California Governor Gavin Newsom recently signed into law 15 bills designed to provide greater employee protections in California.  Among those bills were Assembly Bill 9 (“AB 9”) and Assembly Bill 51 (“AB 51”), both of which are aimed at protecting employees’ rights to litigate harassment, discrimination, and retaliation claims.

As we previously blogged about here, AB 9 increases the time limit for individuals to file a discrimination, harassment, or retaliation claim with the California Department of Fair Employment and Housing, effectively extending the practical statute of limitations for filing a lawsuit under FEHA to four years.

AB 51 may have even more significant ramifications.  AB 51 prohibits employers from requiring employees or potential employees to enter into arbitration agreements as a condition of employment.  More specifically, AB 51 provides that employees and applicants cannot be required to waive a right, forum, or procedure for a FEHA or Labor Code violation in exchange for employment or an employment-related benefit.  Additionally, employers may not threaten, retaliate, discriminate against, or terminate an applicant or an employee for refusal to consent to such waiver.

In 2018, Governor Jerry Brown previously vetoed a similar bill, Assembly Bill 3080 (“AB 3080”), stating that the bill “plainly violates federal law.”  While proponents of both AB 51 and AB 3080 promote the initiatives as bills consistent with and necessary in light of the #MeToo movement, opponents argue that the bills are preempted by the Federal Arbitration Act (“FAA”).  Specifically, several courts, including the United States Supreme Court, have confirmed on numerous occasions that the FAA preempts state laws when such laws contravene the FAA’s presumption in favor of enforcing arbitration agreements.

The authors of AB 51 likely anticipated this preemption argument by inserting a “savings clause”:  “Nothing in [AB 51] is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.”  Based on a plain reading, AB 51 would therefore not apply to any arbitration agreement enforceable and governed under the FAA, including arbitration agreements with class action waivers.  However, until AB 51 is challenged, there will exist some uncertainty as to how courts will interpret this provision.  As a result, employers should anticipate challenges to AB 51 almost immediately.

Irrespective of whether AB 51 is challenged and whether such challenges are successful, AB 51 will not invalidate existing arbitration agreements and will apply only to agreements entered into, modified, or extended as of January 1, 2020.  Employees who prevail under AB 51 may be awarded injunctive relief and, notably, attorneys’ fees, among other available remedies.

Employers should evaluate their arbitration agreements and internal policies in advance of January 1st, and continue to monitor developments in California’s most recent attempt to establish its own standards wholly different and apart from the rest of the United States.  The employment lawyers at Hogan Lovells are available to help navigate this change and others as the legal landscape continues to evolve.