Bill Before California Assembly would Eliminate Mandatory Arbitration Agreements
California has had a storied relationship with arbitration. One of the U.S. Supreme Court’s most significant recent opinions on arbitration, AT & T Mobility v. Concepcion, stemmed from a lawsuit filed in California. The state’s attempts to limit the power of mandatory arbitration agreements in both employment and consumer contracts have been repeatedly foiled through preemption under the Federal Arbitration Act (FAA).
California lawmakers are currently tempting the itchy trigger finger of federal preemption yet again. Currently before the state Assembly is AB 3080, a law that would, among other things, prevent employers from requiring employees to agree to arbitrate claims under the state’s Fair Employment and Housing Act (FEHA) or Labor Code as a condition of employment. Despite earning “job killer” status from the California Chamber of Commerce and panicked objections from the state’s employer defense bar, the bill has recently received approval from the Assembly’s Judiciary Committee and is now being considered by the Appropriations Committee.
A similar bill that would have banned mandatory arbitration agreements in employment contracts was vetoed by Gov. Jerry Brown in 2015. Unlike the prior effort, the 2018 bill frames the arbitration agreement ban as another front in the war on sexual harassment in the workplace. Mandatory arbitration agreements mean that a large share of employment-based sexual harassment claims are settled through private arbitration, a process that often requires the parties to keep the decision private.
Specifically, AB 3080 would prevent employers from requiring employees to agree to arbitration of any FEHA or Labor Code claims as a condition of employment or the receipt of employment-related benefits, as well as preventing employers from requiring that employees sign non-disclosure agreements that would prevent workers from discussing sexual harassment they suffered, witnessed, or discovered. Voluntary arbitration agreements are not barred under the proposed law, but employers are prohibited from retaliating against workers who refuse to sign a voluntary arbitration agreement. Employers would be subject to claims under both FEHA and the Labor Code for violations of the proposed law.
The bill’s sponsor, Assembly member Lorena Gonzalez Fletcher (D-San Diego), has explained that arbitration serves to perpetuate harassing behavior that persists in many workplaces. “In forced arbitration, settlements often require the victim to refrain from discussing the case publicly. In a workplace with a culture of sexual harassment, these arbitration agreements are particularly toxic, enabling the abusive behavior to continue unchecked.” The bill has gained support as a further advancement of the #MeToo movement. One noteworthy advocate for the bill is Susan Fowler, a former engineer for Uber whose blog post about the problematic culture of sexual harassment and discrimination at the tech company led to the ouster of CEO Travis Kalanick. In a New York Times op-ed in support of the proposed law, Fowler noted that requiring arbitration of harassment claims is ultimately costly for companies: “Forced arbitration leads to long-term operating risk. Forcing legal disputes about discrimination, harassment and retaliation to go through secret arbitration proceedings hides the behavior and allows it to become culturally entrenched.”
