A ruling last week by U.S. District Court Judge Kimberly Mueller halted enforcement of and invalidated in full an anti-arbitration law identified by the California Chamber of Commerce as a job killer.
The law, AB 51 (Gonzalez; D-San Diego), would have banned employers from, as a condition of employment, entering into arbitration agreements for claims brought under the Fair Employment and Housing Act and the Labor Code.
The CalChamber led a large coalition of employers in challenging the law, arguing that AB 51 conflicted with federal law. After considering all briefing, Judge Mueller granted plaintiffs’ motion for a preliminary injunction in full.
Of particular concern to employers were provisions of the law that placed on employers the extraordinary burden of criminal penalties punishable by imprisonment and fines.
CalChamber President and CEO Allan Zaremberg pointed out that the arbitration agreements AB 51 attempts to ban have long been favored by California and federal law, and have been consistently upheld by the courts.
“We are pleased the court recognized the fact that placing businesses at risk for criminal penalties for a practice that has long been supported both by California and federal law was excessive,” said Zaremberg.
“While it may not serve the best interests of the trial lawyers, expeditious resolution through the arbitration process serves the interests of employees and employers.”
The CalChamber and the employer coalition filed their initial motion to invalidate and stop enforcement of AB 51 on December 6, 2019.
On December 30, 2019, Judge Mueller issued a temporary restraining order, halting enforcement of AB 51 until the matter could be resolved.
Benefits of Arbitration
As pointed out in the initial complaint filed against AB 51, businesses routinely enter into arbitration agreements with workers, either as a condition of employment or on an opt-out basis, so that both parties can make use of alternative dispute resolution procedures.
The U.S. Supreme Court, the complaint states, observed in Circuit City Stores, Inc. v. Adams, “there are real benefits to the enforcement of arbitration provisions. … Arbitration agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation, which often involves smaller sums of money than disputes concerning commercial contracts.”
The complaint points out that arbitration provides workers with a fair and effective means of resolving their disputes:
• Arbitration procedures are fair—the vast majority of agreements and the leading arbitration providers require fair procedures. If an arbitration agreement prescribes unfair procedures, courts can and will refuse to enforce the agreement.
• Arbitration offers workers simple procedures that they can navigate even without a lawyer. That simplicity matters because many workers who have disputes are unable to secure legal representation, and their inability to obtain a lawyer creates insurmountable obstacles to bringing claims in court.
• Arbitration is faster than litigation in court. As a recent study released by the U.S. Chamber’s Institute for Legal Reform found, arbitration cases in which the employee brought the claim and prevailed took, on average, 569 days to complete, while cases in court required an average of 665 days.
Moreover, employees did better in arbitration than in court—in cases decided by an arbitrator or court (rather than settled), employees who filed claims won three times as often in arbitration—32% compared to 11%—and recovered an average award of $520,630 in arbitration compared to $269,885 in court.
• Arbitration also lowers the costs of dispute resolution, which creates savings that in part can be passed on to workers through higher wages and consumers through lower prices.
To view legal documents in the case, Chamber of Commerce of the United States of America et al. v. Becerra et al., go to www.calchamber.com/legalaffairs.