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A California bill that would ban forced arbitration heads to Gov. Newsom

California capitol building
California’s state Capitol building.
(Robert Greene / Los Angeles Times)

When companies in California tell job candidates they have to give up their right to sue the company for most disputes, a bill headed to Gov. Gavin Newsom’s desk would let the candidates decline without fear of losing their job offer.

The bill is the latest effort by state governments to limit private companies from imposing forced arbitration agreements, whose surge in popularity has contributed to the difficulty of workers suing their bosses for sexual harassment in the era of #MeToo.

Federal law and some U.S. Supreme Court decisions do not let state governments ban these arbitration agreements. Supporters argue that the bill in California would not ban arbitration agreements, but make them optional: Employees could sign them, but they may not be punished for declining to. The bill would not affect existing arbitration agreements and would apply only to people hired after Jan. 1, 2020.

Still, Republicans and the state’s business groups said the bill is illegal and would probably be challenged in court.

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The state Senate voted Thursday to approve the bill.

The Economic Policy Institute says more than 67% of all employers in California require workers to sign these arbitration agreements. Companies like these agreements because arbitration costs less than going to court and moves faster. Labor groups argue that arbitration puts employees at a disadvantage because the employees don’t have an attorney and are subject to the ruling of an arbitrator who is often selected and paid for by the company.

A coalition of business groups, including the California Chamber of Commerce, says the bill would effectively ban arbitration agreements. California already allows workers to sue companies on behalf of the state, seeking civil penalties for labor law violations. State Sen. Shannon Grove (R-Bakersfield) said that law has led to thousands of lawsuits, and limiting arbitration for labor disputes is “just another way that frivolous litigation can be filed in this state.”

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State Sen. Hannah-Beth Jackson (D-Santa Barbara) said the purpose of the bill is to protect employees. She said legislators enact laws protecting workers against wage theft and sexual harassment, but that those laws are undermined by forced arbitration agreements prohibiting employees from taking their case to court.

“You should be hired on the basis of your qualifications and not rejected because you do not wish to sign away your rights,” she said.

It’s at least the third time California lawmakers have tried to do this. Former Gov. Jerry Brown vetoed similar bills in 2015 and again last year.

Gov. Newsom has been willing to sign things Brown did not. This year, Newsom signed a law requiring presidential candidates to publicly disclose their tax returns, something Brown had vetoed.


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