Employers in California need to regularly review and revise their employment contracts and practices. For example, the state adjusts minimum wage regularly. Those adjustments make it important for companies with minimum wage workers to review and update payroll practices.
California also has many employment regulations that are stricter on organizations than federal statutes are. For example, the legislature adopted AB 51 in 2019. The law included several provisions that go beyond federal workplace protections. It effectively prohibited binding arbitration requirements in employment contracts by stating that companies couldn’t force workers to waive their rights as a condition of employment. However, the courts have since determined that AB 51 is not enforceable. Employers may want to return to the practice of integrating alternative dispute resolution clauses into their employment contracts accordingly.
Arbitration isn’t the only option
There is little question that mandatory arbitration clauses can be beneficial for employers. By requiring that workers with complaints about their employment attend arbitration, employers keep issues out of civil court. Such clauses deter the vast majority of employment litigation.
Companies can save tens of thousands of dollars with the addition of such clauses to their contracts, as these clauses can deter frivolous lawsuits. They can also help prevent the reputation damage that employment lawsuits could cause for the company.
That being said, workers have begun to avoid contracts that require mandatory binding arbitration. Some of the best and brightest professionals may decline to sign employment contracts that require arbitration specifically. They view these clauses as unfavorable and don’t want to waive their rights.
Employers may want to consider instead requiring alternative dispute resolution. That allows either party to consider mediation as one of the options. Mediation, like arbitration, can allow for the resolution of disputes outside of court in a confidential environment.
Both mediation and arbitration can protect the privacy and reputation of an organization and can keep the costs of resolving employee complaints low. By requiring alternative dispute resolution instead of demanding arbitration in particular, employers may overcome the aversion that some workers have to arbitration clauses while still securing crucial organizational protection.
Companies may want to revise their employment contracts to reflect changing policies in California. Reviewing and updating employment contracts can help organizations prevent expensive and reputation-damaging lawsuits filed by workers.