General Assembly Defies US Supreme Court on Employee Arbitration/Class Action Waivers

Recently, the US Supreme Court ruled that employers can require their employees to agree to binding arbitration with respect to employment disputes, and can require that their employees waive the right to file a class action lawsuit. See Epic Systems Corp. v. Lewis, 137 S.Ct. 809 (2017). In Epic Systems, the US Supreme court upheld a class action waiver that was part of a mandatory arbitration clause because the Federal Arbitration Act preempted any efforts by state legislatures and various state supreme courts to weaken arbitration provisions. However, the California General Assembly and the California Supreme Court are quite hostile to mandatory arbitration and class action waivers.

As such, it is not surprising that in late August 2018, the California Senate passed AB 3080 which is aimed, essentially, at overturning the Epic Systems case, at least here in California. See text of AB 3080 here. The bill passed the lower house earlier this year and now heads to Governor Brown’s desk. Predictions are that he will sign it.

San Diego Corporate Law: What is in AB 3080?

Effective January 1, 2019, AB 3080 would prohibit and forbid any employer from requiring an employee — or other worker — to waive any “right, forum, or procedure” for a violation of the California Fair Employment and Housing Act or any provision of the California Labor Code. In plain language, the provision forbids employers from requiring arbitration. In general, the mandatory arbitration provisions are phrased in terms of “waiver” of a hearing or trial in the California court system.

This provision is broad since the word “right” would conceivably vitiate every “pro-employer” provision in employment contracts throughout California. Clauses that might be eliminated include forum selection, limitation on liability, choice of law, and notice provisions if such arguably shorten any applicable statute of limitations.

In another attack on Epic Systems, AB 3080 forbids employers from imposing requirements unless the employee does something like fill out a form or some such. This is another direct challenge to Epic Systems. As a reminder, in Epic Systems, the employers in the case obtained the “consent” of their employees by sending an email stating that various disputes would be subject to arbitration and that class actions were waived. The employers then stated something to the effect that “your continued employment constitutes your agreement” to these new conditions of your employment. AB 3080 forbids that type of “consent.”

AB 3080 allows employees and workers to sue for threatened or actual retaliation by an employer against an employee or worker that refuses to agree to arbitration and/or refused to waive his/her rights to file class action lawsuit.

In addition, unrelated to the Epic Systems decision, AB 3080 prohibits an employer from requiring an employee to not disclose any instances of sexual harassment suffered, witnessed, or discovered in the workplace. The language is arguably broad enough to prohibit confidentiality clauses in settlement agreements.

As noted, Governor Brown is expected to sign AB 3080. Parts of the law are clearly in direct conflict with Epic Systems, so legal challenges to the law are sure to follow if the Governor signs the bill. In the meantime, the legislation will create a “chilling effect” on employers who may have planned to impose mandatory arbitration and class action waivers on their employees.

Contact San Diego Corporate Law

If you would like more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email.

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