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The End of Arbitration Agreements in California?

Employers usually prefer arbitration over litigation to resolve employment disputes. Arbitration is usually quicker and cheaper, and often a more confidential process than a public lawsuit. As such, many employers require employees to sign agreements where the employee agrees to forego filing a civil lawsuit following employment disputes, and instead proceed with arbitration. Those days may be over.

Just a few weeks ago, the California Legislature passed AB 465, a bill that would make mandatory agreements to arbitrate employment disputes illegal. Governor Brown has not signed the bill yet - he has until October 11, 2015. If he does sign the bill, the new law would affect arbitration agreements entered into, revised, or extended on or after January 1, 2016.

Under the new law, employees would still be allowed to "knowingly and voluntarily" agree to arbitrate employment disputes, but an employer could not require an agreement to arbitrate as a condition of employment. And if the employee does "knowingly and voluntarily" agree to arbitrate disputes, the burden is on the employer to prove that the agreement was in fact voluntary.

The net result is that the law will make it much more difficult for employers to avail themselves of the benefits of arbitration. Employers will also lose a potential shield against frivolous claims and costly class action lawsuits. If given the choice, virtually all employees would choose to litigate disputes in front of a jury, as opposed to a neutral arbitrator, and if the bill becomes law, employees will have a much easier time realizing that goal.

If the law does go into effect, and an employer wants to continue to incorporate arbitration agreements, employers must be sure that there is language in the agreement indicating that the agreement is not mandatory and that signing the agreement is not a condition of employment for the employee. The unfortunate reality however, is that most employees will simply refuse to sign them. October 11 could be a tough day for employers (and arbitrators!) and a great day for employee-rights attorneys.

This article is for education and information purposes only; it should not be construed as legal advice. If you have an employment law question for inclusion in a future article, contact Brett T. Abbott at Gubler & Abbott LLP (bta@thecalifornialawyers.com). For specific employment law advice or other legal assistance, contact Gubler & Abbott LLP, (559) 625-9600, 1110 N. Chinowith St., Visalia, CA 93291 (www.thecalifornialawyers.com).

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