By cutting off contractual freedom for pre-dispute arbitration agreements in the workplace, trial lawyers and unions in California intend to pave the way for more and bigger class actions [Dave Roberts, Fox and Hounds] More: Coyote (“Here is how you should think about this proposed law: Attorneys are the taxi cartels, and arbitration is Uber. And the incumbents want their competitor banned.”)
Update: Gov. Jerry Brown vetoes the anti-arbitration bill.
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Arbitration is forced on employees who have no choice if they want a job. Arbitration “Agreements” are written by corporate lawyers to benefit employers who fear the justice that juries provide. Most employees don’t understand what arbitration is or that the deck is staked in the employer’s favor.
There’s also “click-through arbitration”; the now-standard “if you want to use this cell phone service, you agree that any and all disputes will be resolved through arbitration. If you want to own this car, you agree that any and all disputes will be resolved through arbitration. If you want to buy this house, you agree that..” and so on. It’s not like this is the result of a negotiation between equal parties, this is “you want it, we got it, and you’ll only get it on our terms”.
Of course, at least in CA (and a handful of other states), the court’s hostility towards arbitration forces manufacturers of even relatively expensive products (such as cars) to an interesting choice. They can subject themselves to the randomness of trial, where even if successful, the cost of their defense will exceed the value of the product being litigated over by some small multiple, while a loss at trial will exceed the cost of the car between 10 and 25 fold – the vast majority of that money going not to the aggrieved consumer, but rather, their lawyers.
Even “simple” discovery and a few depositions can cost 10$ of thousand$, since plaintiff lawyers are permitted broad latitude in requesting things that likely will never be used at trial – and they are in sole control of the litigation. The consumer has no incentive to settle. With a well pled suit, they don’t need to make payments on their vehicle, the accruing interest simply adds to the damages they will seek some multiple of at trial, they can (in at least some courts) drive a rental instead (and add that to their damages) during the often multi-year pendency of the trial. All the while, plaintiff attorneys claims of ever increasing fees and expert costs (which courts have proven, time and again, to be loath to review much less rein in) come to be the primary factor encouraging settlement by the manufacturer…
Obviously, the calculus changes at least a little in the case of personal injury claims, but for run of the mill warranty issues, defending oneself is a money losing decision on a massive scale.
Its almost like the state doesn’t want a business to be able to defend itself…
I agree with Dean and DensityDuck. There is no “contractual freedom” in pre-dispute arbitration agreements. If you want the job, you have to sign. And if every employer enacts these clauses, then if you want to work anywhere, you have to sign. There is no choice and no freedom.
Bad actors on both sides, Dean. Take today’s example, a guy who thought he couldn’t be fired while on FMLA, using the time to open his own restaurant.
http://www.courts.ca.gov/opinions/archive/S207536.PDF (unpublished and non-binding on others)
and here’s an employee class action in action, proceeding under the Private Attorney General Doctrine for alleged BPL 17200 code violations. Note that there are seven causes of action, of which only one (requiring the employees to purchase shoes from a particular vendor for which they are apparently not reimbursed) seems to have been the source of any harm. Others include failing to put the start date of the pay period on some paychecks, just the end date…
http://www.courts.ca.gov/opinions/documents/B249505.PDF
And here is BPL 17200, in case you are wondering how clearly CA laws spells out the practices the business should know is illegal, so they may guide themselves appropriately.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210
Please cut and paste the links, I’ve not done well with a href= of late.
I added on this informative post by blogger Coyote (“Here is how you should think about this proposed law: Attorneys are the taxi cartels, and arbitration is Uber. And the incumbents want their competitor banned.”)