It is no secret that California is no friend to arbitration agreements. As the United States Supreme Court noted in its 2011 opinion in AT&T Mobility LLC v. Concepcion, “California’s courts have been more likely to hold contracts to arbitrate unconscionable than other contracts,” despite directives from the High Court that arbitration agreements must be placed “upon the same footing as other contracts.”

Not to be outdone by the courts, the California Legislature decided to weigh in on the ongoing battle over arbitration agreements with the introduction of Assembly Bill 465 (“AB 465”) earlier this year. The bill, which passed the California State Senate on Tuesday and is now pending before the Assembly, would add a new provision to the Labor Code to prohibit any person from:

[R]equir[ing] another person to waive any legal right, penalty, remedy, forum, or procedure for a violation of any provision of [the California 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.

If enacted, the bill would make such waivers, including, presumably, class action waivers that were expressly sanctioned by Concepcion, “involuntary, unconscionable, against public policy, and unenforceable” if made a condition of employment. The bill also would make it unlawful to threaten, retaliate, or discriminate against any person who refuses to sign such a waiver.

AB 465 would not apply to individuals registered with a self-regulatory organization under the Securities Exchange Act of 1934 (e.g., FINRA arbitrations) or to employees who are “individually represented by legal counsel” in “negotiating the terms” of a waiver. On its face, AB 465 only prohibits the waiver of a “legal right, penalty, remedy, forum, or procedure” for a violation of the California Labor Code, meaning that it should not affect arbitration agreements relating to claims arising under the Fair Employment and Housing Act or other California statutes not housed within the Labor Code (although the bill could be construed more broadly under the “last antecedent rule“).

Nevertheless, AB 465 would result in a substantial change in the law. Quite obviously, it would severely restrict, if not outright prohibit, California employers’ use of mandatory arbitration agreements as well as class action waivers involving wage and hour issues. Because the Federal Arbitration Act (the “FAA”) has been almost universally interpreted (outside of California) to reflect “a liberal federal policy favoring arbitration agreements” and to preempt “state-law rules that stand as an obstacle to the accomplishment of the FAA’s objectives” or are “applied in a fashion that disfavors arbitration,” AB 465 almost certainly would be struck down by a federal court soon after its enactment. In any event, it is likely that if this bill becomes law, it will touch off a whole new round of “whack-a-mole” by the United States Supreme Court, in which it once again tries to try to bring California judges (and now its legislature) in line with “the supreme Law of the Land.”

Should AB 465 become California law, employers should be prepared to make sure that agreements to submit claims to arbitration are voluntary on their face and as a practical matter. Most new employees will willfully sign arbitration agreements even when they are not made a condition of employment.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Tony Oncidi Tony Oncidi

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including…

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection. A substantial portion of Tony’s practice involves the defense of employers in large class actions, employment discrimination, harassment and wrongful termination litigation in state and federal court as well as arbitration proceedings, including FINRA matters.

Tony is recognized as a leading lawyer by such highly respected publications and organizations as the Los Angeles Daily JournalThe Hollywood Reporter, and Chambers USA, which gives him the highest possible rating (“Band 1”) for Labor & Employment.  According to Chambers USA, clients say Tony is “brilliant at what he does… He is even keeled, has a high emotional IQ, is a great legal writer and orator, and never gives up.” Other clients report:  “Tony has an outstanding reputation” and he is “smart, cost effective and appropriately aggressive.” Tony is hailed as “outstanding,” particularly for his “ability to merge top-shelf lawyerly advice with pragmatic business acumen.” He is highly respected in the industry, with other commentators lauding him as a “phenomenal strategist” and “one of the top employment litigators in the country.”

“Tony is the author of the treatise titled Employment Discrimination Depositions (Juris Pub’g 2020; www.jurispub.com), co-author of Proskauer on Privacy (PLI 2020), and, since 1990, has been a regular columnist for the official publication of the Labor and Employment Law Section of the State Bar of California and the Los Angeles Daily Journal.

Tony has been a featured guest on Fox 11 News and CBS News in Los Angeles. He has been interviewed and quoted by leading national media outlets such as The National Law JournalBloomberg News, The New York Times, and Newsweek and Time magazines. Tony is a frequent speaker on employment law topics for large and small groups of employers and their counsel, including the Society for Human Resource Management (“SHRM”), PIHRA, the National CLE Conference, National Business Institute, the Employment Round Table of Southern California (Board Member), the Council on Education in Management, the Institute for Corporate Counsel, the State Bar of California, the California Continuing Education of the Bar Program and the Los Angeles and Beverly Hills Bar Associations. He has testified as an expert witness regarding wage and hour issues as well as the California Fair Employment and Housing Act and has served as a faculty member of the National Employment Law Institute. He has served as an arbitrator in an employment discrimination matter.

Tony is an appointed Hearing Examiner for the Los Angeles Police Commission Board of Rights and has served as an Adjunct Professor of Law and a guest lecturer at USC Law School and a guest lecturer at UCLA Law School.