BILL ANALYSIS Ó
AB 465
Page 1
GOVERNOR'S VETO
AB
465 (Roger Hernández)
As Enrolled August 31, 2015
2/3 vote
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|ASSEMBLY: | | (May 14, |SENATE: | | (August 24, |
| |45-30 |2015) | |22-15 |2015) |
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|ASSEMBLY: | | (August 27, | | | |
| |46-31 |2015) | | | |
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Original Committee Reference: L. & E.
SUMMARY: Imposes specified restrictions on contractual waivers
of rights and procedures under the Labor Code.
AB 465
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The Senate amendments:
1)Eliminate a $10,000 civil penalty for violations of this bill.
2)Provide for injunctive relief.
3)Provide that this bill does not apply to persons registered
with a self-regulatory organization as defined by the federal
Securities Exchange Act of 1934 with respect to any
requirement that that individual arbitrate disputes that arise
with their employer as specified under the rules of the
self-regulatory organization.
4)Provide that this bill does not apply to an employee who is
individually represented by legal counsel in negotiating the
terms of an agreement to waive any legal right, penalty,
remedy, forum, or procedure for a violation of the Labor Code.
5)Add a severability clause.
6)Make other clarifying changes.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: According to the author and the sponsor, the goal of
this bill is to protect workers from being coerced into signing
contracts to waive the right to take labor violations to the
Labor Commissioner or to court and submit all claims to the
employer's arbitrator. Therefore, this bill is designed to
ensure that waivers of important employment rights and
AB 465
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procedures arising under California law are made voluntarily and
with the consent of the employee.
This bill largely tracks the provisions of AB 2617 (Weber),
Chapter 910, Statutes of 2014, legislation introduced last year
and signed into law by Governor Brown, which imposed specified
restrictions on future contractual waivers of rights under the
Ralph Civil Rights Act and Bane Civil Rights Act.
This bill is sponsored by the California Labor Federation,
American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO). They state that there are very few
remedies available to most low-wage workers when their rights
are violated. They can file a claim to the Labor Commissioner
or they can find access to counsel through a collective legal
action. Yet employers have found a way to circumvent these
avenues. Increasingly, companies are requiring workers to sign
waivers of the right to take claims to the Labor Commissioner or
to court and instead requiring them to take any claims to the
employer's private arbitrator. They argue that this bill would
provide some basic protections to these workers. It would
require that these agreements be voluntary and not required as a
condition of employment. It would require that a waiver of
rights be voluntary. Lastly, it would prohibit employers from
threatening, retaliating, or discriminating against workers for
refusing to sign such a waiver. These are core tenets of
contract law and are consistent with the Supreme Court's
direction that such contracts should not be entered into under
coercion.
Opponents argue that this bill directly conflicts with prior and
recent rulings from both the California and United States
Supreme Courts, which have consistently stated any state law
that interferes with the Federal Arbitration Act is preempted.
Opponents also argue that adequate protections already exist for
mandatory, pre-dispute employee arbitration agreements.
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Opponents contend that arbitration provides an effective and
efficient means to resolve employment-related claims and that
this bill will send disputes into the overburdened and
underfunded judicial system.
GOVERNOR'S VETO MESSAGE:
Assembly Bill 465 would outlaw the use of mandatory arbitration
agreements as a condition of employment, making California the
only state in the country to have this particular prohibition.
I have reviewed in depth the arguments from both sides about the
fairness and utility of mandatory arbitration agreements. While
most evidence shows that arbitration is quicker and more
cost-effective than litigation, there is significant debate
about whether arbitration is less fair to employees. The
evidence on actual outcomes in arbitration versus litigation is
conflicting and unclear, with some studies showing employees
receive more in arbitration while other studies show the
opposite.
While I am concerned about ensuring fairness in employment
disputes, I am not prepared to take the far-reaching step
proposed by this bill for a number of reasons.
California courts have addressed the issue of unfairness by
insisting that employment arbitration agreements must include
numerous protections to be enforceable, including neutrality of
the arbitrator, adequate discovery, no limitation on damages or
remedies, a written decision that permits some judicial review,
and limitations on the costs of arbitration. See, e.g.,
Armendariz v. Foundation Health Psychcare Services, Inc. 24 Cal.
4th 83 (2000). If abuses remain, they should be specified and
solved by targeted legislation, not a blanket prohibition.
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In addition, a blanket ban on mandatory arbitration agreements
is a far-reaching approach that has been consistently struck
down in other states as violating the Federal Arbitration Act
("FAA"). Recent decisions by both the California and United
States Supreme Courts have found that state policies which
unduly impede arbitration are invalid. Indeed, the U.S. Supreme
Court is currently considering two more cases arising out of
California courts involving preemption of state arbitration
policies under the FAA. Before enacting a law as broad as this,
and one that will surely result in years of costly litigation
and legal uncertainty, I would prefer to see the outcome of
those cases.
For these reasons, I am returning AB 465 without my signature.
Analysis Prepared by:
Ben Ebbink / L. & E. / (916) 319-2091 FN:
0002490