Last month, in Chamber of Commerce of the U.S., et al. v. Bonta, et al. the Ninth Circuit Court of Appeals struck down a key portion of California’s AB 51 based upon pre-emption by the Federal Arbitration Act. Among other things, AB 51 made it unlawful for employers to require employees to agree to arbitrate employment claims as a condition of employment, even if the arbitration agreement contained an opt-out clause. The law subjected employers to civil and criminal penalties for any violations. As a result of the Ninth Circuit’s recent decision. employers are still allowed to utilize arbitration more often with disputes for their employees – at least for now.
Why Is Arbitration Important to Employers?
As an alternative dispute resolution (ADR) method, most times, arbitration makes it possible for employers to resolve conflicts more quickly and cost-effectively. It is a more attractive option than litigation, which can be expensive and time-consuming. Additionally, arbitration rulings are legally binding, which distinguishes this type of ADR from mediation.
However, that binding aspect – for better or worse – is one reason employees generally don’t like the idea of arbitration. Many assume arbitrators are more likely to make decisions that favor employers. While an arbitrator is required to serve as an impartial third party, it can be difficult to overcome the perception that employees are not getting a fair shake.
California’s Long-sought Goal to End Arbitration
California is often considered to be a more “workers’ rights” friendly state, more so than many other states. Legislators have tried multiple times to end the practice of employment dispute arbitration clauses through various methods. Most of these attempts have been legally challenged and struck down.
Yet, the persistence of the opposition to arbitration seems to suggest that the California legislature is likely to continue in their efforts. But for now, employers can continue to make arbitration provisions a mandatory and enforceable condition of employment.
Should I Include an Arbitration Clause in My Contracts?
There are many choices to make when it comes to building your workforce. Accepting the inevitability of conflict and taking steps to control those costs is wise, as is consulting an experienced employment attorney who can help you to make the right decisions.