4 Things Workers Should Know About the New Law Barring Mandatory Arbitration

Jan. 1, 2020, is not just the beginning of a new decade. It is also the starting point for a new era of employment law in California. A new law, signed by the state’s governor in September, essentially ends forced arbitration in employment agreements.

It prohibits companies from requiring applicants or employees to sign away their right to sue should a dispute or complaint arise. These mandatory clauses, which have become increasingly common, force workers to rely solely on the secret arbitration process in order to resolve issues. With the law effective as of Jan. 1, we wanted to highlight four key elements California workers should know.

Existing Agreements Don’t Appear to Be Affected

The new law applies to employment agreements “entered into, modified or extended” from Jan. 1, 2020, onward. That language suggests any existing contracts with arbitration agreements won’t be affected, and – unless altered – can exist under the previous rules.

The Law Bans Retaliation Against Workers

Employers can still ask an applicant or worker to agree to an arbitration clause. But unlike before, the employer can not make signing this clause a condition of accepting the job. What if an employer asks, but you, as a worker, don’t want to sign the arbitration clause?

The new law makes it illegal for an employer to retaliate against or threaten a worker that refuses to enter an arbitration agreement. In that way, you can’t be pressured into signing such a clause.

Many Business Groups Oppose the Law

A lot of business groups, such as the California Chamber of Commerce, are against the law. They argue it will lead to more unnecessary lawsuits while lengthening how long it takes to resolve issues. However, supporters of the law argue allowing the complaint to be resolved publicly through the courts – rather than in secret via arbitration – helps protect workers.

The Law Might Not Be Around Very Long

Experts believe the new law will face significant legal challenges. That is in part because it may be pre-empted by the Federal Arbitration Act. If a challenge is brought and the courts agree, California’s new law might be neutered – or even thrown out – before it makes much of an impact.

While it’s impossible to say how things will turn out, it’s worth keeping an eye on developments.