California's Arbitration Ban

This month, a California bill prohibiting workplace arbitration was signed into law. Effective January 1, 2020, the new law criminalizes the use of mandatory arbitration agreements by making such a practice a misdemeanor offense. It prevents allegations of discrimination, harassment, and retaliation arising under that state’s Fair Employment and Housing Act from being subject to mandatory arbitration. This action sets up a direct conflict with the Federal Arbitration Act (FAA) and clear federal policy favoring arbitration. Challenges to constitutionality of this and other states' laws of this nature are coming. In recent terms, the U.S. Supreme Court reminded states of the predominance of federal policy regarding arbitration, striking down efforts to undermine the use of arbitration. States will likely argue that an arbitration agreement covering such claims is effectively a contract that is void as a matter of public policy. It will be argued such provisions fall within the FAA’s savings language, which preserves traditional state law defenses to arbitration agreements arising out of contract formation. At least one attorney commentator recognizes the problem with this argument-- that the underlying state policy established by the statute appears to directly conflict with the FAA’s underlying purposes, making the policy itself unconstitutional. As such, an unconstitutional policy should not void a contract whose terms are consistent with federal policy regarding dispute resolution. See more here-- https://tinyurl.com/y5yld9x4 and https://tinyurl.com/y37n4pxn