Employment Arbitration Agreement
In some instances, your employer may have asked you to sign what is called an “Arbitration Agreement.” This is an agreement that binds you and your employer to resolve disputes that arise between you two in a forum called arbitration, as opposed to litigating the matter in a civil court.
Arbitration, which will be covered more fully in a future article, is an alternative dispute process which takes place outside the courtroom, where the matter is decided by someone called an arbitrator rather than by a jury. Although arbitration is often times faster and more cost effective, it may end up being more favorable towards the employer for a variety of reasons (such as the lack of a jury), so it may not always be in the best interest of the employee to arbitrate rather than litigating their employment case in civil court.
When you end up making a claim or filing a lawsuit against your employer for wrongful termination, unpaid wages or overtime wages, rest or meal break violations, sexual harassment, discrimination (such as race, disability, gender or sexual orientation discrimination), hostile work environment, or other employment claims, your employer may end up forcing the claim or lawsuit into arbitration under the Arbitration Agreement you signed.
AB 51 and Option to Opt Out of Employment Arbitration
But what happens if your employer does not give you the option to opt out of entering into an Arbitration Agreement? For example, if your employer says you have to sign an Arbitration Agreement as a condition of being hired for the job.
In California, Assembly Bill (AB) 51, which is effective as of January 1, 2020, answers this question. AB 51 prohibits an employer from conditioning employment, or any employment benefit, on an employee having to sign an Arbitration Agreement. In other words, an employer cannot force you to sign an Arbitration Agreement in order to be hired, keep your job, or to receive a benefit like a promotion or bonus. If your employer violates this law, then the Arbitration Agreement may be found invalid.
As it stands, California Labor Code section 432.6, which codifies AB 51, states that an employer “shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation . . . including the right to file and pursue a civil action or a complaint with . . . any court or other governmental entity of any alleged violation.”
While recent rulings have challenged AB 51, including Viking River Cruises, Inc. v. Morianawhich ruled that the Federal Arbitration Act preempts a ban on the employer from mandating arbitration of PAGA claims, as it currently stands at the time of this article in other contexts, AB 51 still prohibits an employer in California from requiring a potential or current employee into signing an Arbitration Agreement.
This is certainly an area of law that is still developing and may potentially change again, so employers and employees must continue to keep an eye on any further changes to the law. In the meantime, employers should be careful in the wording of any Arbitration Agreement, ensuring that it is not presented as mandatory since it may be found invalid. Employees, at the same time, need to be aware and mindful of any situation when presented an Arbitration Agreement by an employer, especially if the employer indicates it is mandatory.