A California law that would have effectively put an end to forced arbitration was set to take effect on the first day of 2020. However, a judge in Sacramento enjoined authorities from enforcing it. Companies that were found to be in violation of the statute could have faced both civil and criminal penalties. The state’s attorney general acknowledged that arbitration agreements can be enforced, and he said that the law took pains not to infringe on an employer’s right to engage in arbitration.
The attorney general said that the goal was to regulate employer conduct as opposed to trying to invalidate arbitration agreements in general. Groups representing business interests in the state claim that the law should be struck down because it is in conflict with the Federal Arbitration Act. In 2017, the Supreme Court ruled that the FAA allowed for forced arbitration agreements.
A law firm representing parties challenging the law claim that there are many benefits to arbitration. It claimed that arbitration is less expensive, less time-consuming and can actually benefit employees. The firm also said that it found the idea that a company could face criminal charges for engaging in a lawful activity was not practical. However, it is unclear why the judge ruled against the state as she has not yet released an opinion in the matter.
Companies may benefit from allowing a legal representative to help them during the dispute resolution process. Legal counsel may also be helpful in creating employment agreements that protect a company’s rights without violating state or federal law. As a general rule, businesses are allowed to compel employees to pursue an arbitration proceeding if a dispute arises. However, if a case does go to court, an attorney may help a company defend itself.