Update 9/15/21: On September 15, 2021, in Chamber of Commerce of the U.S., et al. v. Bonta, et al., No. 20-15291, 13 F.4th 766 (9th Cir. Sept. 15, 2021), the Ninth Circuit issued a ruling upholding most of AB 51. On October 20, 2021, the U.S. Chamber of Commerce filed a petition with the Ninth Circuit requesting a rehearing en banc, seeking to reverse this decision. That petition is currently pending before the court.
Update 1/7/2020: A federal district court has issued a temporary restraining order blocking enforcement of AB 51. A hearing is set in the case for January 10, 2020.
Update 10/10/2019: Governor Newsom signed AB 51 into law today.
The California Legislature is trying for a third time to protect workers from being forced to sign arbitration agreements. It passed Assembly Bill 51 (“AB 51”), which, if it becomes law, will: (1) prohibit employers from conditioning employment, continued employment, or any employment-related benefit on the applicant or employee waiving rights under the Fair Employment and Housing Act (“FEHA”) or the Labor Code, including the right to proceed in civil court; (2) prohibit employers from retaliating against an applicant or employee for refusing to waive employment-related rights; and (3) deem violations of these provisions as “unlawful employment practices” under the FEHA.
AB 51 follows in the footsteps of two nearly identical bills that then Governor Jerry Brown vetoed in 2015 and 2018. In his September 2018 veto message for Assembly Bill 3080 (“AB 3080”), Governor Brown expressed his belief that the bill ran afoul of U.S. Supreme Court precedent and “plainly violate[d] federal law.” He believed that California was preempted from interfering with the formation of arbitration agreements.
Proponents of the bill disagree with Governor Brown’s analysis and argue that AB 51 will survive judicial scrutiny. As reflected in AB 51’s bill analysis, they argue that it “simply gives the worker the option of whether or not to form the contract in first place,” and “nothing in AB 51 selectively calls out arbitration contracts . . . .”[1] They further contend that “[a]ll the bill does is say that an employee cannot be forced to sign an arbitration agreement, and if the employee elects not to, the employee cannot be retaliated against.”[2]
OVERVIEW OF ARBITRATION
To understand the potential impact of AB 51, it is helpful to start with an overview of arbitration. As discussed in greater detail in a previous blog post, arbitration is a form of private dispute resolution that takes place outside the court system. Employers often require employees to sign arbitration provisions and waive their right to a jury trial as a condition of employment. Indeed, the Economic Policy Institute and Center for Popular Democracy estimates that almost 83%, or 95 million, of the country’s private, non-unionized employees will be subject to arbitration by 2024.
There is a reason that so many employers require arbitration: It helps stack the deck against employees. Employees are less likely to win their case in arbitration, and when they do their awards are lower on average. When arbitrators get repeat business from employers and their counsel, those employers tend to receive more favorable outcomes.
Courts—including the California Supreme Court—have recognized arbitration’s potential for abuse, and have mandated that workplace arbitration agreements meet minimum standards of fairness.[3] States have also sought to limit arbitration abuse. Unfortunately, however, the U.S. Supreme Court has taken the position that the Federal Arbitration Act (“FAA”) preempts state laws that limit arbitration.[4]
Recently, particularly because of the #MeToo and #TimesUp movements, people have started to recognize that mandatory arbitration agreements disempower and silence victims of sexual harassment and other workplace abuse.[5] These developments underscore the importance of AB 51.
WHAT WOULD AB 51 DO?
AB 51, introduced by Assemblymember Lorena Gonzalez, would add Labor Code section 432.6 and Government Code section 12953. These additions would provide significant protections for employees facing pressure from employers to sign arbitration agreements.
Labor Code section 432.6(a) would prohibit employers from requiring employees to waive their rights under the FEHA or the Labor Code:
A person shall not as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision 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.[6]
Section 432.6(b) would add anti-retaliation protections for applicants or employees who refuse to sign agreements forcing them to waive their rights.[7]
Section 342.6(c) would confirm that agreements that require employees to opt out of a waiver or take other affirmative actions to preserve rights would be deemed a condition of employment so as to be covered by the law. [8]
Section 436(d) would allow a prevailing plaintiff to obtain injunctive relief, “any other remedies available,” and reasonable attorney’s fees.[9]
AB 51 also adds Government Code section 12953, which provides that a violation of Labor Code section 432.6 is also a violation of the FEHA.
AB 51 was carefully drafted so as not to run afoul of the FAA. Section 432.6(f) provides that “[n]othing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (9 U.S.C. Sec. 1 et seq.).”[10] Section 432.6(g) provides that the prohibition on conditions requiring a waiver of rights “does not apply to postdispute settlement agreements or negotiated agreements.”[11] These clarifying additions, which were not present in AB 3080, were presumably added to appease opponents of the bill and increase its chances of being signed into law.[12] Section 432.6(i) states that the provisions of the section are severable, such that if any provision is found to be invalid, the rest remain in effect. [13]
The law would apply to “contracts for employment entered into, modified, or extended on or after January 1, 2020.”[14]
CONCLUSION
With AB 51, California workers no longer have to waive their right to a jury trial in order to secure gainful employment. We strongly support this bill.
* * *
Written by Ramit Mizrahi, Esq. and John L. Schwab, Esq.
[1] Senate Judiciary Committee Analysis (July 8, 2019), AB 51, p.10.
[2] Id. at p. 8.
[3] See, e.g., Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 669 (2000) (setting minimum standards of fairness in employment arbitration).
[4] See AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (holding that the FAA preempts state laws that restrict arbitration agreements from having provisions that prohibit class actions).
[5] See, e.g., Assembly Committee on Labor and Employment Analysis (March 4, 2019), AB 51, p. 3 (discussing the protest by Google employees regarding the company’s use of arbitration agreements, and the protest by Harvard Law students regarding the use of arbitration agreements at recruiting law firms).
[6] AB 51, § 432.6(a).
[7] Id., subdiv. (b).
[8] Id., subdiv. (c).
[9] Id., subdiv. (d).
[10] Id., subdiv. (f).
[11] Id., subdiv. (g).
[12] Compare AB 3080, § 432.6 with AB 51, § 432.6. See, e.g., Senate Judiciary Committee Analysis (July 8, 2019), AB 51, p. 11; CalChamber Coalition Letter to Assembly Judiciary regarding AB 51.
[13] AB 51, § 432.6(i). Section 432.6(e) carves out applicability 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.”
[14] Id., subd. (h).
