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Mandatory arbitration clauses and employees in California

On Behalf of | Jan 21, 2022 | Employment Issues

Back in October 2019, California passed a new law (AB 51) that forbids employers from forcing mandatory arbitration clauses on their employees as a condition of their employment. Naturally, a lot of businesses weren’t pleased.

Therefore, it was almost immediately met with legal challenges. Eventually, the 9th Circuit court reversed a lower court’s ruling and reaffirmed the validity of the law.

What does this mean for employers?

Essentially, the 9th Circuit court said that the law merely prohibits mandatory arbitration. It does not prohibit voluntary arbitration agreements (nor speak to their validity or enforcement).

Even though the battle over the legality of AB 51 is still ongoing, this leaves employers with a difficult choice:

  • Continue to require their employees to sign arbitration agreements knowing that they may be wholly invalid (and that the business may ultimately be on the hook for any attorney fees the employee incurs if they choose to fight the agreement in the future)
  • Change their policies to give employees the option to agree to arbitration – and offer them an incentive to make that agreement (which will strengthen the company’s position if the agreement is later challenged as coercive)

Keeping abreast of the changes in employment law isn’t easy, especially when there are ongoing court battles. That’s why it’s always wisest to have experienced legal guidance as you develop (or revise) your company’s employment policies. The more carefully you craft your employment contracts, the more likely you can avoid serious issues. If you do end up in litigation over an employee arbitration clause, find out more about your legal options by contacting one of Hart Kienle Pentecost’s employment attorneys today. We’d be happy to help.

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