California Looks to Abolish Forced Arbitration

Los Angeles, CA A common tactic of employers and organizations looking to avoid lawsuits is to require mandatory arbitration to enforce a contract. The California Senate, however, is looking to abolish mandatory arbitration as it relates to California labor law, preventing employers from forcing employees into arbitration.

Arbitration agreements - whether with employees or customers - force a claimant to go through an arbitration process to settle any complaints. In some cases, arbitration can be preferable to a lawsuit. Among the benefits of undergoing arbitration are that arbitration tends to be a quicker and less expensive process than a lawsuit.

Arbitration itself is not necessarily a bad thing, but if the worker signs an agreement to undergo an arbitration process designed and paid for by the employer, the employee has no recourse if the arbitrator - who might be paid for by the employer - finds in favor of the employer. Further, employees might be denied jobs if they refuse to agree to the arbitration.

In other words, some employers might force employees to take part in a complaints system that could be biased in favor of the employer.

Bill AB-465 was recently passed by the California Senate, in a bid to curb this sort of situation. Ultimately, Bill AB-465 - titled “Contracts against public policy” and drafted by Roger Hernandez - would make it illegal for employers to force employees to sign these arbitration agreements.

“This bill would prohibit any person from requiring another person, as a condition of employment, to agree to the waiver of any legal right, penalty, forum, or procedure for any employment law violations,” the preamble to the bill reads. “The bill would prohibit a person from threatening, retaliating against, or discriminating against another person based on a refusal to agree to such waiver, and would provide that any such waiver required from an employee or potential employee as a condition of employment or continued employment is unconscionable, against public policy, and unenforceable.”

Under the bill, any person who waived his or her rights would have to do so voluntarily. Further, the person or organization hoping to enforce such a waiver would have to prove that the waiver was given knowingly and voluntarily. Employees would be able to waive their rights as a condition of employment only if those employees had legal counsel to negotiate the terms of the arbitration agreement.

If AB-465 passes, it would affect agreements dated on or after January 1, 2016.