BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
SB 1407 (Jackson)
As Amended April 28, 2014
Hearing Date: May 6, 2014
Fiscal: No
Urgency: No
TMW
SUBJECT
Employment Discrimination
DESCRIPTION
This bill would invalidate the waiver or release of claims made
under the Fair Employment and Housing Act (FEHA) by an
individual against an employer, unless the waiver or release of
claims is knowing and voluntary, as defined, and clearly stated
as part of a negotiated settlement agreement of the claims.
BACKGROUND
Existing law, the Fair Employment and Housing Act (FEHA),
prohibits discrimination in housing and employment because of
race, religious creed, color, national origin, ancestry,
physical disability, mental disability, medical condition,
genetic information, marital status, sex, gender, gender
identity, gender expression, age, sexual orientation, or
military and veteran status (protected characteristics).
A recent trend has emerged in which some employers are requiring
workers to sign employment documents, before, during, or upon
termination of employment, that contain inconspicuous terms
waiving or releasing liability of the employer for any and all
employment claims, including discrimination, harassment, and
retaliation claims protected under the FEHA. In exchange for
signing these documents, the employer offers bonuses, raises, or
continued employment to those workers. Current law invalidates
waivers of FEHA rights as a matter of public policy, but there
is no limitation on releasing FEHA claims.
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This bill contains similar limitations on waivers of FEHA claims
as in AB 1715 (Asm. Comm. on Jud., 2003), which would have
provided that any waiver of rights or procedures under the FEHA
must be knowing, voluntary, and not made as a condition of
employment or continued employment. AB 1715 also would have
invalidated arbitration agreements between employers and
employees that relate to employment practices covered by the
FEHA that are required as a condition of employment or continued
employment. AB 1715 was vetoed.
This bill would invalidate the waiver or release of FEHA claims,
unless the waiver or release of claims is knowing and voluntary
and clearly stated as part of a negotiated settlement agreement
of the claims.
CHANGES TO EXISTING LAW
Existing law , the Fair Employment and Housing Act (FEHA),
prohibits, as a matter of public policy, discrimination in
housing and employment on the basis of race, religious creed,
color, national origin, ancestry, physical disability, mental
disability, medical condition, genetic information, marital
status, sex, gender, gender identity, gender expression, age,
sexual orientation, or military and veteran status. (Gov. Code
Sec. 12920 et seq.)
Existing case law provides that the rights and procedures
established by the FEHA are established for a public purpose and
cannot be contravened by private agreement, but provides that
agreements that are knowingly and voluntarily negotiated and
entered into between an employer and employee may be upheld.
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83.)
Existing law prohibits an employer from requiring the execution
of a release of a claim or right on account of wages due, or to
become due, or made as an advance on wages to be earned, unless
payment of those wages has been made. A release made in
violation of this provision shall be null and void and a
violation of this provision by the employer is a misdemeanor.
(Lab. Code Sec. 206.5.)
Existing law generally regulates the formation of contracts and
provides that anyone may waive the advantage of a law intended
solely for his or her benefit, but provides that a law
established for a public reason cannot be waived by private
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agreement. (Civ. Code Sec. 3513.) Existing law also authorizes
the court to refuse to enforce a contract, or provision thereof,
if the court finds the contract to have been unconscionable when
made. (Civ. Code Sec. 1670.5.)
Existing law provides that a general release does not extend to
claims which the creditor does not know or suspect to exist in
his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her
settlement with the debtor. (Civ. Code Sec. 1542.)
This bill would provide that any waiver or release of claims
under FEHA is contrary to public policy and shall be
unenforceable, unless the waiver or release of claims is knowing
and voluntary and clearly stated as part of a negotiated
settlement agreement of the claims.
This bill would provide that a waiver or release of claims shall
not be considered knowing and voluntary unless the following
conditions are met:
the waiver or release is part of a negotiated agreement
between the individual and the employer that is written in
plain language and in a manner calculated to be understood by
that individual or by the average individual eligible to enter
into a negotiated agreement;
the waiver or release shall be in conspicuous writing,
specifically refer to the individual's claims under FEHA, and
refer by name to FEHA in connection with the waiver or
release;
the individual waives or releases claims under FEHA only in
exchange for consideration in addition to anything of value to
which the individual already is entitled;
the individual is advised in writing to consult with an
attorney prior to executing the final negotiated agreement;
the agreement shall not have the effect of misleading,
misinforming, or failing to inform participants and affected
individuals. Any advantages or disadvantages described shall
be presented without exaggerating the benefits or minimizing
the limitations;
the individual shall be given at least 21 days after receipt
to consider the final negotiated agreement;
the agreement shall provide that, for at least seven days
following the execution of the agreement, the individual may
revoke the agreement, and the agreement shall not become
effective or enforceable until that seven-day period or a
longer negotiated period has expired; and
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the waiver or release of claims is prohibited when the
consideration for the waiver or release is employment,
continued employment, or the payment of wages, including, but
not limited to, a raise or a bonus, unless the individual has
previously initiated a written claim to an administrative
agency or a court, or presented a written grievance or
complaint to the employer. In those instances, the waiver or
release of claims shall reference the written claim,
grievance, or complaint.
This bill would prohibit a waiver of any right or claim that
arises following the execution of the waiver.
This bill would define "release of claims" to include, but is
not limited to, requiring an individual to execute a statement
that he or she does not possess any claims or injuries against
the employer.
This bill would provide that a waiver agreement does not affect
the Department of Fair Labor and Housing's authority and
responsibilities to enforce FEHA, and a waiver shall not be used
to justify interfering with the protected right of an individual
to file a charge or participate in an investigation or
proceeding conducted by the department.
COMMENT
1. Stated need for the bill
The author writes:
A disturbing practice has emerged in certain workplaces where
employers are engaging in ongoing sexual harassing conduct,
but are then exempting themselves from the law by requiring
workers to sign away their rights as a condition of employment
or receiving wages.
These employers routinely require workers to sign "agreements"
for bonuses, raises, or employment that include inconspicuous
terms that release the employer for any and all claims,
including sexual harassment claims; prohibit workers from
discussing the conditions of the workplace; and that force
workers into private arbitration so that any claims brought
against the employers remain secret and outside a court of
law.
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With the ability to engage in this kind of routine employment
practice, employers can sexually exploit their workers, who
are often very young women, without fear of liability or
public scrutiny.
. . .
Employees have argued that these releases should not be upheld
because the terms were inconspicuous and executed along with
and alongside other employment materials/agreements (e.g.[,]
receiving a raise or bonus). As such, the releases were
unconscionable and were not knowingly or voluntarily entered
into. Some arbitrators have agreed with this argument and, in
fact, one arbitrator declared that this kind of practice
"shocked the conscience." However, other arbitrators have
upheld the releases and thereby prohibited any sexual
harassment claims from moving forward.
This bill would generally prohibit employers from requiring
workers to sign inconspicuous releases of claims in exchange
for employment and/or wages. More specifically, this bill
would state that any waiver or release of [Fair Employment and
Housing Act (FEHA)] claims is unenforceable, unless knowing
and voluntary and executed as part of a negotiated settlement
agreement. The bill would follow federal law, under the Older
Workers Benefit Protections Act (29 U.S.C. [Sec.] 621), to
require certain minimum standards for what is considered
"knowing and voluntary."
2. Prohibiting waivers and releases of FEHA employment claims
Existing law, the FEHA, prohibits, as a matter of public policy,
discrimination in employment on the basis of race, religious
creed, color, national origin, ancestry, physical disability,
mental disability, medical condition, genetic information,
marital status, sex, gender, gender identity, gender expression,
age, sexual orientation, or military and veteran status and
authorizes any person claiming to be aggrieved by an alleged
unlawful practice to file with the Department of Fair Employment
and Housing a complaint against the employer. (Gov. Code Sec.
12920 et seq.) This bill would prohibit a waiver or release of
FEHA claims unless the waiver or release by the claimant was
knowing and voluntary.
The author asserts that under current law, employers may require
employees to execute these kinds of releases after the
employer's unlawful conduct because, although existing law
limits releases of claims for wages due, it does not prohibit
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releases of FEHA claims. The author argues that because there
is no statutory limitation on FEHA claim releases, employers can
sexually exploit their workers, who are often very young women,
without fear of liability or public scrutiny and coerce these
workers to sign documents containing waivers and releases of
claims in exchange for wages, bonuses, and continued employment.
These workers are not made aware that these documents contain
waivers and releases of claims, and existing law makes it
difficult to demonstrate that the documents were executed
without knowledge of their FEHA rights and, in certain
instances, were not voluntary.
One example of this problem with FEHA claim releases is provided
in Skrbina v. Fleming Companies, Inc. (1996) 45 Cal.App.4th
1353, in which an employee was required, as part of his
severance package, to sign a release of all state and federal
employment laws and regulations claims. The court noted that in
general, "a written release extinguishes any obligation covered
by the release's terms, provided it has not been obtained by
fraud, deception, misrepresentation, duress, or undue
influence." (Id. at p. 1366.) The court discussed the
plaintiff's claims, who asserted that he "never intended to
abandon his discrimination and harassment claims and that
neither the company nor the union told him that signing the
release might affect those claims; he was told only that he must
sign in order to collect his severance benefits. Absent fraud,
deception, misrepresentation, duress, or undue influence,
however, these assertions do not raise a triable issue as to the
knowing and voluntary character of his act." (Id. at p. 1367.)
The court then held that the plaintiff's argument that the FEHA
claims waiver was not knowing and voluntary under the
requirements of Older Workers' Benefits Protection Act (OWBPA)
under the federal Age Discrimination in Employment Act (ADEA)
did not apply to the state FEHA claims. (Id. at pp. 1367-1368.)
Other examples of FEHA claims release issues have surfaced where
employers, after allegedly sexually harassing employees,
required the employees to sign documents containing
inconspicuous FEHA claims waivers and releases in exchange for
wages, bonuses, raises, and continued employment. (See Lo v.
American Apparel, Inc. (Super. Ct. Los Angeles County, 2011, No.
BC 457920; Nelson v. American Apparel, Inc. (Oct. 28, 2008,
B205937) [nonpub. opn.].)
While state law does not specifically limit releases of FEHA
claims, federal law, the OWBPA, prohibits ADEA claim waivers
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unless the waiver is knowing and voluntary on the part of the
employee. The OWBPA recites a list of conditions that must be
met when determining if the waiver is knowing and voluntary.
Notably, this bill contains those factors as follows:
the waiver or release is part of a negotiated agreement
between the individual and the employer that is written in
plain language and in a manner calculated to be understood by
that individual or by the average individual eligible to enter
into a negotiated agreement;
the waiver or release shall be in conspicuous writing,
specifically refer to the individual's claims under FEHA, and
refer by name to FEHA in connection with the waiver or
release;
the individual waives or releases claims under FEHA only in
exchange for consideration in addition to anything of value to
which the individual already is entitled;
the individual is advised in writing to consult with an
attorney prior to executing the final negotiated agreement;
the agreement shall not have the effect of misleading,
misinforming, or failing to inform participants and affected
individuals. Any advantages or disadvantages described shall
be presented without exaggerating the benefits or minimizing
the limitations;
the individual shall be given at least 21 days after receipt
to consider the final negotiated agreement;
the agreement shall provide that, for at least seven days
following the execution of the agreement, the individual may
revoke the agreement, and the agreement shall not become
effective or enforceable until that seven-day period or a
longer negotiated period has expired; and
the waiver or release of claims is prohibited when the
consideration for the waiver or release is employment,
continued employment, or the payment of wages, including, but
not limited to, a raise or a bonus, unless the individual has
previously initiated a written claim to an administrative
agency or a court, or presented a written grievance or
complaint to the employer. In those instances, the waiver or
release of claims shall reference the written claim,
grievance, or complaint.
These conditions were enacted in 1990 in order to protect older
workers from age discrimination and have been interpreted and
defined by case law. Furthermore, the United States Equal
Employment Opportunity Commission has issued a policy guide for
understanding waivers of discrimination claims in employee
severance agreements. Accordingly, employers are familiar with
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these provisions and are already required to comply with them.
Further, the California Employment Lawyers Association, sponsor,
notes that this bill "borrows from California's
unconscionability doctrine and the [OWBPA] to establish clear
minimum standards under state law that will protect workers from
unfair releases of claims. California's unconscionability
doctrine protects workers from overly oppressive and one-sided
agreements. Under a procedural unconscionability analysis,
oppression is present when unequal bargaining power prevents
'real negotiation' and creates 'an absence of meaningful
choice.' Carboni v. Arropside [1991] 2 Cal.App.4th 76, 85.
Substantive unconscionability is present if risks are allocated
'in an objectively unreasonable or unexpected manner' which are
'not justified by the circumstances under which the contract was
made.' (Id. at 83.)"
By utilizing the unconscionability doctrine and OWBPA language,
this bill would provide employee protection when executing
waivers and releases regarding FEHA claims. Notably, the
provisions in this bill have narrow application and would not
apply to any other employment, termination, contract, or tort
claim. Nor does it add any new rights or new remedies, or
prohibit voluntary agreements for FEHA claims. It would only
apply to claims under FEHA.
3. Opposition concerns
California Employment Law Council, in opposition, asserts that
this bill "is overly broad and could call into question the
validity of releases in the severance context, which take place
routinely and are important in concluding the employment
relationship." In response, the author argues that employers
are already required to comply with the OWBPA, which this bill
models. The OWBPA was enacted to protect older workers during
employment severance in order to protect the workers' benefits
and rights under the ADEA. Since employers have been required
to comply with the OWBPA since 1990, they should not have any
difficulty complying with the requirements in this bill.
Support : California Applicants' Attorneys Association;
California Immigrant Policy Center; California Nurses
Association; California Rural Legal Assistance Foundation, Inc.;
Consumer Attorneys of California; Equal Rights Advocates; Legal
Aid Society - Employment Law Center; Mexican American Legal
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Defense and Educational Fund
Opposition : California Employment Law Council
HISTORY
Source : California Employment Lawyers Association
Related Pending Legislation : None Known
Prior Legislation : AB 1715 (Asm. Comm. on Jud., 2003) See
Background.
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