s motion under s. 7 and stayed the action: Leon v. Dealnet Capital Corp., 2021 ONSC 3636. John Leon appealed from the decision. Dealnet then brought this motion to quash the appeal. Dealnet argues that the appeal is prohibited by the broad appeals bar in s. 7(6) of the Arbitration Act, which provides that “[t]here is no appeal from the court's decision” made under s. 7 of the Arbitration Act.

[4] Parkdale Community Legal Clinic (“Parkdale Clinic”) appears as an intervener.

Background Facts and Statutory Schemes

[5] The Employment Agreement between Mr. Leon and Dealnet contains an arbitration clause which provides that:

All disputes arising out of in connection with this contract [the Employment Agreement], or in respect of any legal relationship therewith or derived there from, will be referred to mediation and, if unsuccessful, finally resolved by arbitration under the statutes of the Province of Ontario.

[6] The Employment Agreement also contains a “Governing Law” provision which provides that the Employment Agreement is subject to the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), and ESA “rights” and payments not referred to in the Employment Agreement or which exceed amounts payable under the Agreement will supersede the contractual provisions:

This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario. This Agreement shall be subject to the Employment Standards Act, 2000 (Ontario), as amended or replaced. If the Employee is entitled to any rights or payments under that legislation which are not reference [sic] in this Agreement or which exceed amounts payable under this Agreement, the provisions of that legislation shall supersede the provisions of this Agreement. The failure of any provision of this Agreement to reference or acknowledge the provisions of that legislation shall not invalidate that provision (the Governing Law Clause).

[7] Section 5 of the ESA prohibits “contracting out” or waiving of ESA employment standards:

5 (1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.

[8] Sections 7(1) and (2) of the Arbitration Act provide:

7 (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

(2) However, the court may refuse to stay the proceeding in any of the following cases:

1. A party entered into the arbitration agreement while under a legal incapacity.
2. The arbitration agreement is invalid.
3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
4. The motion was brought with undue delay.
5. The matter is a proper one for default or summary judgment.

[9] Section 7(6) simply provides, under the marginal heading “No appeal”, that “There is no appeal from the court’s decision.”

[10] The associate judge concluded that there was a valid arbitration agreement between the parties; that the dispute arguably falls within the scope of the arbitration agreement; and that there were no grounds upon which she should refuse to stay the action.

Jurisdiction

[11] The court has the power to quash an appeal by s. 134(3) of the Courts of Justice Act, R.S.O. 1990 c C.43.

Issues and Argument

[12] Counsel for Dealnet makes several arguments. Dealnet argues that the wording of s. 7(6) of the Arbitration Act is clear. Once a court has ruled under s. 7(1) that a civil proceeding is stayed in favour of an arbitration, all appeals are barred. The Associate Judge, in detailed reasons, considered the relevant exceptions including invalidity of the arbitration agreement. The associate judge held that the arbitration agreement was valid, relying on binding Supreme Court of Canada and Ontario Court of Appeal precedent. Dealnet argues that allowing this appeal to proceed would thwart the clear legislative policy set out in the Arbitration Act, which strongly favours giving effect to arbitration agreements. Dealnet relies on recent Court of Appeal and Supreme Court of Canada jurisprudence, including TELUS Communications Inc. v. Wellman, 2019 SCC 19, Uber Technologies Inc. v. Heller, 2020 SCC 16, Heller v. Uber Technologies Inc., 2019 ONCA 1, Toronto Standard Condominium Corp. No. 1628 v. Toronto Standard Condominium Corp No. 1636, 2020 ONCA 612, and Ontario Medical Assn. v. Willis Canada Inc., 2013 ONCA 745.

[13] On the other hand, the appellant and the Parkdale Clinic argue that the arbitration clause at issue in this appeal is illegal on its face, as it requires the appellant employee to refer all disputes arising from his employment to private arbitration in breach of the ESA. They argue that the Ontario Court of Appeal in Heller v. Uber Technologies Inc., 2019 ONCA 1, at paras. 32-43, 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, since these are minimum employment standards in the ESA. The Employment Contract is void ab initio because it contracts out of ESA protections. The arbitration clause falls as well. Thus the associate judge did not have the authority to render a decision under s. 7(1) of the Arbitration Act. The appeal cannot be barred since the decision could not have been made under s. 7(1). The s. 7(6) statutory bar cannot bar appeals of decisions where the decision-maker lacked the authority to render the initial decision.

[14] The appellant and the Parkdale Clinic argue that the decision incorrectly gives effect to the Governing Law clause as a “saving provision”, even though the Court of Appeal has consistently held that saving provisions cannot remedy an otherwise illegal provision. They refer to an equally compelling, and competing, public policy, of protecting vulnerable workers by ensuring that statutory rights under the ESA are protected. They rely on the Court of Appeal’s decision in Rossman v. Canadian Solar Inc. (“Rossman”). In Rossman, an employer tried to cure an unlawful termination clause that capped benefit continuation at 4 weeks (instead of the statutory 8 weeks) by relying on a “saving provision.” The Court of Appeal held that provisions that contract out of the ESA cannot be cured through a “saving provision.” To do so would incentivize employers to insert illegal clauses into employment agreements and would flout the ESA’s purpose of employee protection. It would, in other words, be a form of illegal checkerboarding. As noted by the court at para. 40:

In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA – to protect employees and to ensure that employers treat them fairly upon termination…

[15] The appellant and the Parkdale Clinic also rely on the Court of Appeal’s decision in 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.”

[16] The only issue is whether I should exercise my discretion to quash the appeal because it is completely devoid of merit. In Schmidt v. Toronto-Dominion Bank, 1995 3502, 24 O.R. (3d) 1 (C.A.) at paras. 6-7, the Court of Appeal held that the power to quash an appeal “will seldom be exercised”. It pointed out that “It is very difficult, in most cases, to reach the conclusion that an appeal is devoid of merit without hearing the entire appeal.” The court held that there “is a minimal level of merit needed to defeat a motion to quash.”

[17] I cannot conclude that the appeal is completely devoid of merit. The central issue – whether section 7(6) of the Arbitration Act bars the appeal, or whether the arbitration provision contravenes the ESA and is illegal and unenforceable - is important. The Parkdale Clinic has intervened in the interests of vulnerable workers, highlighting the importance of the questions of law to be resolved. I decline to exercise my discretion to quash the appeal without full argument on the appeal.

[18] The parties are to schedule the appeal, and may request a Case Management Conference if required.

Costs

[19] The parties agree on the quantum of costs on the motion of $15,000.00. But Dealnet argues that a portion of the work on the motion may well be used on the appeal, so 50% of this amount should be reserved to the discretion of the judge hearing the appeal. I do not agree. These are costs incurred on this unsuccessful motion to quash, and now is the time to settle costs.

[20] Dealnet is to pay to John Leon costs of $15,000.00 inclusive on the motion, payable within 30 days. The Parkdale Clinic neither asks for nor is awarded costs.

___________________________ Kristjanson J.

Released: November 4, 2021