The Ninth Circuit Court of Appeals panel that originally decided Chamber of Commerce v. Bonta last fall recently issued an order withdrawing its prior opinion and granting a panel rehearing. The divided panel’s original decision upheld portions of Assembly Bill 51 (“AB 51”), a California law that prohibits employers from requiring that employees sign an arbitration agreement as a condition of employment. The panel’s decision to rehear the appeal is notable because it suggests that the panel may rule that the Federal Arbitration Act (“FAA”) preempts AB 51 in its entirety following the U.S. Supreme Court’s recent decision in Viking River Cruises, Inc. v. Moriana. The Supreme Court in Viking River Cruises held that California law precluding the division of PAGA actions into individual and non-individual claims through an agreement to arbitrate was preempted by the FAA.

Background

AB 51 applies to any arbitration agreement entered into or modified on or after January 1, 2020, the date the law became effective. Under AB 51, it is unlawful for employers to require that employees or applicants sign an agreement to arbitrate claims under the California Fair Employment and Housing Act (“FEHA”) and/or the Labor Code as a condition of employment, continued employment, or receipt of employment-related benefits. Significantly, rather than invalidate the arbitration agreement, AB 51 instead subjects an employer to civil and criminal penalties.

Upon AB 51 taking effect in early 2020, the...

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