Photo of Steven Crass contributed.
Written by Steven Crass
I have never heard of a community member express joy about the prospect of sitting for a lengthy jury trial, nor a judge indicate that he or she has an over-abundance of resources to address the avalanche of pending civil controversies. Nonetheless, there have been repeated attempts in Sacramento to ban employment arbitration agreements, which would require more juries and remove an escape valve for our over-taxed court system. This time, it is by way of AB 51, sponsored by Southern California Assembly Member Lorena Gonzalez.
Arbitration is a mechanism in which parties have their claims heard before a mutually agreed upon person (normally a retired judge) in an office setting instead of by a jury trial in civil court. In order for an employment arbitration agreement to be enforceable, among other things, it must not favor the employer and it must enable all the normal remedies (e.g., money and attorney’s fees).
Many employers favor arbitration because it is a more predictable, cost effective and expedient process. With our impacted courts, it often takes up to, or in excess, of two years to get a case to trial. And, once finished through the trial phase, usually lengthy appeals follow. The argument against arbitration is often that the proceedings are not public. However, this argument fails to take into account that a plaintiff who feels wronged is free to report to government entities such as the Department of Fair Employment and Housing (DFEH), Equal Employment Opportunity Commission (EEOC) or labor commissioner. If the employee believes the claim is similar to those of other employees, there is nothing preventing the employee from sharing the information with his or her co-workers. Indeed, such activity is protected. Moreover, if concern for arbitrations being private were the real issue, AB 51 could simply ensure a more public process to the arbitration process — not eliminate arbitrations entirely.
The real reason for AB 51 is the rise of wage and hour class actions. These types of cases are particularly devastating to businesses, but very profitable for the plaintiff’s bar. Arbitration agreements may require that an employee only arbitrate claims on an individual basis, instead of a class. Wage and hour class actions are civil cases that permit an employee to sue on behalf of her/himself and all other employees based on an alleged technical violation of one of the over 9,000 labor code sections, 17 wage orders and all the associated regulations. Not only is compliance difficult, it can be subjective.
Furthermore, the stacking of multiple penalties based on the same alleged conduct means these cases may generate millions of dollars in damages crippling companies that are doing their absolute best to comply with California’s complex and sometimes idiosyncratic rules. A plaintiff may find a violation after filing the lawsuit even if it was not the original reason stated in the complaint. The business owner (or even supervisor) may be personally liable for damages, so a company cannot go out of business or file bankruptcy instead of facing liability. As a result of the risk and expense of defending these types of cases, employers are often forced into high dollar settlements. Arbitration agreements are a reasonable protection for an employer against these types of lawsuits and still provide the same remedies for employees.
In short, arbitration agreements are good for the community, the courts, and employers. Likewise, there is no downside for employees who can still receive the same amount of damages through a fair and much more expedient process. Arbitration should be encouraged, not made criminal. Incredibly, AB 51 makes employment arbitration agreements a misdemeanor! Maybe we shouldn’t support Assembly Member Gonzalez’s MACA bill!
Crass is an attorney/Of Counsel at Wanger Jones Helsley PC. His practice includes all types of litigation matters in federal or state court as well as hearings in front of governmental agencies, with a focus on representing public and private employers in employment-related litigation.