Assembly Bill 802 Makes Arbitration Less Confidential
On September 30, 2014, Governor Jerry Brown signed Assembly Bill 802 (AB 802) into law, amending Section 1281.96 of the Code of Civil Procedure, relating to consumer arbitration.
Effective January 1, 2015, AB 802 requires large-scale arbitration providers such as JAMS and AAA to collect and publish certain details about consumer arbitration proceedings that were previously confidential. Arbitration providers must publish the required information in a consumer-friendly format, accessible from a conspicuous link on the arbitration providers’ website.
What information will arbitration providers have to publish under AB 802?
- Arbitration Clause: Was the arbitration mandated because of a pre-dispute contractual clause?
- Arbitration Provider: Did the arbitration contract designate a particular arbitration provider? If so, the name of that provider.
- Non-Consumer Party Identification: If a non-consumer party (i.e., employers) is involved, the arbitration provider must disclose the name, type of business entity and if the entity initiating or responding party?
- Nature of the Dispute: Does the dispute involve goods, services, health care, employment or some other issue? If there is an employment dispute, the employee’s salary range should be disclosed unless the employee wishes to not disclose his/her salary.
- Prevailing Party: Who was the prevailing party (i.e., the party with a net monetary recovery or the party awarded injunctive relief)?
- Number of Arbitrations and Mediations: How many times the company has been involved in an arbitration or mediation using this particular arbitration service.
- Consumer’s Attorney: Was the consumer represented by counsel? If so, the full name and firm of the attorney who represented the consumer or claimant.
- Arbitration Timeline: What date was the arbitration demand received by the arbitration provider? When did the arbitration actually occur? What date was the award issued?
- Disposition of the Case: Did the arbitration end with a withdrawal, abandonment, settlement, award, default or dismissal?
- Claim Amount, Attorneys’ Fees, Etc.: What was the claim amount? Award? Attorneys’ fees? Was equitable relief requested and awarded?
- Arbitrator Info: Who was the arbitrator? What was the amount of the arbitration fee? Who paid the fee? Was a waiver for payment granted?
Prior to AB 802, one of the significant benefits to arbitration was the confidentiality and privacy of arbitration proceedings. The new disclosure requirements chip away at these protections and potentially expose businesses to more frivolous claims.
Now consumers (more likely consumer attorneys) can easily assess which entities/employers are arbitrating more often than others and the results of those arbitrations. The new law practically offers up a guidebook for serial complainants to bring claims against businesses who have a public history (in a private forum) of paying out awards to claimants.
This disclosure requirement may also add a layer of time and cost to the arbitration process. Now arbitration providers have to spend time and money collecting, assembling and disseminating information that may not have otherwise been readily available. This could potentially translate into higher arbitration fees and more time spent involved in the overall arbitration process.
Despite the new disclosure requirements under AB 802, arbitration still has benefits for certain employers. Employers can potentially limit employee class actions for wage-and-hour, employment discrimination, and other labor and employment claims. Arbitration may offer a more streamlined process to resolve employment claims. And there is limited discovery, which may help reduce time spent on discovery.
Although there are benefits, arbitration has disadvantages, particularly for employers. Arbitration is often more costly. Arbitration fees are usually more expensive than court filing fees and employers are required to pay the arbitrator’s fees. The outcome in arbitration may also be riskier than state or federal court litigation because there are fewer checks on the arbitrator’s discretion and no meaningful appellate procedure.
Therefore, arbitration may not always be the best option for employers. It is important for employers to discuss with legal counsel before requiring employees to sign arbitration agreements.