New Laws Limit the Scope and Privacy of Arbitration in California Starting January 1, 2015

By Jennifer A. Grady, Esq. and Gayane Khechoomian, Esq.

Photo ANCA Western Region

Photo ANCA Western Region

California Governor Jerry Brown signed two bills into law aiming to restrict the reach of arbitration agreements, starting January 2015. The bills have the effect of chilling arbitration by making it a less attractive option for employers and making it less private.

1. Private Arbitration Providers Must Publish Quarterly Matter Details Online re Consumer Arbitrations

After January 1, 2015, AB 802 will have the effect of reducing the privacy of arbitration by requiring major arbitration providers such as JAMS and AAA to publish at least quarterly on their websites detailed information concerning consumer matters they have abritrated.  Existing law requires a private arbitration company involved in consumer arbitration cases to collect and make certain information regarding those cases available to the public in a computer-searchable format, accessible at the Internet Web site of the private arbitration company, if it has an Internet Web site, and on paper upon request. However, the new bill, which modifies California Code of Civil Procedure section 1281.96 would require that a private arbitration company collect additional information related to a consumer arbitration case, and to provide the information in a single cumulative report.

The bill would require a private arbitration company to make the report available in a format that allows the public to search and sort the information using readily available software, and to make the report accessible on the private arbitration company’s Internet Web site, as specified.

The reporting requirements do not apply to consumer arbitrations administered by the private arbitration company before January 1, 2015.

The bill requires publishing of the following information: (1) the name of any non-consumer party involved in the arbitration (i.e. the name of the employer), (2) the nature of the dispute (e.g. employment), (3) the name of the non-consumer party employer and whether the employer was the initiating or responding party, (4) the annual wage (in a range) earned by the involved employee, (5) the amount of the claim, which party prevailed, and the amount of any award, including attorneys’ fees, (6) whether the employee was represented by an attorney and, if so, the name of the attorney and the law firm, (7) the name of the arbitrator and the amount of the arbitrator’s fees, and (8) the total number of times the employer previously has been a party in arbitration or mediation before the dispute resolution provider.

This bill applies when the nature of the dispute involves one of the following: goods; credit; other banking or finance; insurance; health care; construction; real estate; telecommunications, including software and Internet usage; debt collection; personal injury; employment; or other. If the dispute involves employment, the amount of the employee’s annual wage can be divided into the following ranges: less than one hundred thousand dollars ($100,000), one hundred thousand dollars ($100,000) to two hundred fifty thousand dollars ($250,000), inclusive, and over two hundred fifty thousand dollars ($250,000). If the employee chooses not to provide wage information, it may be noted.

2. Prohibition of mandatory pre-dispute arbitration agreements re certain civil rights violations

The second, more narrow law passed is AB 2617, which prohibits mandatory, pre-dispute arbitration agreements in contracts for the provision of goods or services, to the extent an individual is required to waive the right to bring a civil action for violation of civil rights relating to hate crimes or political activity. The new law prohibits a person or business entity from requiring an individual to waive the rights provided by these statutes, including the right to pursue a civil action for a violation of these statutes.

While the law does not specifically state that it applies to employment agreements, the law may affect certain types of employment discrimination and harassment claims.  The law is also likely be contested in the future because it may run afoul of the Federal Arbitration Act.

To evaluate the efficacy and legality of your company’s arbitration procedures, consult a licensed California employment attorney.EmployeeHandbook_Pop_6467

To schedule a complimentary 15-minute consultation with The Grady Firm’s employment attorneys, call (323) 450-9010, or fill out a Contact Request Form. The Grady Firm attorneys can update your business’ company policies/Employee Handbook, create new policies, prepare employment forms, draft employment agreements, and explain the detailed nuances of the new laws.  

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