A federal circuit court’s rejection of California’s unusual take on banning mandatory workplace arbitration contracts adds to a streak of losses for state lawmakers trying to rein in employer use of arbitration and raises doubts about whether any such state policy could escape federal preemption.
A divided panel of the US Court of Appeals for the Ninth Circuit ruled against California’s 2019 law known as AB 51 on Feb. 15, finding it’s preempted by the Federal Arbitration Act and reversing the same panel’s prior ruling. State laws aiming to limit mandatory arbitration of workplace claims met similar fates in New Jersey, New York, and Washington state over the past five years.
“States are going to keep trying because that’s what I suppose the legislatures think is best,” said Shalom D. Stone, an attorney with Stone Conroy LLC in New Jersey who represented the business groups that challenged and defeated New Jersey’s ban. “They’re going to continue to have a tough time if courts perceive those laws to run counter to the Federal Arbitration Act.”
The Ninth Circuit decision follows a decades-long history of courts finding that federal law favors the use of arbitration and state legislatures’ efforts to limit its use generally aren’t allowed.
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