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The current legal status of mandatory arbitration

| Nov 8, 2020 | Employment Law - Employers |

Many employers include mandatory arbitration clauses in their employment agreements. These clauses basically say that an employee will first go through arbitration for any employment disputes before he or she files a lawsuit with the court. 

In California, there has been a recent attempt to strike down these mandatory arbitration clauses, but Reuters explains that a U.S. District court put a halt to a law that would go into effect in 2020 for a ban on the clauses. 

New law

A new law passed by the California legislature aimed to stop employers from using mandatory arbitration clauses in employment agreements. It would go into effect on January 1, 2020. It would have put into place potential criminal penalties for breaking the law and using such a clause. 

Injunction

According to the California Dental Association, a judge’s ruling put the law on hold in coordination with previous restraining orders that went into effect at the end of 2019. Business organizations and the U.S. Chamber of Commerce claim this law violates the Federal Arbitration Act and therefore is not legal. 

As long as the injunction remains in place, the law is not enforceable. The court will likely hear more in this situation to allow it to reach a final decision on whether this law is valid or if it does violate federal law. In the meantime, employers continue to have the right to include mandatory arbitration clauses in any employment agreement. 

As always employees have the right to refuse to sign such an agreement, but the employer would then have the right to refuse to hire that person.