June 26, 2019

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California Seeks to Prohibit Arbitration Agreements

Meeting Lawyer

In May 2018, the U.S. Supreme Court, in a 5-4 decision, ruled that mandatory arbitration clauses are legal and enforceable. Since three separate cases had similar legal questions regarding arbitration clauses the Court decided to consolidate them and issued its ruling in: Epic Systems Corp. v. Lewis.  

It is not uncommon to see arbitration clauses in contracts these days. In fact, you might be surprised to learn how many times you’ve actually entered into an arbitration agreement. Your banks and credit cards all use arbitration agreements. Many employers enter into arbitration agreements with their employees. If you’ve ever purchased something online, you’ve likely missed the arbitration agreement you agreed to in the fine print of the disclaimer.

Arbitration is an alternative to litigation – that is, an alternative to going to court. In some cases, there is a single arbitrator. In others, there is a panel made up of three arbitrators, one chosen by each party and one agreed to by both parties.

The arbitrator (or arbitrators) listen to both sides and make their decision. In most cases, the decision is enforceable just as if a judge or jury had handed down a ruling.

Arbitration advocates argue that it can be an agreeable alternative to both parties as well as quicker and cheaper than a lawsuit. On the other hand, arbitrations are not public and many large corporations use them to minimize publicity as well as their liability in cases involving sexual harassment, among other things.

Arbitration requires the parties to give up their Seventh Amendment right to a jury trial. Mandatory arbitration agreements also enable large corporations to quietly make disputes go away. Arbitration agreements are not part of any public record, like lawsuits. This allows companies to hide behind these agreements without facing public scrutiny.

Employees Forced to Fight Solo

The Supreme Court’s ruling in Epic Systems is considered a pro-employer, anti-union decision. Why? Because mandatory individual arbitration agreements will often deter an employee from fighting against a corporation for that employee’s rights. If an employee has a dispute with the company for which he works, he’s not likely to have the time or money to pay an arbitrator’s expenses and fight his employer alone.

Imagine requiring each employee of any large mega-corporation to fight his own, individual battle over proper wages and working conditions. Under the Supreme Court’s ruling in Epic Systems, if employees, as part of their employment contracts, are required to arbitrate individually, they must take on their employer one by one, and all alone.

California’s Effort to Prohibit Arbitration Agreements

Justice Ruth Bader Ginsburg, in her dissenting opinion in Epic Systems Corp. v. Lewis, stated, “Congressional correction…is urgently in order.” Although Justice Ginsburg was calling on Congress in Washington, D.C. to act, the legislature in the State of California seems to have been listening.

Recently in August 2018, California’s legislature passed AG 3080, a bill, which, if signed by the Governor, would preclude employers from including arbitration agreements in employees’ contracts. It is difficult to predict whether Governor Brown will sign the bill, as he has gone back and forth on union issues throughout his tenure as governor. The union lobby is quite strong within the State of California, but with Jerry Brown having reached his term limit and not having to face voters again, he doesn’t have much to lose, so he could go either way.

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About Lynn Fugaro

Lynn has been writing web content since 2007 after a lengthy career as a middle school English teacher and administrator. Writing web content seemed a natural progression following a career teaching adolescents about the beauty and the power of the written word, and she quickly got hooked on the challenge of writing SEO- and reader-friendly content that could be found on Page 1 of Google and other search engines.

Having written content for physicians and attorneys for the first few years of her writing career, Lynn has most recently produced original, informative, entertaining, and relevant content for the entertainment industry, the automotive industry, senior communities, pet rescues and numerous other businesses hoping to increase website traffic and page views for all clients looking for informative, vibrant content.