California Employment Law Blog

Understanding SB 365: Changes to Arbitration Appeals in California

Posted by Timothy B. Del Castillo | Oct 12, 2023 | 0 Comments

On Tuesday, Governor Gavin Newsom signed SB 365 into law, a bill with substantial implications for arbitration agreements in employment disputes. This legislation has sparked a spirited debate, with critics expressing concerns about its potential impact on job prospects, while proponents assert it will safeguard the rights of workers and consumers against corporate tactics that delay justice.

SB 365 was jointly sponsored by the California Association of Consumer Attorneys (CAOC) and the California Employment Lawyers Association (CELA). These organizations contend that mandatory arbitration clauses have become increasingly common in consumer and employment interactions, often tilting the balance in favor of businesses and employers at the expense of workers and consumers.

The key change introduced by SB 365 is that, if a court dismisses a case or rejects a defendant's request to compel arbitration, the case can continue in court even if the defendant chooses to appeal the decision. This contrasts with the current law, which permits defendants to halt court proceedings during an appeal following a decision denying arbitration.

Supporters of SB 365 believe the bill is necessary to curtail corporate misuse of arbitration to impede justice for workers and consumers. They argue that the present system enables corporations to file frivolous appeals as a means of prolonging cases, potentially for several years. One prominent example cited by proponents is the recent case of Uber and Lyft, where the companies filed motions to compel private arbitration when the California Labor Commissioner took legal action against them. The court rejected these motions since neither the State nor the Labor Commissioner had signed arbitration agreements. However, due to California's current law suspending court cases during an appeal, Uber and Lyft could file an appeal, causing an extended delay in the State's case.

On the other side of the debate, opponents of SB 365 argue that the bill might hinder job prospects, making it more challenging for businesses to attract and retain employees. They further contend that it could escalate costs for businesses as they may need to litigate more cases in court.

Critics also underscore that SB 365 departs from established legal precedents, notably referencing the Federal Arbitration Act (FAA). The FAA underscores a national policy favoring arbitration of claims and necessitates equal treatment of arbitration agreements with other contracts. Opponents assert that laws such as SB 365 could be invalidated due to potential conflicts with the FAA, as they seem to undermine the principles of arbitration. It's worth noting that courts have consistently rejected laws similar to SB 365 that undermine arbitration.

Whether you are a worker or an employer affected by an arbitration agreement, it's advisable to seek legal counsel to understand your rights under SB 365. An experienced attorney can guide you in assessing the relevance of the new law to your situation and represent your interests in court, should the need arise. 

About the Author

Timothy B. Del Castillo

Tim Del Castillo is Founding Partner of Castle Law: California Employment Counsel, PC.


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