California has initiated a regulatory scheme to give employees more power to reject their employer’s arbitration agreements and to do so without retaliation or consequence by their employer. Assembly Bill 51 (AB 51) prohibits a person from requiring 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 (FEHA) or other specific statutes governing employment as a condition of employment, continued employment, or the receipt of any employment-related benefit. It also prohibits an employer from threatening, retaliating or discriminating against, or terminating any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation of the California Fair Employment and Housing Act or the California 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.

There remain significant concerns about the enforceability of AB 51. Employers contend that it violates the Federal Arbitration Act (FAA) California has attempted similar schemes in the past. However, the Federal Courts have often ruled such schemes as improper in light of the public policy in favor of arbitration set forth in the FAA. To date, no Court has ruled on whether AB 51 violates the FAA, however, a number of cases addressing this issue are pending in Federal Court.

From an employer’s perspective, if an arbitration agreement is offered it should not be offered on a take it or leave it basis and the negotiations for the agreement should you reflect that the employee was not required to enter into the arbitration agreement and did so voluntarily with full knowledge of the consequences and after having the opportunity to speak with an attorney. Otherwise, it may be in the employer’s best interest not to seek an arbitration agreement with its employees at all. In either case, before employers revise their practices in light of AB 51 they should consult with qualified legal counsel.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.