California Legislature Passes Bill Prohibiting Arbitration Agreements and Non-Disclosure Agreements Regarding California Employment Law Claims
On August 22, 2018, the California State Senate passed AB 3080, which, if signed into law by Governor Jerry Brown, would invalidate two types of commonly-used employment contracts that have been the subject of significant dialogue in the vast wake of the #metoo movement.
First, the bill proposes to prohibit employers from requiring employees to sign any agreement as a condition of employment or employment benefit that bars them from:
- disclosing an instance or other facts pertaining to claims of sexual harassment about which the employee is aware,
- opposing unlawful employment acts,
- participating in investigations or other proceedings regarding unlawful discrimination or harassment, or
- exercising any other right or obligation pertaining to claims of unlawful harassment or discrimination.
Most notably, the bill would prohibit employers from entering into settlement agreements containing confidentiality provisions to resolve sexual harassment allegations, if those agreements are a condition of continued or future employment or an employment benefit. This proposed law would not affect confidentiality agreements between an employer and a former employee, or current employees whose continued or future employment (or an employment benefit) is not conditioned on the agreement.
Second, the bill prohibits all agreements imposed as a condition of employment or an employment benefit in which employees waive the right to pursue any rights granted under the California Fair Employment and Housing Act (“FEHA”). The bill’s language expressly includes agreements waiving the right to sue in court, directly invalidating mandatory arbitration agreements regarding FEHA claims. (FEHA is a California state law that broadly prohibits employment discrimination and harassment on the basis of numerous protected categories, including, but not limited to, race, gender, disability, and sexual orientation.) Under the bill, employers may not use opt-out agreements or otherwise require employees to take affirmative steps in order to preserve their right to sue in court.
As we posted previously, the #metoo movement has led several other municipalities and states, such as New York state, New York City, Maryland, and Vermont, to enact laws designed to limit employers’ ability to prevent publicity or disclosure of sexual harassment allegations by and against its employees. However, California’s law, which is largely aimed toward this same goal, has a much broader reach than those we’ve seen so far in other jurisdictions.
If signed into law, this bill is likely to face significant legal challenges with regard to its prohibition of arbitration agreements in light of the United States Supreme Court’s recent ruling in Epic Systems Corp. v. Lewis, which held that mandatory arbitration agreements are presumptively valid in the employment context under the Federal Arbitration Act (“FAA”). AB 3080 is viewed by many to be a state law that is in direct conflict with the FAA, as interpreted in the Epic Systems ruling, and thus ultimately will be preempted by the FAA.