Anti-Arbitration Proposal Keeps Moving in Senate

An anti-arbitration bill identified by the California Chamber of Commerce as a job killer passed through the first Senate committee to consider it this week. The Senate Labor, Public Employment and Retirement Committee approved AB 51 (Gonzalez; D-San Diego), which prohibits arbitration of labor and employment claims as a condition of employment. AB 51 is a job killer due to the significant increased costs employers will face as a result of more litigation and the expense of delayed dispute resolutions. AB 51 also proposes to add a new private right of action under the Fair Employment and Housing Act (FEHA) and exposes employers to criminal liability for any violation.

Preempted by Federal Law

In testifying against AB 51, CalChamber Executive Vice President Jennifer Barrera emphasized to Senate committee members that the bill will be challenged in court and struck down.

Last year, Governor Edmund G. Brown Jr. vetoed a virtually identical bill, AB 3080 (Gonzalez; D-San Diego), citing his recognition that the bill “plainly violates federal law.”

Both the California Court of Appeal and the U.S. Supreme Court have specifically held that state legislation trying to ban arbitration agreements is preempted by federal law, the Federal Arbitration Act.

Numerous opinions by the U.S. Supreme Court and the California Supreme Court over the last decade have consistently held that any state law that interferes with, discriminates against, or limits the use of arbitration is preempted by federal law.

Delays

Neither employers nor employees will benefit from the delays and uncertainty AB 51 will cause, Barrera commented.

If the use of arbitration is limited, she pointed out, the remaining options for employees are a hearing before the Labor Commissioner (an office that lacks funding or resources for timely responses) and the overworked court system.

Countering the notion that employees can fare better in court, a state Department of Industrial Relations review of 1,500 settlement agreements found that the plaintiffs’ attorneys had failed to protect employees or were of only marginal assistance in a majority of cases.

Key Vote

AB 51 passed Senate Labor, Public Employment and Retirement on June 19, 4-1:

Ayes: Hill (D-San Mateo), Jackson (D-Santa Barbara), Mitchell (D-Los Angeles), Pan (D-Sacramento).

Noes: Morrell (R-Rancho Cucamonga).

AB 51 will be considered next by the Senate Judiciary Committee.