Senator Wiener Introduces Legislation To Stop Corporate Arbitration Abuse

February 10, 2023


February 10th, 2023

Senator Wiener Introduces Legislation To Stop Corporate Arbitration Abuse


SACRAMENTO – Senator Scott Wiener (D-San Francisco) introduced SB 365, legislation to reign in corporate abuse of legal processes around forced arbitration. SB 365 allows a worker’s, consumer’s, or government’s lawsuit to move forward even if a corporate defendant files an appeal to a trial court’s ruling that a forced arbitration clause is invalid or non-existent. Corporations frequently delay proceedings for months or years in consumer and workers rights cases by filing appeals when a forced arbitration clause is ruled invalid or inapplicable. SB 365 will level the playing field for workers and consumers by allowing cases to proceed.


“SB 365 levels the playing field for consumers and workers, who sometimes spend years in court over obviously invalid or inapplicable forced arbitration clauses,” said Senator Wiener. “By delaying justice for consumers and workers, we are denying them justice. SB 365 will prevent corporations from abusing the appeals process when trying to enforce invalid contracts.”


Forced arbitration clauses have become a common feature of consumer transactions and employment relationships. More than half of America’s workforce has been bound by forced arbitration clauses as a condition of employment, and they are a common feature of consumer agreements as well. Under these clauses, consumers and workers whose rights have been violated cannot pursue their claims in court or with a state agency.  Instead, they must submit their claims in a private arbitration proceeding that overwhelmingly favors businesses and employers.  


In some cases, courts rule these clauses unenforceable, whether because the court finds that the agreement is “unconscionable,” or because the clause is invalid for some other reason, as is the case when one party never even signs the agreement.


When a court dismisses these cases or denies the defendant’s petition to compel a case to private arbitration, current law allows corporations to halt proceedings by filing an appeal that can take months or years to be heard. Workers and consumers are not afforded the same luxury.


Through this process, powerful companies typically delay cases against them for one to three years. As a result, key witnesses may lose important documents, forget the facts of their case, or move away. 


When the California Labor Commissioner brought an action against Uber and Lyft for misclassifying their workers as “independent contractors,” the companies filed meritless motions in an attempt to compel the case into private arbitration. The court ruled against Uber’s and Lyft’s motion to compel arbitration because the State and the Labor Commissioner never signed the arbitration agreements and clearly could not be bound by them. 


Due to the one-sided provision in the Code of Civil Procedure that places the court case on pause if an appeal is filed – even though no arbitration clause even existed to bind the State or Labor Commissioner to arbitration – Uber and Lyft were able to file an appeal to delay the State’s case and prevent it from proceeding until the appeal is resolved. 


SB 365 would prevent injustices like this one by ensuring that cases can proceed while an appeal is heard. The bill establishes that an appeal of a court’s decision denying a corporation’s motion to compel arbitration will not stay the consumer or worker’s court proceedings in the trial court while the appeal is pending. 


SB 365 is sponsored by the California Employment Lawyers Association (CELA) and Consumer Attorneys of California (CAOC).


“We applaud Senator Wiener for introducing this critical measure that will prevent corporations from filing meritless appeals to try to enforce unconscionable arbitration contracts, only to delay and obstruct workers’ access to justice,” said Mariko Yoshihara, Esq. Legislative Counsel & Policy Director California Employment Lawyers Association. “When a court finds an arbitration contract to be unlawful, a worker should not have to wait years to proceed with their claim. This bill will allow a worker’s case to go forward when the court has thrown out the illegal contract without waiting for the employer’s frivolous appeal to be decided years later.”


“Workers and consumers deserve a speedy pathway to justice when their rights have been violated,” said Greg Rizio, President of CAOC. “Unfortunately, current law in California favors big corporations who stand to benefit from delaying court proceedings for years at a time simply by filing an appeal. SB 365 would allow those cases to move forward, protecting meaningful access to justice for countless Californians, and we are proud to co-sponsor this important bill.”