On February 15, 2023, the United States Court of Appeals for the Ninth Circuit issued its decision in Chamber of Commerce v. Bonta, holding that federal law preempts California’s AB 51, legislation that outlawed arbitration agreements for claims under the California Fair Employment and Housing Act (FEHA), as well as wage and hour claims under the Labor Code. The decision represents a major win for California employers.
Background of AB 51 and Current Litigation
California’s AB 51 became effective on January 1, 2020, and effectively prevented employers from requiring employees to enter into arbitration agreements. In the weeks prior to it becoming effective, however, the United States Chamber of Commerce (Chamber) filed suit against the State of California arguing the Federal Arbitration Act (FAA) preempted AB 51. The United States District Court for the Eastern District of California issued an injunction against the enforcement of AB 51 in February 2020.
The injunction did not last, however, as the Ninth Circuit reversed the lower court in September 2021. The Chamber immediately requested a rehearing en banc, but before the Ninth Circuit decided to rehear the case, the United States Supreme Court agreed to hear Viking River Cruises, Inc. v. Moriana, a different case involving arbitration in California. The Ninth Circuit announced it would wait for the Supreme Court to rule in Viking River before it considered the request for an en banc rehearing. In an unusual turn, the...
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