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Rand L. Stephens & Richard Koss

Governor Vetoes Bill Banning Mandatory Arbitration Agreements

In a move that seriously diminishes the ability of employees to vindicate their rights under California’s labor laws, Governor Jerry Brown has vetoed AB 465, the bill described in last month’s blog post that would have made it illegal to condition employment on the employee agreeing to arbitrate labor disputes against their employer. California employers may continue to require employees to forfeit their right to sue in court if they wish to have a job, effectively denying them the ability to pursue claims in court for unpaid minimum wages, unpaid overtime, missed rest breaks, and a myriad of other rights. “California employers may exhale in relief,” said one employer defense attorney, acknowledging the fact that employers will continue to be able to violate employees’ rights with near-impunity.

Arbitration advocates insist that arbitration of individual disputes is as good or better for employees to enforce their rights under the law as bringing a lawsuit in court. While any individual who has been through the process of private arbitration can tell you that this simply isn’t true, a three-part exposé by the New York Times has drawn national attention to the fallacy of claiming that arbitration and court produce equivalent results for litigants. Times reporters examined court records and conducted interviews with potential litigants, their attorneys, and corporate executives across the country to determine the effect of mandatory arbitration clauses in consumer and employee contracts. The reporters found that, when individual claimants were unsuccessful in challenging the validity of mandatory arbitration agreements, they almost always abandoned their claims entirely, and only 505 consumers arbitrated claims of $2500 or less between 2010 and 2014.

Arbitration Agreements Forbid Class Actions

While this might not seem to be much money to a corporation, hundreds or thousands of dollars can mean a great deal to an unfairly-charged consumer or a shorted minimum-wage-earning employee attempting to support a family. Bringing these claims without the support of an attorney is intimidating both because of the understanding of the law required, and because of the massive time commitment required. In the past, plaintiffs could band together and find an attorney who could represent a number of wronged consumers or employees as a class in court. Plaintiffs would be able to be compensated for their damages, and attorneys would be able to afford to represent clients who couldn’t pay upfront for representation. However, these mandatory arbitration agreements almost universally ban class action arbitrations, often making it difficult for attorneys to be able to take on these claims without a way to recover fees.

Even when individual plaintiffs can afford to hire a lawyer to represent them in arbitration, the playing field remains uneven. The Times profile details the frustrating story of a female employee bringing a claim for gender-based discrimination with the help of a lawyer who was thwarted by violations of evidentiary rules and chumminess between the arbitrator and defendant, after which the employee was unable to appeal due to the finality of arbitration judgments.

If you have questions about your rights as an employee and need help from an experienced California employment lawyer, contact Bay Area labor and employment attorney Richard Koss for a consultation at 650-722-7046, or Rand Stephens at 510-232-9335.

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