Employers No Longer Able to Require Arbitration Agreements As Condition of Employment

Payne & Fears
Contact

On October 10, 2019, Governor Gavin Newsom signed into law a new bill (AB 51) that will have a substantial impact on the employment litigation landscape in California. 

Historically, many employers have required employees to enter into arbitration agreements as a condition of employment. With AB 51 becoming law, effective January 1, 2020, employers will no longer be permitted to require an employee, as a condition of employment, continued employment, or receipt of employment-related benefits, to waive any right, forum, or procedure to pursue a claim under the California Fair Employment and Housing Act (FEHA). Put simply, the new law bans mandatory arbitration agreements for FEHA claims, and prohibits employers from threatening or retaliating against employees for refusing to sign an arbitration agreement if one is proposed to them. The law also makes arbitration agreements for FEHA claims unenforceable unless an employee affirmatively consents. This new law will affect all employment contracts entered into, modified, or extended on or after January 1, 2020.

WHAT EMPLOYERS SHOULD KNOW

Although employers may continue seeking to enter into voluntary arbitration agreements with employees, they must ensure that such efforts are not a prerequisite for employment, continued employment, or receipt of employment-related benefits. It will be essential that efforts to obtain an employee's agreement to arbitrate claims be made in writing, and that the writing plainly indicates that the employee may choose not to enter into the agreement and that the employee will not be retaliated against in the event he or she chooses not to agree. 

To be sure, employers should expect challenges to AB 51 as preempted by the Federal Arbitration Act ("FAA"). Just last year, former California Governor Jerry Brown vetoed AB 3080, a law which included a similar ban on FEHA arbitration waivers because it plainly violates federal law. Lawsuits challenging AB 51 will surely arise. 

Written by:

Payne & Fears
Contact
more
less

Payne & Fears on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.