Governor Newsom Signs AB51, Purporting To Ban Forced Arbitration Of FEHA And Labor Code Claims

On October 10, 2019, California Governor Gavin Newsom signed Assembly Bill 51 (AB51), which on its face would prohibit employers from requiring job applicants and employees to arbitrate claims under the California Labor Code and the Fair Employment and Housing Act, California Government Code §§ 12900 et seq (FEHA). The bill, a component of the legislative reaction to the #MeToo movement, seeks to ensure employees maintain their right to sue employers in court and retain access to the procedural class action mechanism. The bill will go into effect in January 2020; legal challenges are a virtual certainty. Indeed, courts are likely to find that AB51 conflicts with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (FAA), which establishes a strong federal policy favoring arbitration. The United States Supreme Court has previously found that the FAA preempted California laws restricting arbitration of certain employment disputes. Additionally, in June 2019, a New York federal court held that the FAA controlled over a similar New York State law that prohibited forced arbitration of sexual harassment claims.

AB51's Current Status and Content

AB51 passed the state Assembly in May 2019 and the state Senate in September 2019. Governor Gavin Newsom signed the bill on October 10, 2019, in what has become a legislative session of sweeping change to California's employment laws. (See California Lawmakers Send AB5 to Governor's Desk, dated Sep. 13, 2019.) Introduced by Assembly member Gonzalez, the same representative who introduced AB5, AB51 adds a new section to FEHA as well as a new section to the California Labor Code. The bill will go into effect on January 1, 2020, and represents the third attempt by California lawmakers to pass similar statutes. Former Governor Jerry Brown vetoed similar bills in 2015 and 2018, stating that he believed these bills ran afoul of US Supreme Court precedent and federal law.

AB51 contains two primary provisions. First, it prohibits employers from requiring applicants or employees to waive any right, forum, or procedure for a violation of FEHA and the California Labor Code. Second, it prohibits employers from retaliating against any applicant or employee who refuses to waive such right, forum, or procedure, including by refusing to sign an arbitration agreement. The bill confirms that it even covers arbitration agreements that contain an opt-out clause or other provisions allowing employees to take certain actions to...