Governor Newsom Signs AB 51 Preventing Mandatory Arbitration Agreements in Employment

For years, the battle over arbitration clauses and agreements has raged on in courts and legislatures throughout the country. The latest development in arbitration in employment in California came on Thursday in California when Governor Newsom signed AB 51. The governor’s approval of AB 51 is a victory employees throughout California- it effectively prohibits employers from forcing employees into mandatory arbitration agreements starting January 1, 2020.

It is common practice throughout California to have an employee sign an arbitration agreement at the time she is hired. These agreements are generally non-negotiable, buried in a pile of new hire paperwork, and require the employee to arbitrate any claims arising out of employment. While valid arbitration agreements provide some of the safeguards that are afforded to litigants in court, it often takes away basic protections and rights including a trial by jury, and class or collective action. Arbitration is also a private process so it allows an employer to keep their wrongdoing under wraps.

The United States Supreme Court has said, repeatedly, that arbitration agreements are valid in the employment context. Recognizing the inherent imbalance in power between employers and employees, several states have tried to stop employers from forcing employees into arbitration. However, given the Supreme Court’s rulings, it is impossible to ban arbitration in employment altogether.  The hope is that in California, AB 51 will even the playing field before an employee signs an arbitration agreement; requiring that an employee can only enter such an agreement voluntarily. The law also prohibits an employer from retaliating against an employee who declines to enter into an arbitration agreement, which provides additional protection.

Another significant benefit of the law is that attorneys’ fees are available to prevailing plaintiffs for violations of the law. This is an important piece of the legislation as the availability of attorneys’ fees greatly impacts the ability of plaintiffs’ firms to actually take and litigate these claims. It also provides a valuable bargaining chip in settlement negotiations.

While we expect that there will be legal challenges to AB 51, come January 1, 2020, employees have expanded and important rights with respect to whether they agree to enter into an arbitration agreement. While worker protections at the federal level are being chipped away, in California AB 51 is a significant step in the right direction to preserving employee rights in the workplace.

 

Jean Krasilnikoff