A Ninth Circuit panel that previously upheld a California law prohibiting mandatory employment arbitration agreements in the workplace withdrew its decision and ordered the matter to be resubmitted for a panel rehearing.
AB 51 took effect in January 2020 as Labor Code section 432.6. It prohibited employers in California from requiring employees to sign arbitration agreements as a condition of employment and imposed criminal and civil penalties on employers who violated the law of up to six months imprisonment and a fine of up to $1,000.
In December 2019, the US Chamber of Commerce, along with other business groups, sued the State of California in the US District Court for the Eastern District of California, seeking a declaration that AB 51 was preempted by the Federal Arbitration Act (FAA) and an injunction halting the enforcement of AB 51. The District Court issued a preliminary injunction a year later, in January 2020, concluding that AB 51 was preempted by the FAA. (Chamber of Commerce v. Becerra, Case No. 2:19-at-01142.).
The State appealed, and in September 2021, the Ninth Circuit, in a 2-1 decision, reversed the District Court’s determination that AB 51 was preempted by the FAA and vacated the preliminary injunction. Circuit Judges Fletcher and Lucero reasoned that AB 51’s anti-retaliation provision fell outside the ambit of the FAA, because it was pre-formation conduct.
However, the majority...
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