CALIFORNIA PROHIBITS ENFORCEMENT OF ANY EMPLOYEE ARBITRATION REQUIREMENT AS A CONDITION OF EMPLOYMENT

Epps & Coulson Logo

CALIFORNIA PROHIBITS ENFORCEMENT OF ANY EMPLOYEE ARBITRATION REQUIREMENT AS A CONDITION OF EMPLOYMENT

On June 22nd, we updated clients on the U.S. Supreme Court employee arbitration ruling in the Viking River Cruise case.[1]  We informed that the U.S. Supreme Court held that the Federal Arbitration Act (“FAA”) preempts prior California caselaw that allowed the courts to split a representative plaintiff’s individual California’s Private Attorney General Act (“PAGA”) claims from non-individual specific employment claims of the other allegedly aggrieved employees that the PAGA plaintiff sought to represent (like in a class action).  We now also update clients on the status of 9th Circuit’s allowing California’s Assembly Bill 51 (“AB 51”) to proceed into law, a law that would ban employers from forcing employees to agree to arbitrating disputes as a condition of employment.  AB 51 is to be codified into law as §432.6 to California’s Labor Code.

The 9th Circuit’s would have allowed Labor Code § 432.6 to take effect based on an appellate decision of U.S. Chamber of Commerce et al. v. Rob Bonta, but a request for further en banc review by the 9th Circuit resulted in a stay on the ban of employee mandatory arbitration agreements.  And, the 9th Circuit then decided to wait for the Viking Case decision by the U.S. Supreme Court before proceeding.  Now that Viking was decided, we now await the 9th Circuit’s en banc decision.

As a primer, this code provision would prohibit an employer from requiring an employee to agree to arbitration of any employee dispute as a condition of employment and prohibit the employer from retaliating against an employee or prospective employee for not agreeing to arbitrate.  AB 51 would not apply to agreements that were signed before January 1, 2020.  For those dated January 1, 2020, or after, for Employers who require arbitration, it would be a violation of the law and could subject the employer to injunctive relief, lost wages and attorney’s fees.  The additional codified penalties, such as it being a criminal misdemeanor under California Labor Code § 433 is also up for review.

So now, for employers who want to use mandatory arbitration agreements going forward with new hires and existing employees, in light of Viking, those employers can certainly use arbitration agreements, but that decision should be made with legal counsel.  The upcoming 9th Circuit en banc decision on AB 51 will be pivotal for new agreements.  And while regardless of the outcome of the AB 51 litigation, agreements signed before January 1, 2020 will continue to be valid, there will always be other litigation, business and practical issues that employers need to consider.

Also, going forward, it appears that there may be a split among the federal courts of appeal, which may eventually land this issue before the U.S. Supreme Court too.  Stay tuned.

Here at Epps & Coulson, LLP, we are here for our clients and work to ensure they are up to date on employment matters.  Please contact Dawn at: dcoulson@eppscoulson.com if you have any questions.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

EPPS & COULSON, LLP
Attorneys admitted to practice in California, New York, Colorado, Texas, and Oregon
www.eppscoulson.com
www.companiescounsel.com

[1] https://eppscoulson.com/supreme-court-rules-on-paga-arbitration/