The California Senate Passes a Bill That May Abolish Arbitration Agreements
On August 24, 2015, the California Senate passed measure AB-465 which prevents employers from requiring employees to sign an arbitration agreement as a condition of employment. The Senate approved this measure by a vote of 22-15. In support of this measure, Democratic Assemblyman Roger Hernandez stated, “No worker should be forced to choose between a job and giving up core labor rights and procedures.”
Further, the California Labor Federation acknowledged that arbitration can work well when both parties pay a role in selecting an arbitrator and the rules governing the dispute. However, it noted that a potential flaw of the arbitration process may arise if a worker unknowingly submits to an arbitration process unilaterally designed by an employer, thus binding the employee to a decision made by an arbitrator who is paid by the employer. The California Labor Federation also stated arbitration agreements are problematic when required of employees who cannot read or understand the agreements or when the agreements are in small print or buried in a handbook.
If AB-465 becomes law, it will drive up litigation costs for employers and overburden the judicial system. There is current law that the Court applies to determine whether an arbitration agreement is enforceable.