New California Law Prohibits Coercing Employees Into Arbitration Agreements

The New California Labor Code section 432.6 prohibits employers from requiring applicants for a job or employees to agree to waive their right to file a claim with a state or law enforcement agency or a lawsuit for violation FHEA or labor code violation as a condition of employment or continuing employment. This law also precludes employers from threatening, retaliating, or discriminating against any employee or applicant who refuses to agree to waive their right to filing a claim or a lawsuit for FEHA violation or labor code violations as a condition of continuing employment.

This new prohibition applies to any contracts for employment entered into, modified or extended on or after January 1, 2020, but does not apply to post dispute settlement agreements or negotiated settlement agreements. This means that the employer can continue to lawfully require an employee, as a condition of receiving severance, to sign a severance and release of all claims agreement which will contain a mandatory arbitration provision. Likewise, when parties settle their dispute, it will continue to be lawful to require as a condition of that settlement, to arbitrate any disputes arising out of or related to complying with the terms of that agreement. 

It's important to note that this law doesn't prohibit entering into mandatory arbitration agreements with regard to FEHA and labor code violation claims. This law simply precludes employees from requiring them as condition of employment, or retaliating against employee who choose not to agree to arbitration. 

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