VETOED	DATE: 10/11/2015

To the Members of the California State Assembly:

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.

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.


Edmund G. Brown Jr.