When it comes to employment issues, most employers should try to resolve a dispute before it escalates and a lawsuit is the only alternative.

As an additional alternative to trial, many employers have required their employees to enter into arbitration agreements as a condition of their employment which, in California, were previously legal. This has recently led to a statewide controversy over a new law.

CONTROVERSY OVER AB 51 LEADS TO A LAWSUIT, RESTRAINING ORDER

We have discussed AB 51 in previous blog posts, in which we indicated that Gov. Gavin Newsom signed the bill in October 2019 to:

  • Ban employers from mandating agreements that force employees to waive their rights, such as mandatory arbitration agreements;
  • Prevent employers from including such agreements as conditions for employment; and
  • Prohibit retaliation against employees who choose not to sign voluntary agreements.

And any violations of these new regulations could have left employers not only facing lawsuits from employees but also criminal charges.

The law was set to go into effect on January 1, 2020. However, the Chamber of Commerce filed a lawsuit claiming the law violated the Federal Arbitration Act in December. In January 2020, U.S. District Court Judge Kimberly Mueller determined that lawmakers could not move forward with enforcing Assembly Bill 51 and issued a temporary restraining order on the enforcement of the new law.

WHAT DOES THIS MEAN FOR EMPLOYERS?

The end of 2019 left California employers rushing to comply with several new employment laws. However, the requirement for employers to adjust their arbitration agreements and workplace policies is not enforceable just yet, now that AB 51 is on hold.

This is good news for many employers across the state, but it is only a temporary reprieve. Soon the court will determine whether to permanently enjoin AB 51 or allow it to be enforced. We will, of course, address that upcoming ruling in future blogs.

In the meantime, we will continue to discuss the pros and cons of having an arbitration clause in your employment contracts.