California Legislature Tries Again to Thwart Arbitration With Bill Purporting to Make Mandatory Arbitration Unlawful

California employers should keep an eye on a new challenge to arbitration provisions on its way to the Governor’s desk.  On August 24, 2015, the California Senate passed AB 465, which would make it unlawful for any employer or other company to “require another person to waive any legal right, penalty, remedy, forum, or procedure for a violation of any provision of [the California Labor Code], as a condition of employment, including the right to file and pursue a civil action or complaint with, or otherwise notify, the Labor Commissioner, state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity.”  The Senate version eliminates the originally proposed $10,000 per violation penalty, but continues to authorize an award of injunctive relief and attorneys’ fees to a prevailing plaintiff seeking to enforce the section. The Assembly concurred in the Senate’s amendments on August 27, 2015, and the bill will reach the Governor shortly.

If signed into law in its current form, this bill would purport to bar employers and employees from agreeing to resolve any employment-related disputes that may arise (including disputes about alleged violations of the Labor Code) through arbitration.  Such a measure would almost certainly be challenged as violative of the Federal Arbitration Act, which states unequivocally that written arbitration provisions “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”  The Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), would provide strong grounds to argue that a legislative rule prohibiting private parties from agreeing to arbitrate – like the judicial rule refusing to enforce class action arbitration waivers at issue in Concepcion – would be preempted by federal law and the policy favoring arbitration that it codifies.