9th Circuit Sides With Employers on California Forced Arbitration Law

A California law that prohibits employers from forcing workers to resolve major workplace disputes in private arbitration is a violation of federal statute – according to a recent ruling by the U.S. Court of Appeals for the Ninth Circuit.Los Angeles employment lawyer

The 2-1 ruling addresses conflict over California’s AB51, which criminalizes the act of an employer forcing an employee to sign an arbitration agreement that would compel them to resolve serious job conflicts before a private arbiter rather than in court.

As our Los Angeles employment lawyers can explain, this outcome is considered a big win for employers and big businesses – and a serious blow to the average worker.

These so-called “mandatory arbitration agreements” require workers to settle their complaints about things like sexual harassment, discrimination, and retaliation in a closed-door, private session – with an arbitration company paid by the employer – rather than in an open, public court proceeding. Arbitrators don’t even necessarily have to follow the law or due process, the way courts are bound. Such agreements had become extremely common in California and throughout the country in recent years, with many companies forcing workers to sign them as a condition of employment.

Those who support mandatory arbitration to resolve workplace disputes say it’s faster and cheaper than court, and makes the most sense when trying to settle routine points of contention. However, labor advocates say such agreements help to hide systemic abuses and discrimination. Arbitration agreements were shown to be particularly problematic in the midst of the #MeToo movement because workers weren’t able to identify their unfair or unlawful treatment as part of a bigger problem as opposed to an isolated incident that impacted only them.

AB51, which went into effect in 2019, attempted to address these concerns. It was passed along with a clutch of several other bills intended to protect workers from sexual harassment, unlawful wage gaps, and inadequate workplace health and safety protections.

But the law faced opposition almost immediately, and a federal judge blocked its enactment the same year it passed. An appeal on that injunction resulted in the 9th Circuit initially ruling in favor of the state. However, that same three-judge panel has reversed course after agreeing to hear the case again. This time, citing the Federal Arbitration Act, the court says U.S. law trumps state law in this case, protecting the binding nature of these mandatory employment agreements.

Some have noted the issue was the way the law is written and how it stacked up against existing federal statute: An employer could require an employee to enter into an arbitration agreement – thus violating state law – but could still be able to enforce it under federal law.

All this said, smart employers would still do well to give workers a choice on whether they sign it. For one thing, an employee who willingly signs an arbitration agreement will be less likely to submit to it for conflict resolution – without fighting for their right to go to court. Beyond that, if an employee has the choice to turn down entering into an arbitration agreement, the employer will have an easier time proving the terms of that agreement were substantively and procedurally fair – and thus enforceable. Finally, this latest ruling was split. One person’s opinion stood between this impactful measure being decided the way it was. The issue could always be brought before the court again, and there could be a potentially different outcome.

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

Additional Resources:

9th Circuit sides with employers in dispute over California law barring forced arbitration, Feb. 16, 2023, by Kevin Rector, Los Angeles Times

More Blog Entries:

Los Angeles Sexual Harassment, Rape Lawsuit Filed by Former Bank Exec, Feb. 7, 2023, Los Angeles Employment Lawyer Blog

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