Arbitration: Coming to a Canadian Employment Case Near You
The use of private arbitration is becoming increasingly common in Canada employment law disputes, and the courts are becoming increasingly willing to defer to alternative dispute resolution. A recent decision from British Columbia Court of Appeal (BCCA) confirms that contractual arbitration clauses may be enforceable and binding, particularly in the case of sophisticated executives.
In its ruling in Aspen Technology Inc. v. Wiederhold, 2025 BCCA 261, the BCCA overturned a lower court decision which had refused to enforce the arbitration clause.
When Aspen Technology hired David Wiederhold in 2008, the parties signed an employment contract. In addition, new annual incentive plan documents were signed each year. In these documents, there was a dispute resolution clause which provided that any legal disputes must be exclusively resolved exclusively through arbitration. Any such arbitration, which supplanted the right to proceed with claims in court, would have to be conducted before a three-person arbitration panel in Massachusetts. The arbitration clause also required the parties to share costs.
When Wiederhold believed that the company owed him about $100,000 in bonuses and commissions, he sued in the British Columba courts. The employer’s response was to seek to stay the court claim on the basis of the contractual arbitration clause, which they said made arbitration mandatory.
In first instance, the employer’s attempt to stay the court claim and force arbitration was rejected. The reasoning in support of this decision included that: (1) the requirement to proceed exclusively to arbitration failed for lack of contractual consideration and was not enforceable because it was introduced in incentive documents provided after employment started; (2) the arbitration clause as seen as an attempt to deny an employee rights under the B.C. Employment Standards Act (ESA); and (3) the estimated costs of arbitration were likely disproportionate to the size of the claim.
The employer’s successful appeal to the BCCA resulted in the arbitration clause being enforced, with the court claim therefore being stayed.
On the issue of contractual consideration, the BCCA found that the employment contract expressly contemplated new documents being provided on an ongoing basis during the course of employment. As a result, it was not accurate to consider the emergence of the arbitration clause as a new or improper provision. Instead, this was simply a part of the incentive plan, and agreement to the arbitration clause was essentially a required term of ongoing participation.
With respect to the ESA arguments, the BCCA carefully reviewed the incentive plan wording, which did not deny employees any statutory rights under applicable British Columbia law. While the forum for enforcing rights was through arbitration, nothing in the carefully-drafted contract wording sought to deny employees rights under applicable local law. Given that there was no evidence that the ESA would not be applied at arbitration, the arbitration provisions in the incentive plan were not contrary to Canadian public policy. Simply put, arbitration was expressly stated as being the exclusive means of obtaining relief, which could include a claim for rights under the ESA.
The BCCA also rejected the assertion that the arbitration clause was invalid based on unconscionability or disproportionality. The chambers judge held that the arbitration clause was a “brick wall” to pursuing the specific claim in the case. The BCCA distinguished the facts from those which prevailed in the Uber Technologies Inc. v. Heller decision of the Supreme Court of Canada, finding that Wiederhold had significantly more resources available to him, such that arbitration was not “an obviously insurmountable impediment” to pursuing his claim
Takeaways for Employers
The decision in Aspen Technologies confirms the willingness of Canadian courts to enforce arbitration provisions in employment agreements, especially for issues involving incentive plans and executive claims. While cases will continue to be decided by reference to context and relevant facts, this ruling helps breath further life into efforts to move disputes away from the courts and towards private arbitration. Two significant considerations will be the sophistication of the individual pursuing a claim and the precise wording of the relevant clause. These points reinforce the importance of closely reviewing contractual provisions if the employer is indeed seeking to make arbitration mandatory.