New California Arbitration Law Ends Forced Arbitration

California has taken a significant step towards protecting consumers' rights by ending forced arbitration in certain situations.

The new law prohibits companies from requiring employees or customers to sign away their right to sue in court.

This means that if you're a California resident and you sign a contract with a company, you won't be forced to go through arbitration if you have a dispute.

Forced arbitration can be a major problem, as it often favors big companies over individuals.

The law is a response to a growing concern about the fairness of arbitration, which can be a costly and time-consuming process.

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California employers need to be aware that a violation of Labor Code section 432.6 is a misdemeanor.

The new law prohibits employers from requiring applicants or employees to agree to arbitrate claims brought under California's Labor Code or Fair Employment and Housing Act (FEHA) as a condition of employment.

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Employers can't require arbitration agreements for Labor Code or FEHA claims starting January 1, 2020.

Any arbitration agreements put in place before January 1, 2020, are unaffected and may be enforced.

The new law does not entirely prohibit arbitration agreements with employees and does not apply to breach of contract claims or tort claims like fraud or negligence.

Employers may wish to revise their arbitration agreement to include specific language that recognizes Labor Code section 432.6's requirement that the arbitration agreement be voluntary.

Employers who violate Labor Code section 432.6 may face a misdemeanor charge and an employee may recover their attorneys' fees in any lawsuit brought against the employer.

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California Governor Gavin Newsom signed Assembly Bill 51 into law, adding Labor Code section 432.6, which prohibits employers from requiring mandatory arbitration agreements for Labor Code or Fair Employment and Housing Act claims.

The new law goes into effect on January 1, 2020, but any arbitration agreements in place before this date are unaffected and may be enforced.

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Employers may wish to suspend the use of arbitration agreements until a court strikes down the new law.

Employers may also consider narrowing the scope of their arbitration agreement to only cover non-Labor Code and FEHA claims.

Violating Labor Code section 432.6 is a misdemeanor, and employees may recover their attorneys' fees in any lawsuit brought against an employer for mandating an arbitration agreement or attempting to enforce a mandatory arbitration agreement entered into after January 1, 2020.

Employers may need to revise their arbitration agreements to include specific language that recognizes Labor Code section 432.6's requirement that the arbitration agreement be voluntary.

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