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California Ban on Arbitration Agreements

On October 10, 2019, California Governor Gavin Newsom signed into law a bill that bans mandatory arbitration agreements in employment contracts. The new law, Assembly Bill 51 (AB 51), will take effect on January 1, 2020, and marks a significant shift towards providing greater protections for workers in California.

Arbitration agreements are contracts that require employees to resolve workplace disputes through arbitration instead of going to court. These agreements have become increasingly common in recent years, due in part to a series of Supreme Court decisions that have upheld their use.

However, many employee rights advocates argue that mandatory arbitration agreements are unfair to workers because they strip them of their right to a trial by jury and often favor employers who are typically repeat players in arbitrations. Additionally, employees may not understand the potential impact of signing the agreements.

AB 51 prohibits employers from requiring employees to waive any right, forum or procedure for a violation of the California Fair Employment and Housing Act (FEHA) and the California Labor Code. The law includes provisions that make it illegal for employers to discriminate against workers who refuse to sign an arbitration agreement, and it also protects workers who have already signed an agreement but now wish to opt out of it.

While the ban on arbitration agreements has been cheered by worker advocates, it has faced pushback from business groups such as the California Chamber of Commerce and the California Restaurant Association, who argue that the new law is pre-empted by the Federal Arbitration Act (FAA).

Legal challenges to AB 51 are likely, with some experts predicting that the U.S. Supreme Court may ultimately decide the issue. In the meantime, though, California employers should take heed and adjust their practices accordingly.

In conclusion, AB 51 is significant because it sends a message that California is committed to protecting workers` rights and is willing to take on powerful business interests to do so. As for the future, it remains to be seen how this new law will play out in the courts and in the workplace. Nonetheless, it is clear that the debate over arbitration agreements is far from over.