Assembly Bill 3080, authored by Assembly Member Lorena Gonzalez Fletcher, is pending before Governor Jerry Brown after having passed both houses of the Legislature. AB 3080 would prohibit non-disclosure agreements regarding sexual harassment, as well as ban arbitration agreements for any alleged violation of the Labor Code or the Fair Employment and Housing Act in the Government Code.
Labor and employment laws can be equally enforced in arbitration as they can in court because arbitration only specifies the forum in which the dispute is resolved. It does not result in any diminution in an employee’s substantive rights. This is the fundamental claim of the proponents of banning arbitration, but it is not factually correct. For example, when arbitration agreements attempted to ban punitive damages, or shorten a statute of limitations, those were all struck down by California courts.
In addition, AB 3080 would violate federal law by precluding arbitration agreements in all employment disputes. The U.S. Supreme Court (most recently on May 21, 2018) has repeatedly struck down state legislation that prohibits, restricts or interferes with arbitration agreements. AB 3080 is another example of a state bill that clearly runs afoul of the Federal Arbitration Act (FAA). If the author is so confident that this bill will survive such a legal challenge, why does the bill contain a severability clause to protect the remaining provisions of the bill is this provision is struck down?
For the proponents of AB 3080, there is a more appropriate venue to address the reach of the FAA. There is a bipartisan effort in Congress that is underway to amend the Federal Arbitration Act to allow sexual harassment claims only. If this FAA amendment is successful, then such state law prohibitions would not be federally preempted.
Another troubling aspect of AB 3080 is that the bill is not limited to sexual harassment claims as its proponents claim. Rather, the bill would apply to all claims made under the Labor Code and the Fair Employment & Housing Act in the Government Code. As such, it is much broader than a similar bill vetoed by Governor Brown in 2015 (AB 465, Hernandez).
Moreover, AB 3080 basically precludes settlement agreements of any claim under the Labor Code and FEHA that include a waiver. Precluding the informal resolution of civil claims would likely overwhelm California’s judiciary by forcing all claims to be tried by a jury or judge, creating significant delays that would harm individuals who have suffered a wrong.
To make matters worse, employers in this state could face criminal liability for violating the prohibitions pf AB 3080 because the provisions of this bill are included in Chapter 2 of Article 3 of the Labor Code, thereby making any violation of AB 3080 a criminal misdemeanor (per Labor Code Section 433). Such an outcome is unwarranted.
Employers use arbitration to ensure a uniform manner in which to resolve legal disputes because these agreements provide predictability and they help mitigate costs and attorneys’ fees which are prevalent in class action litigation. The increased use of arbitration in California is a direct result of the substantial and growing costs of litigation in this state.
If not for arbitration, then low-wage workers are less likely to have a forum in which to adjudicate their employment disputes. This is due to the fact that more often attorneys are unwilling to accept cases for low-wage workers because there is not the financial opportunity that comes with representing a higher-wage earner. If arbitration is prohibited as contemplated by AB 3080, then litigation is the only avenue and many workers will not be represented.
It is also ironic that we often find mandatory arbitration clauses in collective bargaining agreements utilized by labor unions, as well as contingency fee agreements utilized by plaintiffs’ lawyers. It does raise the question of why do lawyers and unions backing AB 3080 want to ban arbitration agreements for everyone else when they use such agreements themselves?
Finally, the real winners under AB 3080 will most likely be class action plaintiffs’ lawyers. Arbitration is a less formal, less costly, and less time-consuming forum to resolve a legal dispute. The cost savings is not in the compensation paid to the employees; rather, it is in the fees paid to attorneys. No wonder the plaintiff’s bar wants to do away with arbitration.
For all of these reasons, Governor Brown should follow the precedent he set in 2015 and veto this over-reaching measure.