California Outlaws Forced Arbitration in Most Employee-Employer Disputes

Companies in California can no longer force workers as a condition of employment to sign away their right to have claims of discrimination, unfair pay or harassment resolved in a court of law as opposed to an arbitrator. There are a few exceptions, but the sweeping effect of  AB-51, signed into law by Gov Gavin Newsom, will have a significant impact on the landscape of future employment litigation in California.workplace arbitration agreements

As our Los Angeles employment attorneys can explain, mandatory employee arbitration agreements have had chilling effect when it came to worker rights and employer accountability. Not only are arbitration agreements costly for workers, they tend to end more favorably for employers, class action isn’t an option and it’s all confidential. A company could turn a blind eye to something like sexual harassment for years – and victims would never have the benefit of all the claims that came before them. And what if a worker refused to sign the arbitration agreement? They risked being fired – or never hired in the first place.

This is not to say arbitration has no place at all in resolving employer-employee disputes, but not when workers are forced to sign away their rights or risk giving up their job to someone who will.

The bill’s sponsor said nearly 70 percent of California workplaces will be impacted. However, it will only be in effect for new employees. Unless and until federal law changes, workers who have already signed employee arbitration agreements may still be locked into those if a company chooses to force the issue.

California Workers Were the Driving Force Behind the New Law

An estimated 60 million American workers have signed mandatory employee arbitration agreements – often without fully understanding what they are signing.

Increasingly, they are fighting back – with California workers on the front lines.

In 2015, a former community manager for a $16 billion office rental startup in Berkeley sued the company for firing her after she refused to sign a mandatory arbitration agreement. (She also alleged employee misclassification that resulted in wage and hour losses in the form of unpaid overtime.) Her story made national news and she testified before the California Legislature on the issue last year.

Then last year, thousands of workers for Google staged a walkout to express their disdain for mandatory arbitration agreements the company had forced them all to sign.

What Exactly Does The New Law Prohibit? 

As our L.A. employment attorneys can explain, the new law in summary says it’s unlawful to require arbitration as a condition of employment. Further, it outlines additional protections against workplace retaliation against employees who refuse to sign arbitration agreements, allowing them remedy through the state Labor Commissioner’s Office.

But while this new law, which formally goes into effect early next year, is a welcome one for many employees, it didn’t go quite as far as others might have hoped. For example, it’s not retroactive for employees who have already signed arbitration agreements as a condition of employment. The main reason for this is lawmakers had to carefully avoid running afoul of the Federal Arbitration Act and U.S. Supreme Court case law – both of which give companies the right to enforce mandatory arbitration agreements.

Thus, the new law will only impact new workers.

The law does not stop employees from voluntarily entering an arbitration agreement.

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 949.375.4734.

Additional Resources:

New state law bans mandatory arbitration for new employees — but doesn’t cover everyone, Oct. 13, 2019, San Francisco Chronicle

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