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California Again Tries to Restrict Employment Arbitration Clauses

Governor Newsom has signed AB51 into law. The new statute purports to prohibit employers from requiring applicants or employees to waive their rights bring lawsuits to vindicate their labor and employment claims. It adds new Labor Code section 432.6, which, effective January 1, 2020, will provide:

(a) 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.

(b) An employer shall not threaten, retaliate or discriminate against, or terminate any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation 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.

The new statute will only affect attempts to require arbitration in employment after January 1, 2020. Enforcement of existing arbitration clauses will be governed by the principles established in Armendariz v. Foundation Health Psychcare Services, Inc.,24 Cal.4th 83 (2000).

It is far from a certainty that the new statute will withstand a court challenge. Past California attempts to limit the use of arbitration provisions have been held invalid as violations of the Federal Arbitration Act. As the U.S. Supreme Court explained when it invalidated a judicially created rule that barred class action waivers in arbitration agreements, any rule that interferes with the FAA’s goal of favoring promoting arbitration is not enforceable. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). The new statute does not just interfere with that goal, it would completely bar arbitration in the employment context.

Contact Information
  • Pasadena Office
    3020 East Colorado Boulevard
    Pasadena, California 91107
    Phone: 626-449-2300
    Fax: 626-449-2330
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