Traditionally, many employment agreements in California and elsewhere have included language requiring workers to resolve disputes with their employers through arbitration, rather than litigation. While public policy generally favors the use of arbitration and other methods of alternative dispute resolution, there was concern that employees were being forced into surrendering their legal rights. In response, California passed a law, known as AB 51, prohibiting companies from requiring workers to sign arbitration agreements as a condition of employment.

Various business groups, including the U.S. Chamber of Commerce, fought AB 51 in court, and after multiple proceedings, the U.S. District Court for the Eastern District of California issued a permanent injunction barring the state from enforcing the ban on mandatory arbitration clauses in most cases. This ruling followed a decision from the Court of Appeals from the Ninth Circuit holding that the Federal Arbitration Act (FAA) pre-empted the California provision when agreements are governed by the FAA.

With the legal issues finally resolved, the large majority of employers within the state can continue requiring that employee complaints be resolved before an arbitrator, instead of in a lawsuit. Still, the drafting and enforcement of mandatory arbitration clauses should be done carefully and with the guidance of an experienced attorney, who can offer guidance on issues such as:

  • Agreements subject to the FAA — The holding on pre-emption only applies to employment agreements governed by the FAA. Language within the FAA excludes contracts with certain workers within the field of interstate transportation. 

  • Clear and unambiguous language — Should a question exist regarding the existence or application of a mandatory arbitration clause, any ambiguity would be likely be resolved in the worker’s favor, so companies should ensure that language addressing arbitration is clear. 

  • Sexual assault and harassment claims — Under federal law, complaints involving allegations of sexual and harassment cannot be subject to mandatory arbitration.

  • Mutual agreement — Both the employer and employee must agree to the arbitration clause. It cannot be imposed unilaterally.

  • Unconscionability — An arbitration clause must not be overly unfair or constitute a deprivation of the worker’s substantive rights, such as the ability to recover damages or attorney’s fees.

Ensuring that a mandatory arbitration provision is enforceable is just the first step toward an efficient, legal resolution. The choice of a qualified arbitrator should also be made with great care so that the process runs smoothly. 

At Quinn & Kronlund LLP in Stockton, we are accomplished attorneys who draw on our extensive experience when serving as arbitrators. We are capable of resolving the most complex cases and handle each matter with the highest levels of skill and professionalism. To discuss your Northern California arbitration issue, please contact us online or call 209-943-3950.