Transportation Brief: California Takes Aim at Mandatory Arbitration

by Braden K. Core, Prasad Sharma, Ryan W. Wright

October 31, 2019

The Governor of California recently signed into law AB 51. This new law makes it an “unlawful employment practice”—and a misdemeanor criminal violation—for an employer to require employees to arbitrate claims arising under the California Labor Code (encompassing wage-and-hour claims), as well as certain discrimination claims. 

AB 51 applies to “contracts of employment” entered into, modified, or extended after January 1, 2020.  

Notably, the law states that a mandatory arbitration agreement is not saved by an “opt out” provision, a right built into many arbitration agreements for the express purpose of strengthening enforceability. 

While a preemption challenge to the law under the Federal Arbitration Act (FAA) is likely, even if it is successful, it may not help transportation businesses, because many “contracts of employment” with transportation workers are exempt from the FAA. This means that a favorable preemption ruling may not offer the industry relief. 
 
AB 51 is a negative development for employers. However, it does not mean that every transportation provider’s arbitration agreement will be rendered unenforceable. Now is the time to review your approach to arbitration in California in light of AB 51.

Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

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