Federalism and the Arbitration of Consumer and Employment Disputes in the United States and Canada: The Road Not Taken?

Abstract

In many respects, the tale of the arbitration of consumer and employment disputes in the United States and Canada is a similar one. Both jurisdictions were traditionally hostile to arbitration, both jurisdictions had a complete change of heart in recent years, and in both jurisdictions, arbitration is widely used in the consumer and employment sphere. Moreover, in both jurisdictions questions have been asked regarding the fairness of arbitration agreements in consumer and employment contracts due to the inherent power imbalance between consumers or employees on the one hand and businesses or employers on the other. Despite these similarities, the consumer and employment arbitration landscape in each is radically different, whereas consumer and employment arbitration in the US is almost impossible for consumers and employees to avoid; in Canada, the opposite is true. This radical difference results from key differences in each jurisdiction’s understanding of federalism so that whilst Canadian provinces and courts have been able to protect consumers and employees, US states and courts have found themselves hamstrung by the Supreme Court’s interpretation of the Federal Arbitration Act and the dominance of federal law over state law. This has led to US courts pushing the envelope of the doctrine of unconscionability whilst Canadian courts have found this unnecessary due to provincial regulation. This article analyzes the different paths taken by federalism in each jurisdiction and how that in turn led to almost opposite outcomes for arbitration law north and south of the world’s longest border. Ultimately, the article concludes that in both federalism and arbitration law, Canada and the US each represent the road not taken by the other.