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Paul Zimmerman

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AB 3080: Arbitration and Nondisclosure Agreements in the Crosshairs

Assembly Bill 3080 is pending legislation that should be of great interest to all California employers. The proposed law seeks to prohibit employers in California from requiring an applicant or employee to agree to arbitrate discrimination, harassment or retaliation claims as a condition of employment, continued employment, or receipt of any employment-related benefit. As pointed out in one of our previous blog posts, not only does AB 3080 look to make many employment arbitration agreements unlawful in the Golden State, but it also forbids an employer from prohibiting an employee or independent contractor from disclosing sexual harassment he or she suffers, witnesses or discovers. The upshot: if the bill is signed into law, these banned acts will be characterized as unlawful employment practices under the Fair Employment and Housing Act, which would entitle employees to remedies for every violation.

By way of this post, we want you to know that the bill recently passed both the State Assembly and Senate, and is now on its way to the desk of Governor Jerry Brown for signature. He has until September 30 to sign or veto the legislation.

Will the Bill Become Law?

What exactly Governor Brown will do in terms of AB 3080 is anybody’s guess. Of note, in 2015 he vetoed AB 465, a bill that also sought to ban mandatory arbitration agreements as a condition of employment – though that bill was offered before the #MeToo movement, which has been the driving force behind AB 3080 from the start.

To be clear, if AB 3080 is signed into law, companies could still require that disputes be arbitrated, but not as a condition of employment. This means that employees would have the ability to opt out of arbitration agreements (or refuse to sign them in the first place). Also, employers would be prohibited from requiring nondisclosure agreements regarding sexual misconduct in order for them to be offered (or to keep) a job. That being said, the law would not render existing arbitration or nondisclosure agreements unenforceable.

A Lawsuit on the Horizon

Should Governor Brown sign AB 3080, it’s a virtual certainty that it will be subject to immediately challenge in court. The prevailing school of thought amongst the employment bar is that the legislation is unconstitutional and otherwise preempted by the Federal Arbitration Act (which expressly states that arbitration agreements “shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”). The enforceability of arbitration agreements (including those with class action waivers) was further and recently confirmed by the U.S. Supreme Court in Epic Systems Corp. v. Lewis. That being said, it is no surprise that the California legislature has taken a more aggressive stance with respect to arbitration agreements following that decision.

Stay Tuned

As September 30 approaches, we will watch closely the happenings in Sacramento and report back with any news about AB 3080.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.