Ninth Circuit holds the Federal Arbitration Act (FAA) preempts AB 51, which attempted to prohibit employers from requiring employees to waive, as a condition of employment, the right to litigate claims under the FEHA and the California Labor Code. Arbitration agreements are on an equal footing as other contracts and will be analyzed in the Ninth Circuit in accordance with FAA principles of “equal protection treatment.” California employers can continue to use mandatory arbitration agreements for employees and new hires.

In a significant win for California employers, the Ninth Circuit Court of Appeals, in Chamber of Commerce v. Bonta,¹ affirmed a district court injunction striking down California Assembly Bill 51 (“AB 51”) as preempted by the Federal Arbitration Act (FAA), after nearly three years of legal challenges. As a result, California employers may continue to implement mandatory employment arbitration agreements for employee claims for unpaid wages, discrimination, and numerous other causes of action under the Labor Code and the Fair Employment and Housing Act (FEHA).

Banning Mandatory Arbitration: California AB 51’s Purpose

Congress enacted the FAA to promote agreements to arbitrate and combat the longstanding “hostility towards arbitration.”² The FAA has been described repeatedly as “embodying a national policy favoring arbitration and a liberal federal policy favoring arbitration agreements.”³ The U.S. Supreme Court has routinely found the FAA preempts...

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