California Governor Vetoes Bill Seeking To Eliminate Mandatory Arbitration Agreements in Employment

On August 24, 2015, the California Assembly approved AB 465, which requires that arbitration agreements, and other waivers of legal rights, be “knowing and voluntary and in writing, and expressly not made as a condition of employment.” Currently under California law, the enforceability of an arbitration agreement is determined by principles of procedural and substantive unconscionability, and California courts may enforce an arbitration agreement even if the employer offered it on a “take it or leave it” basis. If enacted in its current form, AB 465 would change that, such that an arbitration agreement could be found unenforceable merely because the employer presented it on a “take it or leave it” condition of employment, even without a showing of unconscionability, and even if the terms were fair. This bill also prohibits employers from threatening, retaliating, or discriminating against workers for refusing to sign such a waiver, and provides employees who are successful in invalidating the agreement the right to recover their attorneys’ fees.

Critics of the bill argued that this bill directly conflicted with prior and recent rulings from the United States Supreme Court, which have consistently stated any state law that interferes with the Federal Arbitration Act is preempted. As recently stated by the United States Supreme Court in AT&T Mobility v. Concepcion, “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” Should your company have questions regarding whether your arbitration agreement is in conformity with the current state of California law, we encourage you to reach out to one of our employment attorneys within California who can assist you.

Other Bills Approved or Vetoed by Governor Brown

Signed into law:

• SB 588 “Wage Theft” Bill, allowing the labor commissioner to file a lien on an employer’s property to help employees collect unpaid wages.
• SB 178, requiring police to get a court order before they can search messages, photos and other digital data stored on your phone or company servers.
• SB 703, expanding legal protections for transgender workers by barring state agencies from doing business with companies that discriminate in the benefits they offer.
• SB 358, granting female workers in California new tools to challenge gender-based wage gaps. Supporters say it offers the strongest equal-pay protection in the nation. The bill expands California’s existing equal pay law and goes further than federal law by placing the burden on the employer to prove a man’s higher pay is based on factors other than gender. It also protects workers from discrimination and retaliation if they ask questions about how much other people earn, though it doesn’t require that employers provide that information. Workers also will gain the right to sue if they are paid less than someone with a different job title who does “substantially similar” work. The Fair Pay Act stipulates employers can justify higher wages for men only if the pay is based on seniority, a merit system, quantity or quality of production or any other “bona fide factor other than sex.”

Vetoed:

• Despite signing SB 358 to bridge wage gaps, Brown vetoed AB 1017, which would have barred employers from using previous salary information to justify paying women less than their male co-workers.
• SB 406, which would have expanded the number of people entitled to take up to 12 weeks of unpaid leave from work under the California Family Rights Act to include grandparents, siblings, grandchildren and parent-in-laws. Current state law allows employees to take leave only to care for parents, children, a spouse or domestic partner.