A new California law states that California companies can no longer require their employees to sign an arbitration agreement clause as a condition of employment. The victory for California workers came nearly a year after Google employees forced the company to change its policy regarding mandatory arbitration agreements.
Previously, an employing company could force new workers to sign arbitration agreements that would force harassment, discrimination, and wage claims into arbitration. At the time, companies would give new workers the option to either sign the arbitration agreements or to lose out on a job opportunity.
The new California law targets exactly those manipulative tactics by companies and bans them. The law applies to new employees required to sign arbitration agreements to get hired or current workers who risk being fired if they don’t agree.
To give some context, arbitration agreements are often used by these companies in order to force claims by workers to undertake arbitration instead of a trial. Arbitration is far more likely to result in a positive result for the defendants and is often costly and burdensome for workers seeking to sue their employers.
Earlier this year, the U.S. House of Representatives approved a bill concerning the FAIR Act that would ban mandatory arbitration agreements in a similar manner to the new California law. While the approval is a small victory for employment rights, the bill still has to go through the Senate where it is largely expected to be defeated.
The California law was careful not to conflict with the Federal Arbitration Act and U.S. Supreme Court decisions that allow companies to enforce mandatory arbitration agreements. Importantly, the law also does not ban arbitration agreements but simply says that they cannot be used as a condition for employment.
A big change in the law such as this one is always susceptible to challenge in the courts. It remains to be seen just how far state legislation will go and to what degree if any, federal legislation will follow.
