California Passes Slew Of Worker-Friendly Laws, Most Notably Banning Mandatory Arbitration of Employment Claims

California Governor Gavin Newsom just signed a new batch of worker-friendly laws sponsored by Democrats in the California Assembly and Senate.  These laws cover a range of topics from arbitration agreements to workplace safety.

AB 51 will garner particular attention because not only does it substantially prohibit arbitration agreements, it criminalizes them.  The new law applies to contracts for employment entered into after January 1, 2020.  It precludes requiring an applicant or employee, “as a condition of employment, continued employment or receipt of any employment-related benefit . . . to waive any right, forum or procedure” for any claim arising under California’s Labor Code and its Fair Employment and Housing Act.  The lawmakers anticipated that employers might try to sidestep this law by including an opt-out provision in otherwise mandatory arbitration programs.  To that end, the law also provides that “an agreement that requires an employee to opt out of a waiver or take any affirmative action in order to preserve their rights is deemed a condition of employment.”  AB 51 has minimal exceptions; it does not apply to post-employment agreements such as settlement or severance agreements.  Nor will the new law apply to persons registered with self-regulatory organizations under the Securities Exchange Act. 

What about Federal Arbitration Act preemption you ask?  A year ago, former Governor Jerry Brown vetoed nearly identical legislation because he was persuaded the law was preempted.  Courts should find this law is preempted just as they struck down AB 2617 signed in 2014 to bar mandatory arbitration agreements in contracts for goods and services.  Still, the law has not been struck down yet, so employers do face a choice.  For example, some employers may opt to rely on the strong arguments in favor of preemption and continue to use arbitration agreements on the assumption that if challenged, they will prevail.  Because that course is currently declared to be “an unlawful employment practice” under the Labor Code, it is technically a misdemeanor for persons administering the program.  However, the same is true for many other violations of the Labor Code and to date the State has not squandered its scarce prosecutorial resources to charge HR professionals, so the risk appears low.  Still, employers must be mindful that they are inviting challenges should they continue to use such agreements next year.  Someone will be the test case.  Businesses must ask themselves, am I ready for it to be me?

Some employers may elect to suspend the use of such agreements pending a decision by the courts striking down the act.  Others may note that the new law only applies to arbitration of claims under the Labor Code and the Fair Employment and Housing Act and implement agreements that cover other claims but exclude those two laws.  The problem with that approach is those two laws cover the vast majority of claims made by employees under California law, so the arbitration agreement would only cover state-law claims such as wrongful termination in violation of public policy or torts such as intentional infliction of emotional distress.  Still other employers may race to implement arbitration programs before January 1, but those employers will still face the question what to do after that.

Among the other laws just signed by Governor Newsom, several could have an impact on all employers.  For example, AB 9 extends the time to file a claim for harassment, discrimination or related retaliation claims from one year to three.  As if California did not already have enough penalties for Labor Code violations, AB 673 adds an additional $100 fine for initial failure to pay all wages on time and $200 plus 25% of pay unlawfully underpaid, for subsequent violations.  SB 142 adopts on a state-wide basis a San Francisco ordinance requiring employers to provide a lactation room that is not a bathroom, is in “close proximity” to the employee’s work area, and that is equipped with a chair, running water, electricity, a shelf or table and a refrigerator or other means for storing milk.  Companies employing less than 50 employees may be exempt if they can demonstrate these requirements would be an undue hardship.

In California’s ongoing effort to perfect harassment prevention training, AB 547 and SB 530 modify training requirements for the janitorial and construction industries by implementing peer training for janitors and apprentice training, among other things, in the construction industry.  AB 203 requires construction companies train workers on “valley fever” awareness.  Valley fever is a lung infection caused by a fungus most often found in soil in California and Arizona.  Also employee-health related, AB 35 will trigger new reporting requirements and an investigation of a serious violation in the event employee blood tests reveal lead levels of 20 micrograms per deciliter or higher.  Airlines should note that AB 1748 will make it easier for flight crews to qualify for three months of unpaid time to bond with a child (born, adopted or foster placements).

In sum, there is a little something for everyone in this latest batch of California laws.  Stay tuned for new developments regarding AB 51 and the courts.