Governor Brown got it right when he vetoed Assembly Bill 465, which would have restricted the enforcement of arbitration agreements requiring the arbitration of claims brought against employers for violations under the California Labor Code.  The proposed bill would have made it unlawful to use such provisions as a condition of employment.  The governor indicated in his veto message that California would have been the only state with such a far-reaching ban on arbitration.  He noted that arbitration provides substantial benefits to workers, and his veto struck a reasonable balance between the interests of employers and workers.

The governor acknowledged that recent California Supreme Court and U.S. Supreme Court cases have found that state policies that unduly impede arbitration are invalid.  Recognizing the potential for costly litigation and legal uncertainty, the governor stated that he prefers, at this time, to wait to see how the U.S. Supreme Court rules on two cases arising out of California regarding FAA preemption of state arbitration policies. Recognizing the potential for costly litigation and legal uncertainty, the governor stated that he prefers, at this time, to wait to see how the U.S. Supreme Court rules on two cases (here and here) arising out of California regarding FAA preemption of state arbitration policies.

Notably, the governor left open the possibility of approving narrower legislation that is tailored to address specific abuses or concerns regarding arbitration agreements.  His message signaled an invitation for more creative and better constructed strategies from lawmakers.  Governor Brown’s veto message may be found here.