In a previous blog post, we discussed a decision by the Ninth Circuit regarding mandatory arbitration agreements for employees. A major change to this area of law may be on the way in the state of California, if Assembly Bill 425 is signed into law. This bill would altogether prohibit employers from requiring their employees to sign arbitration agreements as a condition of their employment.
AB 425 was passed by the California Assembly and Senate in August 2015. If it is signed into law by Governor Jerry Brown, it will take effect on January 1, 2016. The bill would become Section 925 of the California Labor Code.
What Does the Bill Require?
AB 465, if enacted, will prohibit any employer from requiring an employee, as a condition of employment, to agree to the waiver of “any legal right, penalty, forum, or procedure for any employment law violations.” It also prohibits employers from threatening, retaliating against, or discriminating against employees for refusing to sign such waivers. In addition, it stipulates that if a waiver of this type will be unenforceable if it is required from an employee (or a potential employee) as a condition of employment or continued employment.
You may be wondering how, under those regulations, an employee’s agreement to arbitrate would be legally valid. The statute stipulates that any waiver of employment rights (such as an agreement to arbitrate) must be “knowing and voluntary and in writing, and expressly not made as a condition of employment.” If the employer seeks to enforce the waiver, then the employer would have the burden of proof to show that the waiver was knowing and voluntary.
There are several other important aspects of AB 465:
- If the bill is enacted, it will apply only to waivers that were signed on or after January 1, 2016 – so you do not have to worry that this legislation will render any current contracts invalid.
- It authorizes reasonable attorney’s fees to the prevailing claimant.
- It exempts organizations that are considered self-regulatory under the Securities Exchange Act of 1934, and it does not apply to regulations adopted under that Act pertaining to any requirement of a self-regulatory organization that a person arbitrate disputes between an employer and an employee.
- It does not apply to employees who were individually represented by legal counsel when negotiating the terms of an agreement to “waive any right, penalty, remedy, forum or procedure for a violation of this code.”
Binding Arbitration and Preparing for the Future
If AB 465 is passed into law, it will have major ramifications for employers who require their employees to sign arbitration agreements. If you are an employer in California, and you would like your employees to commit to arbitration, it may be in your best interests to begin thinking now about how you will revise your policies if the bill is enacted.
Schedule a consultation with a Beck Law P.C. labor and employment law attorney today if you are in Sonoma County, Mendocino County or Lake County California and have questions about your arbitration policies, or the language used in your contracts, schedule a .