Governor Vetoes AB 3080—Says Banning Employment Arbitration Agreements Violates Federal Law
Governor Brown has been busy in the last year of his term signing and vetoing many employment-related bills. We are pleased to report that he vetoed California Assembly Bill 3080 (AB 3080). AB 3080 sought to amend the California Fair Employment and Housing Act (FEHA) and the California Labor Code making it an unlawful employment practice to require an applicant, employee, or independent contractor to agree in any contract entered into, modified, or extended on or after January 1, 2019 to arbitrate claims arising under FEHA or the Labor Code. AB 3080, if signed into law, would have prohibited, penalized, and criminalized (under Labor Code § 433) most employment arbitration agreements in California.
CDF LLP was a key participant in the effort to prevent AB 3080 from becoming law, not just because it was bad for California employers, but also because it was unconstitutional. We prepared a detailed letter on August 7th to the state Senate and to the Governor, urging that AB 3080 not become law because it was preempted by the Federal Arbitration Act (“FAA”) and therefore unconstitutional. Our letter also stressed that FAA preemption was a non-partisan issue based on decades of Supreme Court opinions. Several employment law practitioners at leading employment law firms also signed the letter. After the bill reached the Governor’s desk, we also helped present letters to the Governor outlining the impact the bill would have had on jobs and the California economy.
In his veto message, Governor Brown cited his prior veto of a similar bill (AB 465 in 2015) when two supreme court cases then were pending, both of which subsequently came down in favor of FAA preemption and one of them was authored by Justice Kagan, an Obama appointee.
The AB 3080 experiment is important for at least two critical reasons. First, if employers decide to use arbitration agreements in California, they need to ensure that they are drafted with care so as to be enforceable to the fullest extent permitted by law. And second, this is not the last time the concerns raised by AB 3080 will arise in California since we fully expect a similar bill to be introduced as soon as next year, and one of California’s gubernatorial candidates very well could sign it, leaving it up to the courts to decide. Were that to happen, however, a constitutional challenge would be mounted to enjoin and challenge it. Stay tuned.