August 30, 2018

The California Senate just passed AB 3080, which bans mandatory pre-dispute arbitration between employers and employees. The bill is headed to the governor’s desk, but even if it is signed, its doesn’t necessarily signal a wave of mandatory arbitration reform across other states.

The #MeToo movement sparked AB 3080 and several other assembly bills, but AB 3080 deals with more than just sexual harassment.

Besides prohibiting contractual rules between employers and employees and independent contractors that prevent an employee from disclosing sexual harassment complaints, the bill also prohibits employers from forcing employees to enter into mandatory pre-dispute arbitration agreements. These agreements prevent employees from suing a company and compels them to handle disputes via private arbitration.

But because of the Federal Arbitration Act, only the ban on confidentiality agreements may stand in federal court if the law is passed and appealed, which is both good and bad news for California employees and independent contractors.

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While California pushes to ban mandatory arbitration clauses and confidentiality agreements, the Securities and Exchange Commission (SEC) is considering forcing investors to settle disputes with public companies via private arbitration and banning investors from filing class action lawsuits, according to a Bloomberg report.

According to the Bloomberg report, the SEC Chairman Jay Clayton’s rationale is to encourage more companies to go public by protecting them from shareholder class action lawsuits.

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The SEC hasn’t yet announced or confirmed this policy shift, and Carol Gilden, a partner in Cohen Milstein’s Securities Litigation & Investor Protection Practice Group, wrote in Law360 that the agency is unlikely to make any big policy shifts despite recent personnel shifts.

The full article can be accessed here.