Job Killer Update: One Arbitration Discrimination Bill Stalls, One Remains on Assembly Floor

A California Chamber of Commerce-opposed job killer that seeks to ban arbitration clauses for alleged civil rights violations was refused passage in the Assembly yesterday. A second job killer bill that discriminates against mandatory employment arbitration agreements will be considered by the Assembly today.

AB 2667: Arbitration Agreements Discrimination

AB 2667 (Thurmond; D-Richmond) failed to pass the Assembly, 38-36 on May 31, however the bill was granted consideration. The bill has until June 3 to pass the Assembly.

CalChamber had identified it as a job killer because it unfairly discriminates against arbitration agreements that waive a right to pursue civil rights violations made as a condition of entering into a contract for goods or services and interferes with the fundamental attributes of arbitration, which is likely preempted by the Federal Arbitration Act (FAA). This will lead to confusion, uncertainty and costly litigation for such contracts.

Key Vote

Ayes: Alejo (D-Salinas), Atkins (D-San Diego), Bonilla (D-Concord), Bonta (D-Oakland) Burke (D-Inglewood), Calderon (D-Whittier), Chau (D-Monterey Park), Chiu (D-San Francisco), Chu (D-San Jose), Dababneh (D-Encino), Dodd (D-Napa), Eggman (D-Stockton), C. Garcia (D-Bell Gardens), E. Garcia (D-Coachella), Gatto (D-Glendale), Gomez (D-Los Angeles), Gonzalez (D-San Diego), Gordon (D-Menlo Park), Hernández (D-West Covina), Holden (D-Pasadena), Jones-Sawyer (D-South Los Angeles), Lopez (D-San Fernando), Low (D-Campbell), McCarty (D-Sacramento), Medina (D-Riverside), Mullin (D-South San Francisco), Nazarian (D-Sherman Oaks), Quirk (D-Hayward), Rendon (D-Lakewood), Ridley-Thomas (D-Los Angeles), Rodriguez (D-Pomona), Santiago (D-Los Angeles), M. Stone (D-Scotts Valley), Thurmond (D-Richmond), Ting (D-San Francisco), Weber (D-San Diego), Williams (D-Carpinteria), Wood (D-Healdsburg)

Noes: Achadjian (R-San Luis Obispo), Allen (R-Huntington Beach), Arambula (D-Kingsburg), Baker (R-San Ramon), Bigelow (R-O’Neals), Brough (R-Dana Point), Brown (D-San Bernardino), Campos (D-San Jose), Chang (R-Diamond Bar), Chávez (R-Oceanside), Cooley (D-Rancho Cordova), Dahle (R-Bieber), Frazier (D-Oakley), B. Gaines (R-El Dorado Hills), Gallagher (R-Yuba City), Gray (D-Merced), Grove (R-Bakersfield), Harper (R-Huntington Beach), Irwin (D-Thousand Oaks), Jones (R-Santee), Kim (R-Fullerton), Lackey (R-Palmdale), Levine (D-San Rafael) Linder (R-Corona), Maienschein (R-San Diego), Mathis (R-Visalia), Mayes (R-Yucca Valley), Melendez (R-Lake Elsinore), Obernolte (R-Big Bear Lake) Olsen (R-Modesto), Patterson (R-Fresno), Salas (D-Bakersfield), Steinorth (R-Rancho Cucamonga), Wagner (R-Irvine), Waldron (R-Escondido), Wilk (R-Santa Clarita).

Absent, Abstaining or Not Voting: Bloom (D-Santa Monica), Cooper (D-Elk Grove), Daly (D-Anaheim), Gipson (D-Carson), Hadley (R-Torrance), O’Donnell (D-Long Beach).

AB 2879: Employment Arbitration Agreements Discrimination

The remaining arbitration discrimination bill on the floor today is AB 2879 (M. Stone; D-Scotts Valley). The bill has been identified as a job killer because it discriminates against mandatory employment arbitration agreements and interferes with fundamental aspects of arbitration and, therefore, is likely preempted by the Federal Arbitration Act (FAA). This will lead to confusion, uncertainty and costly litigation for such employment agreements in place.

CalChamber has enumerated the following concerns with AB 2879:

  • Governor Brown Just Vetoed Similar Legislation Last Year. Last year, AB 465 (Hernandez) was introduced and contained the exact same language as AB 2879, except it was applicable to all employees and placed in the Labor Code. Limiting the ban on mandatory arbitration agreements to just employees who are members of the military forces does not alleviate the concerns of federal preemption raised in the Governor’s veto message.
  • The Recent Supreme Court Case Referenced by Governor Brown Indicates AB 2879 Is Preempted by the FAA as It Discriminates Against Arbitration Clauses and Disfavors Arbitration. AB 2879 deems invalid any arbitration agreement that is made as a condition of employment for an individual who is a member of the military forces, which waives their right to pursue a claim in court, or with the Labor Commissioner or another state agency, for a violation of Section 394 of the Military and Veterans Code. This prohibition directly conflicts with rulings from both the California Supreme Court and the U.S. Supreme Court.
  • Existing Law Already Mandates All Employment Arbitration Agreements, Not Just Those for Certain Employees, Be Conscionable. Courts have repeatedly upheld mandatory arbitration agreements that are consented to by the employee as a condition of employment. However, the courts do recognize that an employee does not have the bargaining power to negotiate terms of the contract and, therefore, the courts have set forth mandatory provisions that must be included in the arbitration agreement to make the agreement fair.
  • Arbitration Does Not Favor Employers Under the “Repeat Player” Theory. Proponents of banning arbitration often have alleged employers obtain some favorable advantage in arbitration because they pay for the arbitration and are often a “repeat player” so the arbitration provider wants to ensure their continued business. This allegation is factually unsupported.
  • Studies Prove Arbitration Is the Only Avenue of Justice for Low-Wage Employees Because Attorneys Will Not Take Their Case. Multiple scholars have found that an employee who earns mid- to lower-level wages simply cannot obtain legal representation in court and cannot afford to pursue a case on his/her own. Comparatively, arbitration allows an employee to pursue a claim either on his/her own or through legal representation, with much lower cost. Banning mandatory arbitration agreements for members of the military forces will eliminate this cost-effective avenue of justice for such individuals.
  • AB 2879 Places Employers in a Litigation Predicament. AB 2879 is targeted at members of the military forces. Notably, in 2014, members of the military were added as a protected classification under the Fair Employment and Housing Act (FEHA) for purposes of employment discrimination (AB 556; Salas; D-Bakersfield). AB 2879 would place employers in a litigation predicament. If they inquire into the status of the applicant for purposes of complying with AB 2879 and specifically ask whether the applicant is a member of the military, the employer risks a discrimination claim if the applicant is ultimately not hired. Conversely, if the employer does not inquire into the applicant’s status as a member of the military and has the applicant sign an arbitration agreement just like every other employee, the employer is at risk for litigation under AB 2879. Such a predicament is entirely unfair to the employer.
  • AB 2879 Will Create a Worse Litigation Environment and Result in Lack of Job Creation. Banning pre-dispute employment arbitration agreements for employees who are engaged in the military will force those individuals into an already-overburdened judicial system. Assuming an employee can find an attorney willing to pursue the case, an employee will potentially have to wait years for a resolution, as opposed to arbitration, which generally is resolved in less than a year.

Friday, June 3 is the deadline by which bills must pass the house in which they were introduced.

Action Needed

Contact your Assembly representatives and ask them to oppose AB 2879.

Staff Contact: Jennifer Barrera

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