In a significant ruling for California employers, the Ninth Circuit on February 15, 2023 in Chamber of Commerce v. Bonta held that California’s Assembly Bill 51—a statute that attempted to criminalize the use of arbitration agreements by employers—is preempted by the Federal Arbitration Act. The Ninth Circuit’s decision affirms a preliminary injunction prohibiting California from enforcing AB 51. As a result, California employers remain able to require employees to sign arbitration agreements in connection with their employment without the risk of potential criminal liability.
The Ninth Circuit’s opinion reaches the opposite result of a prior opinion issued in September 2021 by the same panel of judges. In the new opinion, Ninth Circuit Judge William A. Fletcher changed his vote and joined Judge Sandra S. Ikuta’s opinion affirming the district court’s order.
California’s Assembly Bill 51, enacted with an effective date of January 1, 2020, makes it a criminal misdemeanor for an employer to require an existing employee or a job applicant to sign an arbitration agreement as a condition of employment. Specifically, under AB 51 employers are prohibited from requiring employees to waive “any right, forum, or procedure for violation of any provision of the California Fair Employment and Housing Act” or the California Labor Code. AB 51 criminalizes only the formation of the contract, meaning an employer could be subject to criminal prosecution for requiring an...
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