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What You Need to Know About California’s Ban on Mandatory Arbitration Agreements

In the fall of 2019, California Gov. Gavin Newsom signed AB 51 into law. The legislation bars companies and organizations from resolving most types of employment law claims through forced arbitration. The bill is strict — it even includes the possibility of criminal penalties for employers that violated that law.

However, the bill — which was supposed to take effect Jan. 1, 2020, has largely been delayed. A California federal court blocked many key aspects of the law. Here, our San Francisco employment law attorney provides an overview of California’s prohibition on mandatory arbitration provisions in employment contracts and explains where the law stands now.

AB 51: Understanding California’s Ban on Mandatory Arbitration in Employment

Arbitration is a private process whereby parties resolve a legal dispute outside of litigation. A mandatory arbitration provision requires both parties to handle their disputes in arbitration. In other words, two parties that sign a mandatory arbitration agreement are voluntarily relinquishing their right to go to court.

There is nothing necessarily wrong with mandatory arbitration agreements — at least when both parties are on an equal playing field. Of course, in the real world, not all sides to a legal dispute have the same level of power or resources. California lawmakers believe forced arbitration agreements disadvantage employees in favor of the interests of employers. AB 51 was designed to address this issue.

No Mandatory Arbitration for FEHA and California Labor Code Claims

AB 51 added a new section to the California Labor Code, which substantially limited the use of mandatory arbitration agreements in formal and informal employment agreements entered on or after Jan. 1, 2020. Here are two key provisions that were contained within the state law:

  1. A job applicant or employee could not be required to waive any rights under the California Fair Employment and Housing Act (FEHA) or the state’s Labor Code as a condition of employment; and
  2. An employer cannot threaten, retaliate against, or otherwise abuse an applicant/employee who refuses to enter into a mandatory arbitration agreement.

California Federal Court Blocks Key Provision of AB 51 — May Be Unenforceable

Before California’s ban on forced arbitration could take effect, several parties filed a lawsuit against the state. In January this year, a California federal judge issued an injunction blocking key sections of the law from taking effect on the grounds that the Federal Arbitration Act (FAA) preempts the state statute. As of September 2020, AB 51 is still working its way through the court system. Though there is reason to believe the courts will find major parts of the law unenforceable. Our employment attorneys are monitoring the issue closely for any additional developments.

Call Our San Francisco, CA Employment Lawyers for Help

At Bracamontes & Vlasak, our San Francisco employment attorneys are standing by, ready to protect your rights. If you have questions about arbitration in California, we can help. Contact our law firm today for a no cost, completely confidential consultation. We handle employment law claims throughout the Bay Area, including in San Francisco, Oakland, Berkeley, San Jose, Mountain View, and Palo Alto.