Gov. Brown Declines to Sign AB 465 Which Would Have Prohibited Arbitration Agreements as a Condition of Employment

By lfsuser on October 14, 2015

On October 11, 2015, Gov. Brown declined to sign AB 465. The proposed legislation would have made it unlawful 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.” In other words, the legislation sought to make arbitration agreements as a condition of employment a violation of California law.

Gov. Brown provided insight into his decision. In a memo accompanying the decision, Gov. Brown wrote that a: “blanket ban on mandatory arbitration agreements is a far-reaching approach that has been consistently struck down in other states as violating the Federal Arbitration Act (“FAA”).” He noted that there are currently two cases pending before the United States Supreme Court that arise from California cases involving mandatory arbitration agreements and that “[b]efore enacting a law as broad as this, and one that will surely result in years of costly litigation and years of legal uncertainty, I would prefer to see the outcome of those cases.”

Gov. Brown’s decision not to sign the legislation is a victory for California employers. At least for the time being, employers may continue to require new hires to enter into binding mutual agreements to arbitrate all disputes. Notwithstanding, employers must still ensure that their agreements meet all of the requirements deemed necessary for such agreements to be enforceable by applicable California case law. See, Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000).

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