California Legislature Acts to Bar Mandatory Employment Arbitration Agreements

According to a recent news article form the National Law Review, the California state legislature has just passed Assembly Bill 465 (AB 465), which prohibits the use of mandatory employment agreements by employers in the state. With the bill having passed, it is up to the governor to sign the law by the middle of October or challenge it

job-concept-1445172-4-mThe new law would effect any employment arbitration agreements entered into, renewed, or revised after the first of next year. There is also a provision in the new law making it illegal for an employer to retaliate against or threaten any employee for refusing to sign an arbitration agreement.

As our Orange County employment attorneys can explain, under the new law, if an employer wishes to enforce an employment agreement signed after the first of next year, it will be the burden of the employer to show the arbitration agreement was entered into voluntarily, rather than being a condition of employment.   There are also provisions in the new law that would make it illegal for employers to violate the law, and if it were proven there was a violation, the complaining employee would be entitled to injunctive relief from the court and the payment of attorney’s fees and court costs.   This is very helpful to the injured employee, as he or she might not have enough money to bring legal action, but now this will not be a significant bar to taking legal action, due to the fee shifting provisions in the new law.

There are, however, certain jobs and sectors of employment to which the new law would not apply. For example, brokers who are required by the Securities and Exchange Commission (SEC) to submit to a self-regulating body would not be covered by the prohibition of mandatory employment arbitration agreements. The provision would also not apply to anyone who was representing by counsel (personally) at the time an arbitration agreement was signed. There are certain jobs where employment arbitration is an integral part of the system. Every baseball player who plays for a professional team in California is subject to binding arbitration, unless the parties agree otherwise; but, since there is full representation, these agreements would not be covered by the new law banning mandatory agreements.

There is a law currently in place in California that deals with mandatory arbitration agreements that does not prohibit the use of these agreements, but it requires that any arbitration agreement be made in a manner that does not violate an employee’s due process rights, and must be made with an employee’s knowledge. There is also a requirement that these agreements are mutual with respect to obligations for both employer and employee. However, this is not the same as saying they cannot be tied to employment. In other words, employers can say that here is the employment arbitration agreement and this is what it means. If you want the job, you need to sign the agreement. By doing this, an employer would still be operating in a knowing manner, and the employee would be aware he or she was signing the agreement, even if refusing to sign meant not getting the job.

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

Ban on Mandatory Employment Arbitration Agreements Passed by California Legislature, September 2015, National Law Review

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