New state law bans mandatory arbitration for new employees
Nearly a year after thousands of Google employees walked out and pushed the company to change its mandatory arbitration policy, activists won a statewide victory Thursday. California companies can no longer require employees to sign an agreement forcing harassment, discrimination and wage claims into arbitration as a condition of employment instead of being able to sue.
The law, signed Thursday by Gov. Gavin Newsom, applies to new employees required to sign arbitration agreements to get hired or current workers who risk being fired if they don’t agree. Bill author Assemblywoman Lorena Gonzalez, DSan Diego, said in a statement that arbitration can be highly effective, but “it doesn’t work when corporations say you won’t be hired unless you sign away your rights.”
Gonzalez estimated the new law will affect more than 67% of California workplaces. But
unless federal law changes, it doesn’t solve the situation for workers already locked into contracts, leaving their fate up to individual companies.
“That is terrifying to me,” said Tara Zoumer, a fired WeWork community manager who sued the startup for allegedly overworking and underpaying employees, after she refused to sign a mandatory arbitration agreement in 2015. Last year, she testified before the California Legislature.
“Right now you have 60 million Americans who have been forced into those agreements, and many didn’t understand what they were entering into.”
The new law’s supporters said ending mandatory arbitration behind closed doors brings injustice into the light. Opponents like the California Chamber of Commerce argued it would subject companies to criminal charges, increase costs and delay justice in overburdened courts. A similar bill was vetoed by thenGov. Jerry Brown in 2015 and 2018.
California’s new law gives employees an option if an issue comes up after they join a company, said Vicki Tardif, a Google employee who coorganized the walkout.
Tardif said she isn’t against arbitration but opposes “being forced into it before the dispute even happens.”
California’s legislation was careful not to conflict with the Federal Arbitration Act and U.S. Supreme Court case law that allows companies to enforce mandatory arbitration agreements. The new state law says it’s illegal to require mandatory arbitration as a condition for employment, but doesn’t invalidate existing agreements. It also protects employees from retaliation and allows them to go to the state Labor Commissioner’s Office.
The California Chamber of Commerce said in a letter to the Legislature that the law “will undoubtedly be challenged ... creating more litiga
tion, but not actually providing any benefit to employees as intended.”
Michael Clark, spokesman for the American Arbitration Association, which has administered close to 6 million cases since 1926, said negative conceptions about arbitration as biased or coercive are false.
“We stress our neutrality in the process,” Clark said. “We see arbitration as costeffective, and we find a quicker resolution than litigation. The court system could be delayed in getting cases heard.”
A movement to end forced arbitration, propelled by the #MeToo movement against workplace cultures that condone harassment, has swept Silicon Valley. A handful of tech companies ended forced arbitration this past year, but most (with Google the exception) cover only sexual harassment and assault and still leave other issues to arbitration. Google has applied the arbitration policy only to incidents since March.
Employment lawyers say policy changes haven’t prompted a wave of lawsuits — yet.
Katherine Stone, law professor at University of California at Los Angeles, said ending mandatory arbitration was a way for tech companies to “get goodwill” with employees and a “good gesture and a good start” that they weren’t going to put up with sexual harassment.
Not all have budged. Employees at game developer Riot Games in San Francisco and Los Angeles walked out to protest mandatory arbitration in May. A company spokesman said in an email it would review its policy once ongoing litigation was resolved, but couldn’t say when.
Employment lawyers said new policies haven’t prompted a flood of lawsuits.
Attorneys won’t always take cases on contingency — payment promised if the outcome is successful — for fired workers who can’t afford representation. Or they might recommend arbitration as more likely to yield a financial settlement than going to court.
And in sensitive cases, employees might not want to go public.
“It can be a deeply personal thing,” Tardif said. “For some people, they might like the secrecy . ... Behind closed doors, them and the company, they work it out and move on with their life.”
Zoumer said people don’t want to “rock the boat” or be labeled a troublemaker or an entitled Millennial. She said she felt the effects on her career after being fired from WeWork when she went on a couple of job interviews.
“They were so excited to talk to me, and then they’d hear about me being fired, and they’d say, ‘That’s interesting.’ By ‘interesting’ they meant that you’re a risk,” Zoumer said. A preschool teacher before joining WeWork, she’s now a personal chef and nanny.
California’s law changes the status quo for some, but not all. The rest is up to federal law. The FAIR Act banning mandatory arbitration passed the U.S. House of Representatives in September, but there’s little likelihood it will pass the Senate.
“This is why it’s so critical for California to lead the way — in absence of leadership from Congress ... as a model on how to best protect their state’s workers against agreements forcing the waiver of their most fundamental rights,” Samantha Gallegos, a spokeswoman for bill author Gonzalez, said in an email.
Until then, it’s up to companies.
“This has become an issue of corporate responsibility,” said Steve Smith with the California Labor Federation. “I certainly think this is no longer an issue that they can sweep under the rug.”