Arbitration Clauses In Employment Law: Toronto Employment Lawyer

Section 7 of the Arbitration Act, 1991 states:

  • 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.

If there is ever a dispute that arises, an arbitration clause helps to avoid the complicated court system and it can save you the heavy legal costs of going to court. It is important to ensure that arbitration provisions within your agreements are enforceable as well as clear and unambiguous.

In Fisher’s Guide to the Mediation and Arbitration of Employment Law Disputes, Barry B. Fisher, a prominent mediator in the employment law bar, discusses the benefits of arbitration:

  • One of the biggest advantages to arbitration is that the parties are able to agree on the decision maker…the process is kept confidential and no decision will be released to the public media… (and) the overall costs should be less or at least no more than trial as the arbitration process tends to be more efficient and less paper intensive as a trial.

Arbitration can be a positive mechanism and it can be used to quickly move files forward, however if they are poorly drafted it may slow things down. You should ensure an experienced employment lawyer drafts your employment contracts and contractual provisions dealing with arbitration. Monkhouse Law has experience in drafting enforceable clauses that protect your interest. 

Morrison v Ericsson Canada, 2016 ONSC 3908

The Plaintiff worked for a software company that was acquired by the Defendant. In the offer of employment letter, it specified that the Plaintiff would be subject to all applicable policies of the company, including the annual Sales Incentive Plan (“SIP”). He also received an email from the Defendant confirming his position and the email stated that the employment agreement was subject to the laws of the province of Ontario. The terms of the SIP were provided to employees annually and participation in the program was not mandatory. The Plaintiff signed a goal sheet confirming his agreement to the terms and conditions of the SIP. The SIP agreement requires that if there is a dispute arising out of the agreement that cannot be resolved; the parties must arbitrate the dispute in Texas. The Plaintiff had three decisions appealed to the SIP Executive Committee and he was advised he was unsuccessful. He soon after resigned and began a claim for damages in unpaid commissions. The Defendant, in this case, argues that the arbitration clause should be enforced.

The trial Judge found that the Plaintiff understood the terms of the SIP because he followed the appeal procedure for the first three levels. The only reason he failed to follow the final arbitration procedure was that it was too expensive.

The trial Judge states at para 18:

  • The language in the SIP is clear and unambiguous; Morrison agreed with the provisions. The language of s. 7(1) of the Arbitration Act is mandatory and requires the court to stay a proceeding when there is an agreement to arbitrate and the dispute is properly within the mandate of the arbitrator. There can be no doubt that disputes arising from the SIP and its interpretation and application are exactly the sorts of issues the arbitrator would deal with.

The trial judge references Dell Computer v. Union des consommateurs, [2007] 2 S.C.R. 801, where the Supreme Court of Canada comments on the role of the court in the face of an agreement to arbitrate. At para. 150:

  • That the jurisdiction of the Superior Court is ousted in the face of an arbitration agreement, save and except for some very limited exceptions: “There is consequently no question that, if the arbitration agreement is valid and relates to the dispute, the Superior Court has no jurisdiction to hear the case and must refer the parties to arbitration.

This is further emphasized by Dancap Productions Inc. v. Key Brand Entertainment Inc., 246 O.A.C. 226, the court dealt with a dispute under the Arbitrations Act. The court reaffirmed, at para. 32:

  • Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal.

It was decided that the matters at issue fell within the terms of the SIP agreement. The fact that it might be inconvenient or expensive for him was not a legitimate reason to find that the Plaintiff should be able to avoid the arbitration and pursue the issue through the courts. The action before the courts was stayed and the Plaintiff was directed to proceed with arbitration.

It is important to ensure that the arbitration clause in your employment contract is enforceable by having it looked at by a legal professional. Monkhouse Law has experience dealing with arbitration clauses and protecting employees against the use of unenforceable clauses. Contact us today.

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