California Governor Shoots Down Proposed Legislation Banning Employee Arbitration Agreements

On Monday, Governor Brown vetoed legislation (AB 465) that would have stopped employers from requiring employees from signing arbitration agreements related to their employment. If it had passed, it would have unquestionably resulted in litigation about the validity of the law – a costly process that the Governor was unwilling to start, particularly given that the Supreme Court is currently reviewing two cases related to arbitration clauses.

“While I am concerned about ensuring fairness in employment disputes, I am not prepared to take the far-reaching step proposed in this bill for a number of reasons,” Gov. Brown said in the veto notice. “If abuses remain, they should be specified and solved by targeted legislation, not a blanket prohibition.”  He also expressed considerable concern that this new legislation would be preempted by the Federal Arbitration Act.

It is worth noting that the bill would not have impacted cases where the employee voluntarily entered into an arbitration agreement with his or her employer. Rather, the bill was intended to prevent employees from being unilaterally pressured into signing away their rights. Under these agreements, employees with claims relating to discrimination, wage and hour violations, dangerous working conditions, or other workplace disputes can allegedly only pursue their claims through the employer’s mandated process, according to the group. In order to avoid these agreements, employees would have to point to specific provisions or circumstances that are unconscionable.

The imposition of arbitration agreements is a key issue in employment litigation because the U.S. Supreme Court stated in its 2011 ruling in AT&T Mobility vConcepcion that mandatory arbitration clauses can include class action bans.