Judge Blocks CA Arb Ban

Today, there's a hearing on a Temporary Restraining Order (TRO) against the State of California where a federal district judge is blocking implementation of the state’s new ban on arbitration of cases involving sexual harassment. The court will hear a request by the California Chamber of Commerce and other business groups for a preliminary injunction. This is a big test that will have national impact. The ban was signed into law in October 2019. It prohibits California employers from requiring employees to waive any right to or opt out of any legal forum or procedure established by the California Fair Employment or Labor Code. The new law applies to contracts for employment entered into, modified or extended on or after January 1, 2020-- the effective date of the new law. If an employer violates the act by forcing arbitration, they would commit a misdemeanor. The National Retail Federation filed suit in federal court seeking to prevent the law from going into effect by arguing the Federal Arbitration Act (FAA) and recent U.S. Supreme Court cases created a federal policy of using arbitration as a legitimate alternative to court litigation. Further, the FAA preempts state law to the contrary. A final ruling regarding primacy of the FAA over state law will serve as a bellwether on employer use of arbitration and may thwart other states from passing similar laws. See more here-- https://bit.ly/2R1oWrz and https://bit.ly/2RafHWa UPDATE: Following oral argument during which recent SCOTUS cases involving the FAA such as Epic Systems and Kindred Nursing were cited, the court requested supplemental briefing regarding the state's suggestion that the court lacks jurisdiction. The TRO will remain in effect until January 31, 2020.

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