On February 15, 2023, the Ninth Circuit Court of Appeals blocked a 2020 California law that attempted to prohibit employers from requiring employees and job applicants to agree to arbitration as a condition of employment. The Court’s 2-1 panel decision in Chamber of Chamber of Commerce of the United States of America v. Bonta resolved ambiguity regarding the enforceability of California Assembly Bill (AB) 51. The court held that the Federal Arbitration Act (FAA) preempts AB 51 because the law discriminates against arbitration by discouraging or prohibiting the formation of an arbitration agreement. The decision is good news for California employers as it is now clear that California law cannot prohibit employers from requiring employees and applicants to agree to arbitrate their disputes as a condition of their employment, provided the FAA applies to the arbitration agreement.
In October, 2019, the California legislature passed AB 51 in an effort to ban mandatory employment arbitration. California’s governor, Gavin Newsom, signed the bill into law, with an effective date of January 1, 2020. The law, which among other things created California Labor Code Section 432.6, prevented employers from requiring employees or job applicants “as a condition of employment, continued employment, or the receipt of any employment-related benefit” to “waive any right, forum, or procedure” for discrimination and labor claims, including “the right to file and pursue a civil...
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