SB 707: The People standing up to corporate interests

Arbitration is increasingly used by large corporations to "streamline" the litigation process. Consumer advocates might argue that arbitration is used to hide specific grievances from public view. Regardless, the use of arbitration has grown wildly over the years and is used heavily by companies throughout California and, more specifically, in Silicon Valley. A new law, SB 707 was signed by Gov. Gavin Newsom which radically alters the way arbitration is handled and eliminates potential abuses to the system.

The new law was designed to help curb abuses of the private arbitration system, seeking to end an abusive tactic that employers use to deny their employees justice -- forcing them to arbitrate their legal claims and then suspending the process by refusing to pay the arbitration fees.

Under SB 707, the employer in an arbitration agreement is required to pay specific fees and costs before the arbitration can proceed. However, if the fees or expenses to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement and waives the right to compel arbitration.

Individuals who have been forced to submit to mandatory arbitration to resolve an employment or consumer dispute will be provided with procedural options and remedies under this new law when a company stalls or obstructs the arbitration proceeding by refusing to pay the required fees. Supporters of this new law say forcing workers to sign arbitration waivers lets companies keep harassment, discrimination, and other labor violations out of court which hides this behavior and allows repeat violators to continue their conduct for years.

Employees can also withdraw the claims from arbitration and proceed in court. They can petition the court to compel the employer to pay arbitration fees under the contract or pay the unpaid fees to continue the arbitration and recover such costs from the employer at the end of the proceedings, regardless of whether the employee prevails on the underlying claims.

SB 707 also addresses an alarming lack of diversity in the arbitration industry, which is 74% male and 92% white, a disparity that poses problems when arbitrators are asked to resolve cases involving sexual harassment and discrimination. It requires private arbitration companies to report and collect demographic data in the aggregate relative to ethnicity, race, disability, veteran status, gender identity, and sexual orientation of all arbitrators. It took effect Jan. 1.

Mary E. Alexander is the founding partner of Mary Alexander & Associates, P.C. in San Francisco. She's been recognized as a Top 100 Attorney in California and a Top 30 Plaintiff Attorney in California by the Daily Journal; she's also been recognized as a Consumer Attorney of the Year by Consumers Attorneys of California.