California has long been considered one of the most – if not the most – protective states of employee rights. This continues to ring true, as the legislature has proposed another law aimed at prohibiting employers from requiring employees to sign mandatory arbitration agreements as a condition of employment. In essence, Assembly Bill 51 (AB 51), would prevent employers from requiring their employees to bring all employment related claims, including discrimination, harassment, retaliation, and wage and hour claims, in arbitration instead of state or federal court.
If passed, AB 51 also would prohibit employers from threatening, retaliating against, discriminating against, or terminating an employee or refusing to hire a prospective employee who refuses to sign an arbitration agreement. While the law does provide that employees may voluntarily consent to enter into an arbitration agreement, arbitration agreements with "opt-out" provisions or any provision that requires the employee to take affirmative action to avoid waiving his/her right to civil court would also be prohibited under AB 51. If passed, any violation of this law would constitute an unlawful employment practice under the Fair Employment and Housing Act. The proposed bill also allows for injunctive relief and attorneys' fees to a prevailing plaintiff.
AB 51 passed the Assembly Labor and Employment Committee on March 6 through a 5-1 vote, and the Assembly Judiciary Committee approved the bill on March 19, through a 9-3 vote. It was amended on March 26 to delete a prohibition on disclosing any incidence of sexual harassment to any person, which would have had the effect of banning confidentiality clauses in settlement agreements involving claims of sexual harassment. The bill goes to the Assembly Appropriations Committee next, where we may see additional amendments before a final vote.
While the law is gaining traction in the legislature, it seemingly conflicts with U.S. Supreme Court decisions holding that the Federal Arbitration Act preempts state law regarding both the formation and enforcement of arbitration agreements. If the bill becomes law, it will face an uphill battle in the courts, and may end up in front of the U.S. Supreme Court.
Also, even if passed by the legislature, the bill still needs to be signed by Governor Newsom, who may take the lead from his predecessor and veto AB 51. Two prior bills, AB 3080 (2018) and AB 465 (2015), both of which were very similar to AB 51, were vetoed by Governor Brown in part based on a recognition that they were unlikely to withstand judicial scrutiny. For our previous discussions on AB 465, click here.
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