Recently, the California Legislature passed AB 465 which prevents employers from requiring employees to sign mandatory pre-employment arbitration agreements as a condition of employment. This bill, which is now sitting on Governor Brown’s desk awaiting his signature, adds a new provision of the California Labor Code making it illegal to:
“Require another person to waive any legal right, penalty, remedy, forum, or procedure for a violation of any provision of [the Labor Code] as a condition of employment, including the right to file and pursue a civil action or complaint with, or otherwise notify, the Labor Commissioner, state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity.” (emphasis added)
AB 465 would not prohibit all arbitration agreements, just those that are presented “as a condition of employment.” If not as a condition of employment, arbitration agreements could still be valid under AB 465 provided the agreement is “in writing” and the employee enters into it “knowingly” and “voluntarily.”
If enacted, AB 465 would represent a major change in California law. No longer would employees be required to show both procedural and substantive unconscionability to invalidate an arbitration agreement. Now the agreement would be automatically invalid if it was presented to the employee as a condition of employment. Moreover, AB 465 makes several other changes to existing California law, including (1) placing the burden of proof on employers to show that the arbitration agreement was valid, and (2) awarding attorneys’ fees to employees who are successful in invalidating these agreements.
Given that AB 465 would conflict with the Federal Arbitration Act (and numerous federal court decisions interpreting it), it seems a near certainty that AB 465, if enacted, would be challenged in federal court. Until then, however, if Governor Brown signs AB 465, employers who currently use pre-employment arbitration agreements should consult with employment counsel to devise a go-forward strategy.
You can read the text of AB 465 here.