Since 2021, the challenge to California’s Assembly Bill (AB) 51 (on employment arbitration) has been in limbo awaiting the U.S. Court of Appeals for the Ninth Circuit’s decision on a petition to rehear the appeal en banc. On August 22, 2022, instead of granting or denying the petition for rehearing en banc, the Ninth Circuit made a surprise decision to withdraw its prior opinion and grant a panel rehearing.
Under AB 51, employers are prohibited in California from requiring employees to sign as a condition of employment or employment-related benefits arbitration agreements concerning disputes arising under the California Fair Employment and Housing Act or California Labor Code. AB 51 purports to apply to any arbitration agreement entered into, modified, or extended on or after January 1, 2020.
As AB 51 took effect in early 2020, a California federal district court granted the U.S. Chamber of Commerce’s request for a preliminary injunction, enjoining enforcement of AB 51 with respect to arbitration agreements governed by the Federal Arbitration Act (FAA). The district court ruled that AB 51 put arbitration agreements on an unequal footing with other contracts, in violation of the FAA, by imposing a higher consent requirement on arbitration agreements and potential civil and criminal penalties against employers seeking to enter into arbitration agreements. The State of California appealed the preliminary injunction to the Ninth Circuit.
In 2021, a divided Ninth...
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