The Ninth Circuit Court of Appeals recently struck down a California law that prohibited employers from mandating the arbitration of workplace disputes. This puts arbitration back in play in California for most employment disputes. Read on to find out how we got here and what this means for California employers.
How We Got Here:
The Federal Arbitration Act (the “FAA”) applies to arbitration agreements. Section 2 of the FAA effectively holds that arbitration agreements are presumptively valid and the United States Supreme Court has described Section 2 as “embod[ying] the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts . . . .” As a result, the FAA preempts most state laws that disfavor the enforcement of arbitration agreements.
Enter Assembly Bill 51 (“AB 51”). California passed AB 51 in 2019 to prevent employers from forcing employees to arbitrate certain workplace claims. To ostensibly circumvent the FAA, AB 51 incorporated a provision stating that it did not invalidate written arbitration agreements that were otherwise enforceable under the FAA. AB 51, however, imposed civil and criminal penalties for violations.
AB 51 was set to go into effect on January 1, 2020, but prior to that date, the US Chamber of Commerce sought an injunction restraining its enforcement because of FAA preemption claims. A California Federal Court agreed and granted that injunction in December 2019. California appealed that ruling...
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