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New Laws that Will Significantly Impact the Litigation of Employment Disputes

Posted in Disability Discrimination, Discrimination, Employee Privacy Rights, Employment Contracts and Agreements, Harassment, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

The October 13, 2019 deadline for Governor Newsom to take his final actions in the 2019 legislative season has come and gone and as expected, he signed into law a number of employment-related bills. Below is a summary of just a few of those bills that will have a significant impact on employment litigation in California.  To read the full article, please click here.

A.    Assembly Bill 51

AB 51 was introduced by Assemblymember Lorena Gonzales and will severely restrict the use of mandatory arbitration agreements in employment. The Bill adds section 12953 to the California Government Code (“FEHA”) and states that it is an unlawful employment practice for an employer to violate section 432.6 of the California Labor Code.

B.   Senate Bill 707

In Armendariz v. Foundation Health Psychcare Services, Inc. case (2000) 24 Cal. 4th 83, the California Supreme Court concluded, among other things, that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”  In a number of cases after Armendariz, courts have held that an employer’s failure to pay the arbitration costs [and thus delaying or preventing the arbitration of the dispute] constitutes a material breach of the arbitration agreement.

In line with this case law, SB 707, introduced by Senator Wieckowski, provides that a company’s failure to pay the fees of an arbitration service provider in accordance with its obligations contained within an arbitration agreement or through application of state or federal law or the rules of the arbitration provider hinders the efficient resolution of disputes and contravenes public policy.  According to SB 707, a company’s strategic non-payment of fees and costs severely prejudices the ability of employees [or consumers] to vindicate their rights. This practice is particularly problematic and unfair when the party failing or refusing to pay those fees and costs is the party that imposed the obligation to arbitrate disputes.

Therefore, among other things, SB 707 adds section 1281.97 to the California Code of Civil Procedure and provides that in an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.  As a result, the employee [or consumer] may do either of the following:

  1. Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction; or
  2. Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.

If the employee withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.  Further, if the employee proceeds with an action in a court, the court shall impose sanctions on the drafting party in accordance with Civil Code section 1281.99, which requires the drafting party to the reasonable expenses, including attorney’s fees and costs, incurred by the employee as a result of the material breach.  The court may also impose additional sanctions against a drafting party including, but not limited to, discovery sanctions and terminating sanctions.

C.   Assembly Bill 9

AB 9 was introduced by Assemblymember Eloise Gomez Reyes and will extend the period of time an employee may file a claim with the California Department of Fair Employment and Housing (“DFEH”).  Under current California law, if an employee wishes to file a civil action against an employer or other individual under the Fair Employment and Housing Act (“FEHA”) for employment claims like harassment, discrimination, or retaliation, the employee must first exhaust his or her administrative remedies by filing a verified complaint with the DFEH within one year from the date upon which the alleged unlawful conduct occurred, unless otherwise excused by some statutory exception. If the employee timely files the DFEH complaint, he or she is entitled to receive a right to sue letter from the DFEH and then has one year from the date of the right to sue letter to file a civil lawsuit.  Absent some statutory exception excusing the tardy filing, if an employee fails to timely file the DFEH complaint within the one year statute of limitations, the employee will be barred from bringing a civil action for a violation of FEHA.

AB 9 amends California Government Code section 12960(e) to extend the one year statute of limitations for filing a complaint with the DFEH to three years.  This extension of time (which is six-times the length of the federal standard and three-times the length of the current state standard) will surely have a significant impact on both the workplace itself and the litigation of employment disputes. For example, if an employee has three years to bring a DFEH claim, the employee may be less inclined to try and resolve a dispute soon after it happens, rather than litigating it.  Further, if a DFEH claim is filed three years after the alleged events occurred, and the employee then has another year to file the civil lawsuit after receiving the DFEH right to sue letter, the parties to the lawsuit will have to deal with problematic evidentiary issues like witness memories fading and the preservation of other documentary evidence.

TAKEAWAY:  Employers wishing to have enforceable employment arbitration agreements in place for their employees should work with their employment counsel to be sure the agreement complies with the FAA and other requirements under California law, and implement the agreements with their employees by December 31, 2019. Employers should also work with their employment counsel to determine if they need to reevaluate certain policies and procedures relating to document retention to ensure that employment records which may be relevant to claims under the DFEH are timely preserved based on the extended statute of limitations.

WEINTRAUB TOBIN – Employment Lawyers Supporting Employers

The employment attorneys at Weintraub Tobin have years of experience assisting employers in employment law compliance and in the defense of employment disputes.  Feel free to reach out to one of them today if we can be of assistance with your arbitration agreement, document retention policy, or any other employment law challenge.