Many employers want their employees to sign employment contracts that have mandatory arbitration clauses. An arbitration agreement essentially means that the employee waives his/her right to have the state or federal courts hear employment disputes in favor of a single or multiple arbitrators. Employers generally prefer arbitration over court hearings and jury trials because for several reasons:
- The awards in court hearings and trials are often more than what an arbitrator or arbitration board would award.
- Employers have more control over who hears the dispute. Each side (employer and employee) normally must agree on an arbitrator. Sometimes, each side will choose one arbitrator and then those two arbitrators may select a third arbitrator.
- Other reasons that employers think give them a better advantage in arbitration than in court
Generally, before California enacted an anti-mandatory arbitration law, employers could require that you sign an employment contract that includes a mandatory arbitration clause. The requirement applies before you start working for the employer, if you are already working and wish to continue working after the original employment contract has expired, or if the employer wants you to sign the arbitration employment agreement as a condition of employment.
The US Supreme Court held in 2018 that mandatory waivers of arbitration provisions did not violate the National Labor Relations Act (NLRA). The waivers in the Supreme Court case applied to employee waivers of the right of the employees to participate in a class action lawsuit. The decision is being broadly read by employers to protect employers who mandate waivers of all types of employment disputes.
Fortunately, the California Labor Code provides protections for California employees. Without the protection of the California Labor Code, if you refuse to sign a mandatory arbitration waiver, your employer could:
- Fire you. Employers might agree to keep you employed if you provide valuable services.
- Offer you additional incentives to sign.
- Possibly do nothing.
Most employment agreements that include an arbitration requirement are governed by the Federal Arbitration Act (FAA).
California’s Labor Code prohibits mandatory arbitration waivers
The 9th Circuit Court of Appeals ruled on September 15, 2001, that essentially the California Labor Code section 432.6 can be enforced. The Code prohibits requiring that employees agree to arbitration as a condition of their job – for all requests to sign an arbitration waiver that are made on or after January 1, 2020.
California Labor Code 432.6 provides that:
- You cannot as a condition of your employment, your continued employment, or the receipt of an employment-related benefit:
- “Be required to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act… including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.”
The decision means that California employees cannot be required to accept arbitration of disputes as a condition of their employment. The law gives employees the right to pursue their claims civilly, before agencies, through public prosecution, and other approved methods.
The 9th Circuit Court of Appeals held that the FAA does not preempt (have authority over) California’s code as it pertains to arbitration employment prohibitions – and does authorize any civil or criminal penalties for agreeing to an arbitration employment agreement. The decision does mean that employers can be held civilly and criminally liable if they refuse to hire an employee who declines to sign the arbitration employment agreement – or fires the employee for not signing an arbitration agreement.
Nothing though prevents the employee from accepting an arbitration agreement. The decision means your employer cannot force you to accept an arbitration agreement.
It is likely the decision of the 9th Circuit Court of Appeals will be appealed to the US Supreme Court. For now, the decision is the law across California – if the arbitration agreement was requested or demanded – on or after January 1, 2020.
California employers may provide for a separate arbitration agreement instead of including the waiver in the full employment agreement. Employers will likely also consider including language that the arbitration is voluntary and clarifying that the employee will not lose employment or suffer retaliation for refusing to sign the arbitration agreement (whether it’s a standalone agreement or a provision in a full employment agreement).
If you have any questions about whether you can refuse to sign an arbitration waiver request from your employer, call the Miracle Mile Law Group now. You can reach us at (888) 244-0706 or contact us for a FREE consultation.