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LAWSUIT PREVENTION FOR EMPLOYERS

California Court Grants Injunction Against AB 51

The Coronavirus pandemic has thrust an avalanche of new legal obligations on the employer community.  These are widely expected to yield a bumper crop of lawsuits in the next year, and beyond.  It is against this backdrop that employers recently received a rare piece of good news, the significance of which cannot be overstated. 

On February 7, 2020, the United States District Court for the Eastern District of California halted enforcement of AB 51. This new law, which took effect on January 1, 2020, purported to prohibit employers from requiring employees to submit workplace disputes to mandatory arbitration.  As a result of the court’s decision, the law is presently unenforceable.

Readers familiar with this publication are aware that the author has championed mandatory arbitration policies since at least 1992,  as perhaps the most potent legal protection against lawsuits available to California employers. This is because, among other things, arbitration allows employers to avoid defending workplace claims to the satisfaction of a jury of employees. Such juries are not sympathetic to employers, and employers historically lose the overwhelming majority of  these cases.

As significantly, arbitrating disputes can save employers as much as 90 percent of the defense costs required to defend a workplace dispute through the conclusion of a jury trial. Since employment cases often generate defense costs alone approaching or exceeding a million dollars, this is no trifling matter.

By way of clarification, the injunction that was granted in February is a preliminary injunction, which means the court must make a final ruling before enforcement of AB 51 is permanently enjoined.

However,  many legal scholars have concluded that the Federal Arbitration Act’s broad endorsement of arbitration preempts AB 51, and that the injunction will be upheld on appeal, before the U.S. Supreme Court, if necessary.

In fact, a similar bill was vetoed in 2018 by then-Governor Brown, on the basis of his conviction that it was preempted by federal law.

Based on the above,  employers have everything to gain and nothing to lose by implementing and distributing carefully-drafted written arbitration policies.  And this comes just in time to “man the ramparts” to defend against the tide of Coronavirus-related lawsuits that are expected later this year.

As was the case during the 2007-2009 recession, employers can expect lawsuits alleging  (among other violations) that 1) layoffs and furloughs violated the WARN Act (which requires 60-days’ written notice before a mass layoff),  2) wage and hour claims asserting failure to pay accrued vacation benefits at the time of layoff, 3) employment discrimination claims, alleging that layoffs  had an unlawfully-disparate impact on protected classes (e.g., such as older workers), and 4)  leaves of absence claims, alleging that employees laid off were already on approved (and thus protected) leaves of absence when the layoffs occurred.

Last but not least, the complex new paid leave provisions of the Families First Coronavirus Response Act (“FFCRA”) offer expansive new theories of recovery that are certain to be well-represented in the coming surge of lawsuits.

Employers interested in a “vaccine” against these lawsuits, in the form of a legally-defensible arbitration  policy, are encouraged to contact my office to ensure this policy is properly drafted and distributed in accordance with the courts’ demanding legal standards.  For several articles discussing the powerful, protective properties arbitration policies offer employers, please see the author’s website (http://www.jaygputnam.com/newsletter/).

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Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over 38 years. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives. He has a remarkable record of success.

For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well.

You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them. http://www.jaygputnam.com/newsletter/

This newsletter is not intended as a substitute for legal advice and its content is provided for discussion purposes only.  Any suggestions or recommendations must be assessed by competent legal counsel to be sure the unique requirements of each workplace are properly considered.