Court rules that employers would face hardship in making employment contracts if the law takes effect and is later overturned.
In 2019, Governor Gavin Newsom signed a law that had been vetoed twice by previous Governor Jerry Brown. This law had a goal of making employment contracts more equitable, particularly for employees, by banning provisions that would require employees to agree to arbitration (as opposed to filing a lawsuit). Employer associations an business groups filed a lawsuit against the state over the law. Recently, a California judge ruled that the law — which scheduled to go into effect on January 1, 2020 — cannot move forward, at least temporarily.
According to a California employment lawyer, the law would forbid employers from putting clauses in their employment contracts that would require employees to submit to arbitration. In California, approximately two-thirds of all non-union employers in the private sector have mandatory arbitration policies. Arbitration is a type of alternative dispute resolution where the parties go to a neutral third party, known as an arbitrator, who then will resolve the dispute for them.
Of course, just because arbitrators should be neutral doesn’t mean that they always are. In the employment context, arbitrators are often selected and paid for by the companies. This can put employees at a disadvantage when seeking to resolve an issue with their employers. In addition, an employee may not have a California employment lawyer to represent them in arbitration — while employers often have teams of high-powered attorneys.
The business and employer groups argued that arbitration allows for quicker, less expensive resolutions. They also claimed that this practice is fair to both sides. They did not mention another key benefit for employers: the ability to keep arbitration settlements or awards confidential. This can then be used to cover up patterns of wrongful behavior, such as sexual harassment, discrimination, and retaliation against employees.
Under the new California law, employers could still offer contracts or have policies that mandated arbitration. Employees can choose to sign these agreements — but if they refuse, they could not be punished. The law would only apply to people hired after January 1, 2020. Employers who violate the law could be subject to a range of penalties, including possible criminal prosecution.
In the lawsuit over the arbitration law, the employer and business groups asked the judge to prevent the law from going into effect while the lawsuit itself was decided. The judge agreed, finding that if employers are made to comply with the law, and the law is overturned at a later date, it could cause “irreparable injury.”
While arbitration does have benefits, when one party has substantially more power and money than the other side, the results may be unfair. The law that banned mandatory arbitration provisions was designed to protect employees. If it is overturned, companies will still be allowed to require employees to submit to arbitration rather than consulting with a California employment lawyer and filing a lawsuit.
If you have experienced injustice in the workplace, PLBH can help. We represent employees on a range of employment matters, including workers’ compensation, wage and hour claims, discrimination and harassment matters, and wrongful termination and retaliation issues. Contact us today at (800) 435-7542 or info@plblaw.com to schedule a consultation.