Mandatory Arbitration Agreements May Soon Be History

07.06.15Baylee Olsen

This year Assembly Bill 465 is making its way through legislative committees and is going strong.  

This bill provides for amendments to the Labor Code that would prohibit an employer from requiring a person, as a condition of employment, to agree to the waiver of any legal right, penalty, forum, or procedure for any employment law violations.

It would also prohibit any form of retaliation or discrimination against an employee/applicant for refusing to sign such a waiver.  Only those written agreements which the employer can prove were entered into knowingly and voluntarily, and not made as a condition of employment, will survive.

If AB 465 becomes law, these new provisions will apply to any agreements entered into on or after January 1, 2016, and would impose a $10,000 penalty against the employer for each violation, with the penalty money and reasonable attorney’s fees to be awarded to the employee and/or candidate.

Before then, if employers are serious about using arbitration agreements to limit litigation costs, they should look at their arbitration agreements closely now to make sure they are enforceable under current standards.

It is important to have separately executed mutual arbitration agreements and not just “arbitration policies” buried in employee handbooks.  Read the current draft of AB 465 here.