Court Finds Language of Privacy Act Precludes Arbitration of Privacy Disputes

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Overview

There have been a number of recent decisions in the arbitration space regarding when it is appropriate to stay litigation in favour of arbitration and where it is not. In particular, recent appellate case law (e.g., Wellman, and Heller) discusses and interprets the principle set out in Seidel v. TELUS Communications Inc., 2011 SCC 15 that arbitration clauses will generally be enforced “absent legislative language to the contrary.”

In particular, these cases address whether statutory language in consumer protection and employment legislation constitutes “legislative language to the contrary” that precludes parties from agreeing to arbitrate. However, there was no case law that considered this issue in the context of the various privacy statutes that exist across Canada – until now.

In Butt v. Kiewit Energy Corporation, 2019 NLSC 119 the Supreme Court of Newfoundland and Labrador (the “Court”) considered among other things whether provisions of the Privacy Act (Newfoundland) included language that precluded the arbitration of privacy rights set out in that statute. The Court found that it did.

In particular, the Court held that under sections 7-9 of the Privacy Act, it has exclusive jurisdiction over claims for the statutory privacy breaches (as opposed to the common law privacy rights) and that to the extent an arbitration clause “purport(s) to take away a right, benefit, or protection confirmed by the Privacy Act, it is invalid”. This has implications for those seeking to arbitrate privacy disputes, particularly where consumer protection laws do not already apply to preclude arbitration.

Background

The representative plaintiffs commenced a proposed class proceeding against their former employer alleging breach of privacy (and other causes of action) resulting from the theft of one of the defendant’s computers on which the plaintiffs’ personal employment information was allegedly stored.

The defendant sought to stay the action pursuant to section 97(1) of the Judicature Act (Newfoundland), on the basis that the court lacked jurisdiction as a result of the arbitration clause in in the collective agreement between the defendant and the members of the proposed class. In this case, the arbitration clause reflected the provisions of the Labour Relations Act (Newfoundland), which required arbitration to resolve certain disputes. However, the proposed class would consist of former, not current employees, a fact that was central to the Court’s decision.

The Decision

The issue to be decided was whether the plaintiffs could pursue their claims before the Court or whether they were required to have the claims determined by arbitration under the collective agreement. In order to decide this issue, the Court analyzed (1) the nature of the dispute; and (2) the scope of the collective agreement.

With respect to issue (1), the nature of the dispute, the Court characterized the dispute as being one concerning “the mishandling of the Plaintiffs’ personal information post-employment”.

Importantly, it arose from the employment relationship, because it was in this context that the defendant had obtained the information in question.

However, under issue (2), the Court had to determine whether the collective agreement, and in particular the arbitration clause contained in the collective agreement, applied to the dispute, as characterized by the Court, and whether there was any statutory language that would oust the ability of the parties to arbitrate the underlying privacy dispute.

While the Court held that the dispute over whether the defendant owed a duty to safeguard the personal information in issue fell within the ambit of the relevant provisions of the Labour Relations Act, the real issue was whether the duty to do so post-employment fell within the ambit of the act and the associated arbitration clause. The court held that this issue – about post-employment duties – did not fall within the scope of the arbitration provision or the relevant provisions of the labour relations legislation.

Although it was perhaps not necessary to do so in light of its decision about the scope of the arbitration clause, the Court also held that it had exclusive jurisdiction over the plaintiffs’ claims for the alleged breach of the Privacy Act. In that regard, the plaintiffs relied on section 8 of the Privacy Act, which provides: “An action for violation of privacy shall be heard and determined by the Trial Division”. Section 9 provides: “This Act applies where there is a violation of the privacy of an individual” and that where “there is a conflict between this Act and another Act… this Act prevails.”

The question for the Court was whether these provisions provide “clear legislative language” that arbitration was not available in the circumstances. According to the Court, the Privacy Act did contain clear legislative language: the legislature chose to have all actions for the statutory breach of privacy heard and determined by the Trial Division (section 8) and chose to give the Privacy Act paramountcy over another act if there was conflict (section 9). Accordingly, the legislature’s choice for the forum of such disputes was clear. However, the Court stated that the pursuit of remedies for breach of privacy under the common law tort of intrusion upon seclusion were distinct.

Takeaways

  • While ultimately the Court concluded that the remaining claims for breach of contract, warranty, fiduciary duty and confidence, negligence and intrusion upon seclusion did not fall within the mandatory arbitration provision of the underlying contract and labour legislation, this decision is important from a privacy and arbitration perspective for those seeking to arbitrate privacy disputes:
  • The decision suggests that in Newfoundland and perhaps other provinces that have similar privacy legislation, it may not be possible to arbitrate dispute relating to breaches of the relevant privacy statute. This might already be the case where the claimants are consumers (as a result of consumer protection legislation), but will be more impactful in cases that do not deal with consumers, such as this case.
  • The impact of this decision will vary as between provinces. For example, Ontario does not have comparable privacy legislation. This is important given that the Court distinguished between the statutory and common law privacy breaches.
  • This decision in not surprising in light of existing commentary on privacy rights in Canada, which suggests that they are quasi-constitution (see Douez).
  • The issue of when statutory language will preclude parties from agreeing to arbitrate is currently a hot topic and will likely be decided (again) by the Supreme Court of Canada in Heller. This leaves some uncertainty as to when arbitration clauses will be enforceable, and emphasizes the importance of seeking legal counsel with respect to the enforceability of arbitration clauses.

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