Posted on May 7th, 2020
The laws on hiring new employees are changing, and fast.
Read this article to learn what’s changing in CA regarding mandatory arbitration agreements.
It was reported in 2018 that there were a total of 17.7 million employees in all sectors in California.
For the employers taking these workers on, however, rules are changing. If Assembly Bill 51 passes, it will no longer be legal to require employees to sign up to mandatory arbitration agreements.
Read on as to look at the developments on rules in this area.
What Are Mandatory Arbitration Agreements?
A mandatory arbitration agreement is a provision in a contract of employment. They state that any disagreements which arise between employees and employers must be resolved by mandatory binding arbitration.
Arbitration is a form of alternative dispute resolution. This means that it is a method of settling arguments without recourse to the courts.
It is similar to mediation. However, mediators do not have the power to lay down legally binding verdicts.
Arbitrators essentially act as judges. They hear both sides of a given argument from parties and their attorneys and make a judgment on the basis of this.
Arbitration has the advantage of being more definite than mediation. It is also quicker and cheaper than a court hearing.
Therefore, mandatory arbitration agreements had become increasingly popular in employment contracts in the years leading up to Assembly Bill 51.
Many mandatory arbitration agreements required employees to give up their right of appeal.
What Is Assembly Bill 51?
Assembly Bill 51 contains employee protection measures for those working in California.
The most significant is the ban on mandatory arbitration clauses.
It is important to note that these rules have not yet taken effect. On January 31, 2020, a federal judge issued a full preliminary injunction in relation to the measure.
This does not permanently halt the imposition of Assembly Bill 51. It means that a full hearing will be held in relation to it, and a final judgment will then be passed on its compatibility with federal law.
Pending the outcome of this hearing, mandatory arbitration agreements are still valid.
What Do These New Rules Mean for Employers?
Employers began to use mandatory arbitration agreements due to the regularity of disputes. Employee grievances are common, and dealing with them can be expensive and time-consuming for employers.
Under the provisions of Assembly Bill 51, however, an employer can be held criminally liable where they require an employee to waive their rights under the Fair Employment and Housing Act. Rights under the Labor Code are also protected in this way.
Mandatory arbitration clauses will, therefore, be unenforceable under the new rules. Employers will not be able to write them into employment contracts. Also, the existing clauses of this nature will be void.
Due to the imposition of criminal liability, an employer in contravention of these rules may be brought in front of a criminal court. A heavy fine, as well as a criminal record, could result from this.
Common Employment Disputes
The following are some of the most common reasons for a dispute to arise between an employer and an employee.
Wrongful Termination
Termination is a stressful and often degrading process for an employee. Many terminated employees feel that their employer has wronged them and decide to take a wrongful termination case against them.
Contracts of employment generally have detailed provisions regarding grounds for termination. These can seem straightforward at first. However, when they are applied in the context of a real-world dispute, it can be difficult to decide who is right and wrong.
For example, gross negligence may be grounds for termination. However, an employee might argue that the conduct in question was not negligent because similar actions by other employees were overlooked or not punished.
It is difficult for a third party to definitively say who is right in this situation.
Because of the seriousness of termination, a high number of these disputes require formal resolution.
Unfair Treatment
Unfair treatment is a broad term. It can relate to a host of different workplace issues.
A common example is unequal division of work. An employee might feel aggrieved that they are consistently given a heavier workload than their colleagues. Alternatively, they might feel they are unfairly deprived of responsibility.
These kinds of disagreements are generally less serious than, say, termination disputes.
However, they can escalate to a point where relations between employee and employer have completely broken down. If an employee feels that their contractual rights have been breached or ignored, they may be entitled to seek a form of resolution.
Passing Over for Promotion
Many promotions involve significant financial benefits. Employees therefore often take cases against employers where they feel they have been unfairly denied one.
This is also something that can be resolved by discussion between the employer and employee. Again, however, failure to reach a satisfactory outcome can quickly lead to an escalation of the issue.
Like wrongful termination disputes, promotion cases can be difficult for third parties to make decisions on. An employee might claim that their work was far superior to that of the person who was actually promoted. However, it is difficult for an arbitrator, mediator, or judge to say whether this is objectively true.
Discrimination
Discrimination might relate to race, gender, sexual orientation, religion, or age. There has been increased public consciousness of these issues in recent times. Therefore, this has become a more common reason for workplace disagreement.
The discrimination need not come from an employer. If one employee discriminates against another, and the victim feels the employer did not do enough to address the situation, the employee might decide to take a case against them.
Protecting Your Interests as an Employer
The new rules will make it more difficult for employers to look after their interests. Mandatory arbitration agreements have long been a useful contractual tool for employers, and this development is likely to cause many difficulties.
If you are concerned about any issue in relation to the protection of your business, contact us today to book a free initial consultation.
