WHAT’S NEW IN 2020 – CALIFORNIA PROHIBITS MANDATORY EMPLOYEE ARBITRATION AGREEMENTS « Law Offices of Timothy Bowles | Top Employment Law Firm in Los Angeles

WHAT’S NEW IN 2020 – CALIFORNIA PROHIBITS MANDATORY EMPLOYEE ARBITRATION AGREEMENTS

Arbitration is a form of private dispute resolution that takes the place of a lawsuit and court trial.  Arbitration has many business-related advantages, including a more efficient, less-public process than the often-prolonged procedures of the court. Thus, employers often favor this alternative.

California Labor Code section 432.6, effective January 1, 2020 as part of Assembly Bill (AB) 51, restricts the scope and terms of workplace arbitration agreements. In-state employers will no longer be allowed to require job applicants or employees to enter into mandatory arbitration agreements for discrimination, harassment or retaliation claims under the California Fair Employment and Housing Act (FEHA) and/or claims under the California Labor Code. As this new law has no retroactive application, any valid arbitration agreement under pre-2020 California law signed by December 31, 2019 will remain valid after that date.

Any arbitration agreement entered on or after January 1, 2020 should contain language clearly confirming the worker is voluntarily choosing to arbitrate disputes arising from or relating to the employment relationship. From that date, California employers will no longer be able to condition most workplace arbitration agreements as take-it-or-leave-it even if the employee can opt out of the agreement later. Applicants and employees also cannot be threatened, retaliated or discriminated against for refusing to consent to an otherwise compliant agreement.

Subsection 432.6(f) presents an exception, currently of uncertain scope. Any written arbitration agreement enforceable by the Federal Arbitration Act (FAA) is not invalidated by this new law.  It is left to the courts whether the above ban on mandatory agreements conflicts with the FAA.

In the meantime, as failure to comply with the new law exposes employers to damages claims and possible criminal charges, it is risky to presume this FAA exemption will ultimately prevail. The better practice for affected employers is to ensure compliance with section 432.6 upon the start of the new year.

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For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth

December 18, 2019

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