California Bill to Ban Most Employment Arbitration Agreements Moves One Step Closer to Becoming Law
Topics: Arbitration Agreements
In its continuing, apparent quest to undermine federal law, the California legislature is moving to make it unlawful for employers to require applicants or employees to agree to resolve employment-related disputes by way of arbitration. AB 3080 would add provisions to the California Fair Employment and Housing Act (FEHA) and to the California Labor Code making it unlawful for an employer to require an applicant, employee, or independent contractor to agree to waive any forum (i.e. court) for the resolution of a dispute arising under FEHA (discrimination, harassment, and retaliation) or the Labor Code (wages/wage statements/meal and rest breaks/working conditions). The bill further specifies that an arbitration agreement is unlawful even if applicants or employees are permitted to opt out of the agreement. In other words, even where an employee is permitted to opt out of the arbitration agreement, the agreement still will be deemed to have been forced on the employee as a condition of employment, and therefore, will be considered unlawful.
The problem with AB 3080, apart from the fact that it is horrible for California employers, is that it is plainly unconstitutional and preempted by the Federal Arbitration Act (FAA). The California Legislature is on clear notice of this problem, too. Indeed, the California Legislature has adopted similar laws that have discriminated against arbitration agreements in the past and the courts (including the United States Supreme Court) have refused to enforce these laws, finding them preempted by the FAA (which favors enforcement of arbitration agreements according to the terms agreed upon by the parties to the agreement and displaces state laws that discriminate against arbitration). Business groups and employment lawyers alike, including CDF LLP, have explained to the Legislature that AB 3080, like preceding statutory efforts to preclude arbitration agreements, is unconstitutional and have urged that it not be passed. Thus far, the Legislature appears unmoved. AB 3080 was passed by the state Assembly, was passed out of committee in the Senate, and is now advancing to the floor of the Senate for a vote that will occur sometime between August 21-31. Given the political makeup of the senate, it seems likely that the bill will be passed and presented to the Governor. If signed into law, California employers will be left to foot the bill in court to litigate the invalidity of this clearly unconstitutional law.
In addition to its virtual ban on employment arbitration agreements, AB 3080 would also prohibit contractual provisions that prohibit an applicant, employee, or independent contractor from disclosing information pertaining to an incident of sexual harassment. This would impact settlement of sexual harassment claims. Employers will want to monitor the continued progression of AB 3080 as it pertains to this issue as well.