Arbitration Agreement Adjustments On The Horizon

California juries seem to regularly award gigantic verdicts to employees. On December 16, 2021, a jury awarded a former employee $155.4 million, including $150 million in punitive damages, in Rudnicki v. Farmers Insurance Exchange. This verdict comes on the heels of the $137 million verdict to a former contract employee in Diaz v. Tesla, Inc. in October 2021.

While these enormous awards are likely to be reduced on appeal, they are another reminder that arbitration agreements can be valuable tools for private employers. They can reduce the cost of litigation, help to resolve disputes more quickly, and keep employment disputes out of the hands of unpredictable juries. Class action waivers in arbitration agreements also help to reduce baseless wage and hour claims. Arbitration agreements help to even the playing field for employers.

As previously reported, AB51 (Labor Code section 432.6), enacted in October 2019, prohibits employers from requiring job applicants or current employees to enter into arbitration agreements as a condition of their employment. More than two years later, the fate of the law is still tied up in the courts. While the law has been stayed since December 2019, in September 2021, a Ninth Circuit Court of Appeals panel ruled, among other things, that the Federal Arbitration Act (“FAA”) did not preempt the AB 51’s prohibition on using mandatory arbitration agreements as a condition of employment. This ruling has been stayed while the Ninth Circuit decides whether to have a rehearing before the full panel of the Ninth Circuit.

In addition, there may be beneficial changes on the horizon regarding whether arbitration agreements can require arbitration of claims under the California Private Attorneys General Act (“PAGA”). Currently, arbitration agreements can include class-action waivers, but cannot prevent employees from bringing PAGA representative actions in court. On December 15, 2021, the United States Supreme Court agreed to consider hear Viking River Cruises, Inc. v. Moriana (No. 20-1573), and determine whether under the FAA, arbitration agreements may prevent employees from raising representative claims, including under PAGA.

Takeaway for Employers:  Employers should consider having arbitration agreements. If arbitration agreements are already being used, they should be regularly reviewed to ensure compliance with the latest legal developments.

Please contact a Meyers Nave attorney for help to navigate these issues.

Join Meyers Nave for our Employment Law Update on January 11 and 13, 2022 to discuss this and other key employment law updates.