Employee Arbitration Agreements No Longer OK Under New Law?

Photo by Steve Johnson on Unsplash

Updated 1/3/20: A federal court issued a temporary restraining order stopping the implementation of AB51. That law makes it illegal for employers to make it mandatory for employees to enter into arbitration agreements.

A new law in California attacks employee arbitration agreements and prohibits anyone from requiring an applicant for employment or any employee to waive their right to sue for a violation of any provision of the Fair Employment and Housing Act “FEHA” (California’s anti-discrimination laws) as a condition of employment, continued employment, or receipt of any employment-related benefit. These waivers usually exist in an arbitration agreement. Employers also can not retaliate, discriminate against, or terminate someone’s employment for refusing to sign an arbitration agreement.

The new law applies to contracts signed after January 1, 2020. However, it specifically does not apply to arbitration agreements that are valid under the Federal Arbitration Act, negotiated severance agreements, or post-dispute settlement agreements.

Practical Tip: There will be plenty of litigation on this new law, but until we have the courts’ interpretations of the new prohibitions, what should employers do?

1) If you don’t have an arbitration agreement, or aren’t quite sure what one is, you should still have one.

2) If you have an arbitration agreement, have it reviewed by counsel before you have anyone sign one in 2020 to determine whether it’s covered by the FAA and if not, to make the necessary changes to ensure voluntariness on the part of employees.

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In: Contracts, Employment Law, New Laws

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