Attorney General Becerra Joins Multistate Effort to Examine Potential Harms of Mandatory Arbitration Provisions on Low-Wage Workers

SACRAMENTO – California Attorney General Xavier Becerra today announced an effort to obtain more information on the policies, practices, and procedures of arbitration companies as part of a multistate initiative to examine the potential harms of employer-mandated arbitration agreements on low-wage workers. Arbitration agreements require an employee seeking to remedy a workplace complaint through legal action to submit to the decision of an extrajudicial arbitrator, typically selected by the employer. In letters to arbitration companies, the attorneys general highlight concerns that arbitration agreements may, in practice, negatively affect low-wage workers and unreasonably favor employers and large companies in the resolution of work-related claims.

“Companies shouldn’t be able to sweep worker complaints under the rug,” said Attorney General Becerra. “Arbitration only makes sense when it actually offers an efficient and equitable opportunity to help settle legitimate employee claims. We’re asking arbitration providers to be transparent about the outcomes of their work. With better information, everyone can do more to support workers in our state and nation.”

In the letters, the attorneys general raise several issues around employer-mandated arbitration that can result in companies failing to make good on worker claims. For example, there are instances where employers purportedly exhibit a practice of failing to pay filing fees to initiate an arbitration process they themselves mandated, effectively halting any opportunity to resolve worker claims. In other cases, workers reportedly allege employment status misclassification and, as a result, arbitration providers have subjected them to fee schedules typically reserved for commercial entities, making the process overly burdensome for individual employees. The coalition’s concerns are particularly troublesome given that more than 60 percent of workers who make less than $13 an hour on average have contracts that mandate arbitration. With thousands of cases being handled by arbitration providers annually, low-wage workers are among the most likely to be subjected to a process that may hinder their ability to access justice.

Attorney General Becerra is committed to protecting the rights of workers in California and across the country. He has also consistently expressed concern about binding arbitration agreements. In 2018, the Attorney General called on Congress to pass legislation that would prohibit employers from mandating arbitration to resolve workplace sexual harassment claims. In 2017, Attorney General Becerra urged the U.S. Senate to support a rule that protects consumers from being forced to resolve complaints against a company through costly arbitration proceedings after signing up for a service like a bank account or credit card. More recently, the California Department of Justice, as part of a multistate effort, entered into agreements with major fast food companies operating around the country, prohibiting them from including provisions in contracts that make it more difficult for employees to seek better pay and benefits at competing franchises.

In sending the letters, Attorney General Becerra joins the attorneys general of the District of Columbia, Colorado, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Vermont, and Washington.

Copies of the letters are available here and here.