On Wednesday, the California State Senate passed Assembly Bill 3080 (“AB 3080” or the “bill”) which would prohibit employees from being forced to sign arbitration and/or non-disclosure agreements as a condition of employment under the California Labor Code and California’s Fair Employment and Housing Act (“FEHA”) which is the state agency responsible for, among other things, enacting discrimination protections in employment.
Under current law, California employers may insist that employees enter valid agreements to resolve disputes in front of a neutral arbitrator instead of a judge and jury and may even make the agreement a condition of employment. AB 3080 proposes that employers cannot retaliate against employees and job applicants who choose not to waive their right to pursue claims under either FEHA or the California Labor Code in any particular forum. The bill goes even further and would amend FEHA to authorize discrimination lawsuits against employers that require arbitration agreements
Unsurprisingly, this bill comes in direct response to the #MeToo movement and employee advocates argue that this bill will “prevent companies from keeping harassment, discrimination and labor violation claims out of court and away from the public eye.” Organizations who oppose the bill, such as the California Chamber of Commerce, label AB 3080 as a “job killer” and it would “essentially eliminate settlement agreements for employment related claims and would open employers up to criminal liability for any violation, and is likely preempted under the Federal Arbitration Act.”
As you may recall and we previously reported here, in May the United States Supreme Court held that employers may require employees to sign class action waivers as part of mandatory arbitration agreement and that such employment agreements must be enforced according to their terms. AB 3080 is in direct contradiction with the recent U.S. Supreme Court decision. In fact, during the Senate floor hearing of this bill, the California Legislature acknowledged that federal case law favors enforcement of arbitration agreements. Nonetheless, it is the California Legislature’s position that this bill is “carefully crafted” to pass legal muster. If Governor Brown does sign AB 3080, it can be expected that the courts will ultimately decide whether AB 3080 would be preempted under both the Federal Arbitration Act and/or federal case law.
COUNSEL TO MANAGEMENT:
AB 3080 is now on Governor Brown’s desk and if passed, this bill will drastically change the scope of arbitration agreements and the rights associated with those agreements. As mentioned above, there is an argument to be made that this bill is preempted by federal law but only time will tell if such an argument will be made and whether employers will be forced to forfeit the arbitration forum. Although this bill does not technically outlaw arbitration agreements entirely, it says that employees and job applicants must enter into those agreements voluntarily. Three years ago, Governor Brown vetoed a similar bill and employers can only hope he sees the same rationale that he did three years ago. Should you have any questions regarding your Company’s arbitration agreement and/or its enforcement, please do not hesitate to contact the experts at the Saqui Law Group.