Mandatory Arbitration Isn’t Always Mandatory in Canada

Consumer protection laws vary from province to province in Canada. They limit and, in some cases, void mandatory arbitration clauses in order to preserve a consumer’s right to have a claim decided by the courts, typically by class action. Recent appellate case law suggests that for companies offering services to both consumers and business users, there is a risk that if consumers bring a class action, business users may be able to come along for the ride.

A recent decision of the Ontario Court of Appeal in Wellman v. TELUS Communications Company demonstrates the risk of dealing with consumers and business users under the same contractual terms. The Court of Appeal affirmed the finding that it would not be reasonable to separate the two types of claims. Since a key feature of class certification is the existence of “common elements” among the proposed claimants, the existence of separate contracts may make it more challenging to establish that consumers’ and business users’ claims have enough common elements to proceed as a class action.

Alternatives to consider are to distinguish between business customers and consumers in offerings or terms of service, even if both are covered by the same contract. By expressly distinguishing the two, and stating that the arbitration clause would not apply to consumers but would apply to business users, a company starts to build its case that mandatory arbitration should actually be mandatory for some customers.