Posted on October 22nd, 2018
Do you want to learn more about how arbitration agreements are being affected by recent events? Here’s a guide to California’s latest attack on one of the few tools left for employers trying to survive the onslaught of one side law against us.
The California Legislature continues to ride roughshod over federal law with the passage of Assembly Bill 3080 (AB 3080). AB 3080 means to prohibit employers from entering into arbitration agreements with employees.
It bars them from asking employees to waive participation in class action lawsuits.
A byproduct of the #MeToo movement, the bill sits on Governor Jerry Brown’s desk waiting for a signature. Many believe he’ll soon pen it into law.
Here’s what you need to know about California’s continued war on arbitration agreements.
What Are Arbitration Agreements?
Arbitration agreements help employers and employees avoid trial cases. That means fewer legal and financial consequences for both parties.
They do so by agreeing to go through arbitration rather than other legal channels.
Arbitration resolves conflicts between companies and employees under the Fair Employment and Housing Act (FEHA). Arbitration proves quicker and more efficient than trial cases. It puts less burden on small business owners and employees in terms of legal fees.
Arbitration awards are generally smaller than those in trial cases. But arbitration remains procedurally simpler, too.
So, workers in some cases, make up for smaller payouts with fewer legal expenses.
Arbitration vs. Litigation
Unlike jury members, arbitrators come with special expertise. They have experience looking at evidence and making sound decisions. While juries get swayed by emotions, arbitrators have a reputation for dispassionate decisions.
Decreased legal fees on both sides mean business owners pay less in liability insurance premiums. Finally, arbitration lowers the chances of serious labor disputes and unionization.
Of course, arbitration comes with its opponents. Easier access to arbitration some argue, leads to more trivial employee disputes.
Some also note that arbitrators have unfettered authority. They make major legal decisions without recourse through the courts.
Arbitration lacks clarity when it comes to compliance with the Older Workers’ Benefit Protection Act. Legal confusion also exists about arbitration and class action lawsuits.
Instead of looking for ways to address these issues, California has chosen a full assault on arbitration agreements. Under the guise of the #MeToo movement, an open war continues on legally binding contracts.
If state law undermines fairly negotiated contracts, California business owners face an even bleaker future than we imagined.
Arbitration Agreements: California AB 3080’s Red Flags
AB 3080 raises red flags for many reasons. It comes with unintended but foreseeable consequences, too. Disputes involving alleged sexual misconduct or harassment will lead to victimization of employers.
What’s more, trial lawyers, not employees, will see the greatest gains.
Class Action lawyers will chase disgruntled employees rather than ambulances. These unsuspecting people will get exploited for their willingness to sue. Then, legal expenses will gobble up most of the huge payoffs they’ve been promised.
Instead of protecting employees, AB 3080 will award legal fat cats bigger earnings. What’s more, it will rob employees of the money they might have received (and kept) following arbitration.
But the consequences prove even more far-reaching. It could deadlock California’s already overburdened legal system. Remember, all claims must go before a judge and jury.
Finally, it attacks California’s job creators. AB 3080 will cripple businesses and hinder employment.
It will undermine the efforts of hardworking business owners and will help tank the millions of jobs that they want to create.
It will impact employees, too. Instead of cost-effective arbitration, they’ll have to seek costly legal representation.
Arbitration has proven itself an effective means of resolving employer and employee conflicts. The only people who’ll profit from this new legislation remain trial lawyers (who of course are pushing for it).
AB 3080 & the Federal Arbitration Act (FAA)
Opponents of AB 3080 argue that the Federal Arbitration Act (FAA) preempts it. They look back to the 2014 consumer rights bill, AB 2617, as a precedent.
Like AB 3080, AB 2617 prohibited consumers from entering into arbitration agreements for goods and services. But in Saheli v. White Memorial Medical Center, the appellate court ruled that FAA superseded AB 2617.
This presents important questions:
- What’s the difference between consumer claims and employee claims?
- Is California public policy ready to make an arbitrary distinction?
- Will this distinction hold up before an appellate court?
- Or, will the precedent set in Saheli v. White Memorial Medical Center stand up?
Many believe the precedent will hold. But it will take many years of legal struggle before this gets resolved.
In the meantime, California business owners and employees both stand to lose. What’s more, employers may face civil and even criminal punishment for violating AB 3080.
If that doesn’t send a chill down your spine, I don’t know what will…
Arbitration Agreement: California Crime Watch
AB 3080 will affect multi-state companies doing business in California, too. For example, their California employees will now require different paperwork. After all, forms and policies referring to arbitration could lead to criminal prosecution.
Just imagine the new bureaucratic nightmares this will pose! Businesses employing Californians must read up on the law and their forms and policies accordingly. Otherwise, they face stiff legal consequences.
Many agree that AB 3080 won’t stand up to federal scrutiny. But AB 3080 also has serious legal “tooth.”
Will business owners prove so intimidated by thoughts of civil and criminal prosecution that they refuse to challenge the law? If no one’s willing to pursue a legal battle all the way to the United States Supreme Court, will it remain set in stone?
Legal battles take years to win.
Who would willingly submit themselves to civil and criminal consequences in the meantime?
Who would have the wherewithal and money to fight legal battles in both civil and criminal courts?
While we await Governor Brown’s final decision, these thoughts plague the minds of many employers.
An even bigger question remains: how do you prepare for these changes?
Arbitration Agreements
Do you worry about how AB 3080 will negatively impact doing business in California?
Would you like more clarification about the new law and its impact on you?
Or, maybe you want to better understand AB 3080 and how it will affect your relationships with your employees?
We have the answers to your questions about arbitration agreements.
Contact us today for a free consultation about this legislation and what it means for you.
At DefendMyBiz, our number one priority is defending you and your company against unfair labor laws.
We want to help you get prepared for the fallout from this decision.
Your best weapon remains staying informed and vigilant.
