California's AB 51 Prohibits Employers from Using Mandatory Arbitration Agreements for Employees

Assembly Bill (AB) 51 was signed into law on October 10, 2019 and will be effective January 1, 2020. This new law will drastically affect California employers by altering the rules governing commonly used employment paperwork and the ability of employers to require their employees to solely arbitrate disputes.

Summary of AB 51 

Primarily, AB 51 restricts employers from unilaterally requiring their employees to arbitrate, mediate, or otherwise control the manner and forum of a dispute, as a condition of hire, continued employment, or the receipt of an employment-related benefit.

Additionally, AB 51 prohibits an employer from threatening, retaliating, or discriminating against, or terminating any applicant for employment or any employee because of the employee’s refusal to consent to the waiver of any right, forum or procedure.

However, the legislature did exempt certain employment-related agreements from AB 51’s broad scope. Post-dispute settlement agreements and negotiated severance agreements can still contain language requiring arbitration, mediation, or the like for disputes arising under these types of agreements.

Consequences of Violating AB 51 

Most alarmingly, the legislature expressly makes it a misdemeanor for an employer to violate AB 51. Furthermore, violations of AB 51 are also subject to injunctive relief and statutory penalties defined elsewhere in the Labor Code. Thus, if an employee or former employee sues an employer under this law, all or some of these consequences can befall the employer.

Conclusion

Although AB 51 should be taken seriously, it is unclear how long this new law will remain in effect. Certain aspects of AB 51 are at odds with Federal law and may be struck down; however, this judicial process would likely take years to complete.

In the meantime, California employers should consult with an attorney to correct their employment paperwork and ensure full compliance with AB 51. Too much is at stake.

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