Two labor and employment bills identified as job killers by the California Chamber of Commerce won approval this week in the first Senate committees to consider them.
The Assembly Judiciary Committee approved SB 365 (Wiener: D-San Francisco), which discriminates against the use of arbitration agreements by requiring trial courts to continue trial proceedings during any appeal regarding the denial of a motion to compel, undermining arbitration and divesting courts of their inherent right to stay proceedings.
The Assembly Labor and Employment Committee passed SB 723 (Durazo; D-Los Angeles), which imposes an onerous and stringent process for specific employers to return employees to the workforce for specified industries, including hotels and restaurants that have been disproportionally impacted by this pandemic, and removes guardrails on existing law by making the mandate permanent and significantly broadening the applicability of the law.
In a letter to Assembly Judiciary members, the CalChamber and a coalition of employer representatives and local chambers of commerce asserted that the true motive behind SB 365 is an attempt to severely restrict the use of arbitration agreements.
The bill incorrectly assumes that all appeals related to arbitration are meritless.
Moreover, the bill’s effort to deter arbitration and single out arbitration from other types of proceedings ultimately will result in a finding that SB 365 is preempted by the Federal Arbitration Act (FAA), as the Ninth Circuit recently did by striking down another attempt at limiting arbitration — AB 51 (Lorena Gonzalez; D-San Diego) from 2019.
Allowing a court the discretion to continue with the underlying trial while an appeal regarding a motion to compel arbitration is pending eliminates the entire purpose of arbitration and runs afoul of the FAA, the CalChamber argued.
SB 365 also would incentivize forum shopping even more than what occurs now, with trial attorneys filing claims in venues where they believe judges are more inclined to deny the current law’s requirement to stay a case during an appeal regarding the enforceability of an arbitration agreement.
SB 365 will lead to additional litigation and more money in the pockets of trial attorneys, which will increase the cost of doing business in California and exacerbate the ongoing affordability crisis.
A recent economic analysis projected that SB 365 could cause California to lose up to 18,000 jobs and up to $129 million in state taxes.
A coalition of employer groups and local chambers of commerce explained in a letter to Assembly Labor and Employment members that SB 723, without justification, permanently removes business flexibility and autonomy over hiring decisions.
It also will slow hiring and add administrative costs to a hospitality industry still grappling with the impacts of the pandemic.
In 2020, Governor Gavin Newsom vetoed AB 3216 (Kalra; D-San Jose), which proposed a right to recall for hospitality industry workers during any state of emergency. The Governor’s veto message pointed to the burden the bill would have placed on struggling industries and its failure to narrowly tailor its provisions to COVID-19.
As part of the budget process the following year, negotiations between the Legislature, administration and business community led to a narrower version of a right to recall, SB 93. Tied to the unique circumstances of the pandemic, SB 93 is scheduled to sunset on December 31, 2024.
The CalChamber coalition argues that the COVID-19 era policy should sunset as agreed. The impact of SB 93 demonstrates that SB 723 will bog down hiring and undermine basic management of a business, seeking to micromanage forever the rehiring process for affected businesses, thereby increasing employer costs.
• SB 365 passed Assembly Judiciary on June 13, 8-3:
Ayes: Connolly (D-San Rafael), Haney (D-San Francisco), Maienschein (D-San Diego), Pacheco (D-Downey), Papan (D-San Mateo), Reyes (D-San Bernardino), Robert Rivas (D-Salinas).
Noes: Dixon (R-Newport Beach), Essayli (R-Corona), Sanchez (R-Rancho Santa Margarita).
• SB 723 passed Assembly Labor and Employment on June 14, 5-2:
Ayes: Haney (D-San Francisco), Kalra (D-San Jose), Ortega (D-San Leandro), Reyes (D-San Bernardino), Ward (D-San Diego).
Noes: (Chen; R-Yorba Linda), Vince Fong (R-Bakersfield).
Both bills will be considered next by the Assembly Appropriations Committee.