10.15.2021 | Newsletters

Big Changes for Employee Arbitration Agreements

Arbitration Agreement

If you require applicants or employees to execute an arbitration agreement, you should revise your agreement form in light of a recent Ninth Circuit decision. Last year, the legislature enacted Labor Code section 432.6, which prohibits employers from requiring any applicant or employee to waive the right to any forum or procedure when pursuing Labor Code or certain fair employment claims. Essentially, this means you cannot require an employee to sign an arbitration agreement and you cannot take action against an employee who refuses to sign one. A federal district court issued a preliminary injunction in February 2020, blocking enforcement of the law on the grounds that it conflicted with the Federal Arbitration Act. But the Ninth Circuit Court of Appeal recently reversed most of that ruling, meaning the law is now in effect (with the exception of portions prescribing criminal penalties).

Importantly, the law does not invalidate an arbitration agreement that an employee signs. However, if employees do not sign, you cannot threaten, discriminate or retaliate against, or terminate them. We recommend that you immediately revise your arbitration agreement accordingly, and train your human resources department on this issue.

The lawsuit, Chamber of Commerce v. Bonta, (9th Cir. 2021) — F.4th —, 2021 WL 4187860, is still proceeding, and – in the end – the law may be enjoined again. However, for now, we recommend that you bring your documents and procedures in line with Labor Code section 432.6.

Related practice team: Labor and Employment

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