California Enacts New Laws Attacking Arbitration and Arbitration Agreements
On the last day to sign or veto bills this legislative session, California’s Governor signed into law two bills clearly aimed at attacking and limiting arbitration and arbitration agreements in California. The first, AB 2617, prohibits mandatory, pre-dispute arbitration agreements in contracts for the provision of goods or services, to the extent an individual is required to waive the right to bring a civil action for violation of civil rights relating to hate crimes or political activity. The statute does not expressly state that it applies to employment arbitration agreements and is instead specifically tied to the Ralph Civil Rights Act (Civil Code section 51.7), which prohibits violence or threat of violence against a person because of a person’s protected characteristics (e.g. political affiliation, sex, race, color, religion, marital status, etc.), and the Bane Civil Rights Act (Civil Code section 52.1), which prohibits interference by intimidation or coercion with a person’s constitutional or statutory rights. The new law prohibits a person or business entity from requiring an individual to waive the rights provided by these statutes, including the right to pursue a civil action for a violation of these statutes. The new law applies to contracts entered into, modified, renewed or extended on or after January 1, 2015. Any person seeking to enforce an arbitration provision waiving the right to bring a civil action under these statutes will bear the burden of proving that the waiver was entered into knowingly and voluntarily and not as a condition of the contract or of providing or receiving the goods or services.
Although the new law is tied specifically to hate crime statutes, there is some potential for the law to impact arbitration agreements in the employment arena. In some instances, courts have held that certain types of employment discrimination and harassment claims may also constitute hate crimes within the meaning of Civil Code sections 51.7 and 52.1. These statutes are very broadly and poorly worded, leaving some room for differing interpretations by courts. The new law may also be held to apply to arbitration provisions in independent contractor agreements.
While the scope of the new law and its impact is far from clear, it does seem clear that the new law is contrary to the Federal Arbitration Act and would be deemed preempted as to agreements governed by the FAA. There almost certainly will be many legal challenges to the legality of this new law.
Also in an effort to decrease the attractiveness of arbitration as a forum for dispute resolution, Governor Brown signed into law AB 802, which requires major arbitration providers such as JAMS and AAA to publish at least quarterly on their websites (beginning in January 2015) detailed information concerning arbitrations they have handled, including (1) the name of any non-consumer party involved in the arbitration (i.e. the name of the employer), (2) the nature of the dispute (e.g. employment), (3) where the non-consumer party is an employer, whether the employer was the initiating or responding party, (4) the annual wage (in a range) earned by the involved employee, (5) the amount of the claim, which party prevailed, and the amount of any award, including attorneys’ fees, (6) whether the employee was represented by an attorney and, if so, the name of the attorney and the law firm, (7) the name of the arbitrator and the amount of the arbitrator’s fees, and (8) the total number of times the employer previously has been a party in arbitration or mediation before the dispute resolution provider. This new law has the obvious (and likely intended) effect of destroying the usual benefit of privacy that arbitration and mediation provide.
We will keep you posted as to further developments in this area.