AB 51 – Prohibits Employers From Requiring Arbitration Of FEHA Or Labor Code Claims As Condition Of Employment

Category: Public Agencies
Date: Oct 31, 2019 12:28 PM

AB 51 adds a new Section 432.6 to the Labor Code, which provides the following under subsection (a):

“A person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code) or this code, including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.”

The general impact of the bill’s language will be to prohibit employers from requiring an applicant or employee to submit claims under the California Labor Code or the Fair Employment Housing Act (“FEHA”) to a mandatory arbitration agreement as a condition of employment.  The bill also clarifies that any employment arbitration agreement which requires an employee to affirmatively opt-out of the agreement in order to preserve their rights would be deemed a “condition of employment”.

AB 51 also prohibits an employer from threatening, retaliating, discriminating against, or terminating employees or applicants because they refused to waive any such right, forum, or procedure.  An employer found to be in violation of Section 432.6 may be subject to an unlawful employment practice under FEHA.  A court may award an impacted applicant/employee injunctive relief and any other remedies available, in addition to reasonable attorney’s fees.

There are limited exceptions to this new law for public employers.  The most relevant being that this new law does not apply to post dispute settlement agreements or negotiated severance agreements.  In addition, existing mandatory employment arbitration agreements in effect prior to January 1, 2020, are not impacted.  Rather, these new restrictions will apply only to contracts for employment entered into, modified, or extended on or after January 1, 2020.

While this new law also indicates that it is not intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act, it is not entirely clear what that means for mandatory arbitration agreements that would otherwise include waivers of the rights, forums, and procedures of Labor Code and FEHA claims.  As a result, it is unclear whether AB 51 will be preempted by the Federal Arbitration Act.  LCW anticipates legal challenges to AB 51 before the courts to clarify this issue.

While there are some legal arguments indicating that the Labor Code does not apply to public sector agencies unless expressly stated in the specific code section (which is not the case with AB 51), there are other cases that have found otherwise.  As a result, any public agencies who currently use mandatory arbitration employment agreements as a condition of employment must prepare to comply with AB 51 on January 1, 2020.  In order to comply with this law, employers will have a choice of either halting the practice of requiring employees and applicants to enter into arbitration agreements as a condition of employment altogether or to modify these arbitration agreements to make clear that FEHA and Labor Code claims are not subject to mandatory arbitration.   For employers who select the second option, LCW recommends working closely with legal counsel to have their arbitration agreements modified to comply with AB 51.  

(AB 51 adds Section 12953 to the Government Code and adds Section 432.6 to the Labor Code.)

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