Alert
In Chamber of Commerce v. Bonta, the Ninth Circuit ruled that the Federal Arbitration Act preempts California’s AB 51, which made it a criminal offense for an employer to require arbitration as a condition of employment.
02.22.23
In 2019, California enacted Assembly Bill 51 (AB 51) which made it a criminal offense for an employer to require an employee or applicant to consent to arbitration as a condition of employment. In an effort to avoid preemption under the Federal Arbitration Act (FAA), an Act which bars states from treating arbitration agreements differently than other contracts, AB 51 included a provision stating that if the parties mutually entered into an arbitration agreement, it would be enforceable. Thus, an employer could be subject to criminal prosecution for requiring an employee to enter into an arbitration agreement, but if the employee signed the arbitration agreement, it would be enforced.
Shortly after AB 51 became effective, a district court granted a motion enjoining enforcement of it, ruling that the business groups challenging it would likely prevail on their argument that the FAA preempts AB 51 because it “conflicts with the purposes and objections of the FAA.” To the surprise of many, in September 2021 the Ninth Circuit partially reversed the district court, and vacated the preliminary injunction, holding in that AB 51 was enforceable to the extent it mandated that agreements to arbitrate be “consensual” and mandatory arbitration...
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