The California legislature has passed a bill — AB 465 — that would ban California employers from using mandatory employment arbitration agreements, and Gov. Jerry Brown has until October 11, 2015, to sign the bill into law.
If the bill does become law, it would affect employee arbitration agreements that were entered into, revised, renewed or extended on or after January 1, 2016. Those excluded from the potential new law would include individuals with legal representation during employment negotiations as well as securities brokers and others required by Securities and Exchange Commission regulations to join a self-regulatory organization.
The new law would make it illegal for an employer to discriminate, retaliate or otherwise threaten an individual who refuses to sign an arbitration agreement. For legal challenges to an arbitration agreement, the employer would bear the burden of proof that an employee signed the agreement voluntarily and that doing so was not a condition of employment.
Many legal experts argue that the passage of this new law is a futile exercise, since the U.S. Supreme Court has ruled that the Federal Arbitration Act preempts state law. The Court’s 2011 decision in AT&T Mobility v. Concepcion clearly stated, “When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”
However, if Gov. Brown does sign this bill into law, that law will stand until challenged. If this bill does become law, California employers will need to review their existing mandatory employment arbitration agreements and make the necessary modifications to comply as of January 1, 2016. Among those modifications should be a clear statement that the signing of an arbitration agreement is not mandatory and is not a condition of employment.
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