California Bans Mandatory Arbitration Agreements as a Condition of Employment

California Governor Gavin Newsom has signed a law that prohibits employers in the state from requiring workers to sign a mandatory arbitration provision as a condition of employment.  AB 51 mandates that an “employer shall not threaten, retaliate or discriminate against, or terminate any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation of the California Fair Employment and Housing Act or this code, including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.”  AB51 “does not apply to a person registered with a self-regulatory organization as defined by the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78c) or regulations adopted under that act pertaining to any requirement of a self-regulatory organization that a person arbitrate disputes that arise between the person and their employer or any other person as specified by the rules of the self-regulatory organization.”

Interestingly, a violation of AB51 is a misdemeanor under California’s Labor Code. An employer who violates the new law may be subject to six months in jail and a fine of up to $1,000.  Additionally, an employer may be on the hook for a plaintiff’s “reasonable attorney’s fees.”

According to the text of AB 51, the law is not “intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (9 U.S.C. Sec. 1 et seq.).” Despite this, AB51 is likely to be challenged by employers on exactly this basis.  Last year, a nearly identical bill, AB 3080, was vetoed by California’s previous governor over concerns related to the preemptive effect of the Federal Arbitration Act.

The new law is set to take effect on January 1, 2020 and will apply to all California employment contracts entered into on or after that date.  If AB51 stands, it will be interesting to see whether other states choose to follow California’s lead in banning mandatory arbitration provisions as a condition of employment.  Please check back with Disputing in the future for additional updates on California’s new AB 51 law!

Photo by: Vital Sinkevich on Unsplash