An anti-arbitration bill identified by the California Chamber of Commerce as a job killer will burden the overworked court system if adopted.
AB 51 (Gonzalez; D-San Diego) prohibits arbitration of labor and employment claims as a condition of employment.
The CalChamber has tagged AB 51 as a job killer due to the significant increased costs employers will face as a result of more litigation and the expense of delayed dispute resolutions if the bill becomes law.
AB 51 also proposes to add a new private right of action under the Fair Employment and Housing Act (FEHA) and exposes employers to criminal liability for any violation.
Preempted by Federal Law
In opposing AB 51, the CalChamber has emphasized repeatedly that the bill will undoubtedly be challenged in court, creating more litigation without providing any benefit to employees as intended.
Last year, Governor Edmund G. Brown Jr. vetoed a virtually identical bill, AB 3080 (Gonzalez; D-San Diego), citing his recognition that the bill “plainly violates federal law.”
Both the California Court of Appeal and the U.S. Supreme Court have held specifically that state legislation trying to ban arbitration agreements is preempted by federal law, the Federal Arbitration Act.
Numerous opinions by the U.S. Supreme Court and the California Supreme Court over the last decade have consistently held that any state law which interferes with, discriminates against, or limits the use of arbitration is preempted by federal law.
Given the placement of AB 51’s provisions in the Labor Code, any violation will be a misdemeanor.
Accordingly, employers will face both civil liability for any violation of AB 51 and also may face criminal charges regarding arbitration agreements.
Because any violation of AB 51’s provisions will be an “unlawful employment practice,” it is subject to the private right of action under FEHA.
Besides placing more costs and burden on the Department of Fair Employment and Housing, AB 51 will expose employers to another layer of costly litigation, including attorney’s fees and punitive damages.
Neither employers nor employees will benefit from the delays and uncertainty AB 51 will cause.
If the use of arbitration is limited, options remaining for employees to resolve many labor and employment claims are a hearing before the Labor Commissioner (an office that lacks funding or resources for timely responses) and the overworked court system.
Countering the notion that employees can fare better in court, a state Department of Industrial Relations review of 1,500 settlement agreements found that the plaintiffs’ attorneys had failed to protect employees or were of only marginal assistance in 75% of the cases.
The CalChamber and a coalition of employer groups and local chamber of commerce continue to oppose AB 51 as a job killer.