Federal Court Cements Ban on California’s Latest Attempt To Outlaw Employment Arbitration

January 17, 2024

What's New

California cannot prohibit employers from requiring employees to sign arbitration agreements as a condition of employment, under a federal court order entered January 2, 2024. The permanent injunction came in a lawsuit from the U.S. Chamber of Commerce challenging a 2019 California law that effectively barred mandatory arbitration of employment disputes.

The order from the U.S. District Court for the Eastern District of California essentially seals an agreement between the Chamber of Commerce and the state stipulating that the Federal Arbitration Act preempts state law AB 51 and enjoining its enforcement.

The district court’s order finalizes a preliminary ruling from the Ninth Circuit last year that the FAA preempts AB 51. The case is Chamber of Commerce v. Bonta, E.D. Cal. (order entered January 2, 2024).

What It Means

California will not be able to enforce AB 51, which disallows mandatory arbitration agreements for disputes arising under the California Labor Code. Therefore, California employers can require workers and job applicants to sign arbitration agreements as a condition of getting or keeping their jobs.

What You Should Do

Employers in California who stopped requiring job applicants and employees to sign mandatory arbitration agreements may consider re-instituting them. CWC members may find it beneficial to discuss best practices with other members in the Compliance Network through CWC Collaborate.

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Federal Court Cements Ban on California’s Latest Attempt To Outlaw Employment Arbitration

Jan 17, 2024 – A federal court has ruled that California cannot prohibit mandatory arbitration agreements for employment disputes. The ruling blocks enforcement of state law AB 51, allowing employers to require arbitration agreements as a condition of employment.

Arbitration Obligation Does Not Negate PAGA Standing, California High Court Holds

Aug 16, 2023 – California’s Supreme Court ruled that only state courts—not the U.S. Supreme Court—have final authority to interpret California’s Private Attorneys General Act.

FAA Preempts California Anti-Arbitration Law, Ninth Circuit Rules

Mar 7, 2023 – The Ninth Circuit has ruled that a 2019 law enacted by the state of California that makes it a criminal offense for an employer to require an employee or a job applicant to consent to arbitration is preempted by the FAA.

Supreme Court Rules FAA Transportation Worker Exemption Hinges on Driver’s Job, Not Industry

Apr 22, 2024 – The ruling by the High Court further clarifies the scope of the transportation worker exemption contained in the Federal Arbitration Act.

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May 29, 2024 – The Supreme Court ruled that federal courts must pause, not dismiss, lawsuits when sending parties to arbitration, reinforcing the FAA’s pro-arbitration stance and resolving a split among appeals courts.

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