AB 465 (Hernández; D-West Covina), will increase pressure on the already-overburdened judicial system by precluding mandatory employment arbitration agreements, which both the California Supreme Court and the U.S. Supreme Court have already authorized. As such, AB 465 will serve only to drive up litigation costs, increasing individual claims, representative actions and class action lawsuits against California employers of all sizes until such legislation can work through the judicial process to be challenged again.
The bill passed the Senate Labor and Industrial Relations Committee on June 10 on a party line vote, 4-1.
A recent article in CalWatchDog recapped the committee hearing.
AB 465: Increased Litigation
The California Chamber of Commerce is opposed to AB 465 and identified it as a job killer because:
- California and U.S. Supreme Courts have already authorized mandatory employment arbitration agreements. AB 465 directly conflicts with these prior and recent rulings from both the California and U.S. Supreme Courts, which have consistently stated any state law that interferes with the Federal Arbitration Act is pre-empted. The time, cost and uncertainty created for all California employers while any legal challenge to AB 465 is pending in the judicial system would be detrimental to businesses and unnecessary.
- Adequate protections already exist for mandatory, pre-dispute employee arbitration agreements. The California Supreme Court has already mandated contractual provisions that must be included in a mandatory, pre-dispute arbitration employment agreement. Accordingly, adequate protections already exist in predispute, mandatory employment arbitration agreements.
- Arbitration provides an effective and efficient means to resolve employment-related claims. According to the U.S. District Court Judicial Caseload Profiler, there were 29,312 civil cases filed in California in 2014. As of June 2014, approximately 2,132 cases had been pending in federal court in California for more than three years and the median time from filing of a civil complaint to trial in Northern California was 31 months. A report published by the Heritage Foundation in July 2013, “The Unfair Attack on Arbitration: Harming Consumers by Eliminating a Proven Dispute Resolution System,” concludes that “[a]rbitration is generally faster, cheaper, and more effective than the litigation system. It is not affected by cutbacks in judicial budgets or the increases in court dockets that significantly delay justice.”
- AB 465 will send disputes into the overburdened and underfunded judicial system. AB 465 will force more employment disputes into the already-overburdened judicial system, thereby delaying any recovery of potential wages for an employee even longer by essentially banning any predispute, mandatory employment arbitration agreements.
- AB 465 will create a worse litigation environment and lack of job creation. California’s economic recovery depends on its ability to create an environment where job creation can flourish. AB 465 will neither help California’s litigation environment nor promote businesses’ ability to create jobs as it will drive up California employers’ litigation costs.
Staff Contact: Jennifer Barrera