Assembly Bill 465 attempts to provide a blanket prohibition of all mandatory employment arbitration agreements made as a condition of employment. The bill not only is unnecessary but is a complete overreach that will blow up a whole process that works.
The reason arbitration is an accepted and legally approved solution is because it serves all parties well. Arbitration agreements are proven to result in faster and less costly resolutions with high success rates for employees.
Proponents of AB 465 argue that it is necessary to prohibit all mandatory employment arbitration agreements due to a very specific issue with some agreements precluding an employee’s access to a labor commissioner’s hearing for wage claims. Targeted amendments were offered to fix this narrow issue, but they were rejected.
Importantly, the courts have laid down specific protections for employees in these arbitration agreements to ensure they are fair and balanced by mandating a neutral arbitrator, establishing no limitation on remedies, providing adequate opportunity to conduct discovery and requiring judicial review of rewards to confirm they are fair.
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Since arbitration has proved to be a good solution for both employees and employers, one might wonder why AB 465 is being pushed. Look no further than trial lawyers and unions.
Lawyers will benefit from protracted litigation. Labor unions see this ban as a reason to promote collective bargaining agreements. Ironically, unions employ arbitration in their own collective bargaining agreements.
Continuing to protect arbitration agreements will alleviate the burden on our court system. The legal climate of a state is a significant consideration for a company deciding where to locate or expand its operations. The opportunity to obtain a fair and efficient resolution of legal disputes, access to courts, as well as threats of frivolous litigation all factor into a company’s business planning.
Mandatory arbitration agreements are an accepted and legally approved solution in all aspects of life, including consumer goods and health care. They should continue to be used as an effective way to resolve employment issues as well. With the benefit of court protections for employees, mandatory arbitration agreements provide an expedited and fair process that protects our already overburdened judicial system from additional pressure.
AB 465 is an unnecessary and costly overreach.
Allan Zaremberg is president of the California Chamber of Commerce.