BILL ANALYSIS �
SB 1407
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Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 1407 (Jackson) - As Amended: May 27, 2014
As Proposed to be Amended
SENATE VOTE : 30-5
SUBJECT : EMPLOYMENT DISCRIMINATION: RELEASE OF CLAIMS
KEY ISSUE : SHOULD AGREEMENTS RELEASING EMPLOYERS AND OTHERS
FROM LIABILITY FOR UNLAWFUL DISCRIMINATION AND HARASSMENT BE
KNOWING AND VOLUNTARY IN ORDER TO PROTECT AGAINST THE
INADVERTENT OR COMPELLED LOSS OF LEGAL RIGHTS?
SYNOPSIS
This bill would codify standards for the release of legal claims
and rights under the Fair Employment and Housing Act (FEHA).
Supporters argue that statutory protections are needed because
unscrupulous employers have sought to enforce purported
agreements by which victims of harassment and discrimination
give up legal protections inadvertently and unwittingly in
documents that appear to have another purpose, sometimes with
little if any benefit to the employee. No opposition has been
filed with the Committee, although the author reports that she
continues her efforts to reach consensus with business groups
interested in the measure.
SUMMARY : Codifies basic principles requiring that the release
of employment discrimination claims be knowing and voluntary.
Specifically, this bill :
1)Provides that a release of a claim or right under the FEHA
shall be valid only if it is knowing and voluntary, supported
by consideration, and either of the following conditions is
met:
a) The release is clearly stated as part of a negotiated
settlement agreement that relates to and specifically
identifies a previously-documented dispute or disagreement
between an individual and an employer or other entity
subject to the FEHA.
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b) The release is contemporaneous with the payment of
severance benefits and is clearly stated as part of a
negotiated agreement at the end of the employment
relationship.
2)Provides that "release of claims" includes requiring an
individual to execute a statement that he or she does not
possess any claims or injuries against the employer or other
covered entity.
3)Specifies that any agreement intended to waive an individual's
future claims or rights under this part shall be unlawful.
4)Provides that an employer or other covered entity shall not
retaliate against an individual for refusing to execute a
release or waiver of a claim or right under this part, and
specifies that retaliation does not include a decision to
terminate employment if the decision to terminate employment
occurs before an offer of severance benefits accompanied by a
valid release.
EXISTING LAW :
1)Pursuant to 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.)
2)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.
(Labor Code Sec. 206.5.)
3)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 agreement.
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(Civ. Code Sec. 3513.)
4)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.)
5)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.)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : The author explains that the purpose of this bill is
to protect workers from sexual exploitation and other wrongful
conduct in the workplace by prohibiting employers from requiring
workers to sign inconspicuous releases of claims, often in
exchange for keeping their jobs or receiving wages. The author
states:
A disturbing practice has emerged in certain workplaces
where employers are engaging in ongoing sexual harassing
conduct, but are then purporting to exempt 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.
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.
This Bill Would Codify Certain Minimum Standards For The Release
Rights Under Employment Discrimination Law In Order To Protect
Against Involuntary and Unknowing Agreements. The FEHA
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prohibits discrimination in employment on the basis of race, sex
and other characteristics, and permits an individual who alleges
discrimination to vindicate his or her rights by an
administrative complaint to the Department of Fair Employment
and Housing and a lawsuit against the employer or other covered
entity.
Supporters of this measure complain that some employers have
engaged in unfair and deceptive practices by obtaining the
signature of an employee on a document purporting to exonerate
the employer from liability for discrimination by camouflaging a
release of liability in documents that appear to have other
purposes, often soon after the employer has engaged in sexual
harassment or other unlawful conduct and before the victim has
even asserted a complaint. These releases are sometimes
accompanied by some nominal consideration such as a stipend or
bonus, or simply the payment of wages already due. If upheld,
this practice would permit the employer to engage in illegal
discrimination or harassment - even an ongoing pattern or
practice of discrimination or harassment - by simply buying the
right to do so for little or no compensation and without
meaningful notice or choice by the victim. Although the
validity of these releases would seem to be questionable under
common law principles, they have reportedly been upheld by
private arbitrators who are free to disregard most laws but are
obligated to recognize statutory FEHA rights. (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th
83.)
The author argues that in the absence of statutory limitation on
releases of FEHA claims, employers can sexually exploit their
workers, include very young women, without fear of liability or
public scrutiny, and coerce these workers to sign documents
containing releases of claims. 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. 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.].)
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Author's Amendments. As discussions with employer advocates
continue, the author proposes the following amendments to
reflect the intent of the bill.
12964.5 (a) A release of a claim or right under this part shall
be valid only if it is knowing and voluntary, supported by
consideration, and either of the following conditions are met:
(1) The release is clearly stated as part of a negotiated
settlement agreement that relates to and specifically identifies
a previously-documented dispute or disagreement between an
individual and an employer or other entity subject to this part.
(2) The release is contemporaneous with the payment of severance
benefits and is clearly stated as part of a negotiated agreement
at the end of the employment relationship.
(b) As used in this section, "release of claims" includes
requiring an individual to execute a statement that he or she
does not possess any claims or injuries against the employer or
other covered entity.
(c) Any agreement intended to waive an individual's future
claims or rights under this part shall be unlawful.
(d) Any employer or other covered entity shall not retaliate
against an individual for refusing to execute a release or
waiver of a claim or right under this part. Retaliation does not
include a decision to terminate employment if the decision to
terminate employment occurs before an offer of severance
benefits accompanied by a release under (a)(2).
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association (sponsor)
California Applicants' Attorneys Association
California Immigrant Policy Center
California Nurses Association
California Rural Legal Assistance Foundation
Consumer Attorneys of California
Equal Rights Advocates
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Legal Aid Society - Employment Law Center
Mexican American Legal Defense and Educational Fund
Western Center on Law and Poverty
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334