Kelly M. Raney

Counsel
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Breaking News! New Court Order Bans the Ban on Mandatory Employment Arbitration Agreements

January 31, 2020Client Alert

AB 51 is the California Bill which attempts to ban certain mandatory employment arbitration agreements.  It was scheduled to take effect on January 1, 2020, but was temporarily enjoined on December 30, 2019, after a coalition of business organizations filed a lawsuit that same month in a federal court in California seeking to prevent its enforcement.

Chief U.S. District Judge Kimberly Mueller of the Eastern District of California issued an order today, January 31, 2020, preliminarily enjoining the State of California from enforcing AB 51.  Judge Mueller issued this order after two rounds of hearings and multiple briefings by the various parties to the lawsuit.

Specifically, Judge Mueller’s order prohibits California’s Attorney General, Labor Commissioner, Secretary of the California Labor and Workforce Development Agency, and Director of California Department of Fair Employment and Housing from enforcing:

  1. Sections 432.6(a), (b), and (c) of the California Labor Code, where the alleged "waiver of any right, forum, or procedure" is the entry into an arbitration agreement covered by the Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA"); and
  2. Section 12953 of the California Government Code, where the alleged violation of "Section 436 of the Labor Code" is entering into an arbitration agreement covered by the FAA.

As a result of this order, employers may continue to require that employees agree to arbitration of employment claims as a condition of employment.

Judge Mueller has not yet issued a detailed opinion explaining her order, but she is expected to do so in the coming days.  We anticipate that opinion to explain that AB 51 is preempted by federal law, including the FAA, which allows mandatory employment arbitration agreements.

In the lawsuit, the next step is for this preliminary injunction to become permanent.  The State of California will need to decide whether it wants to continue to fight the case to avoid having it become permanent, or whether it will acquiesce to Judge Mueller’s decision.

We encourage you to have your arbitration agreements reviewed to ensure that they are otherwise legally compliant and contain necessary language consistent with the Court’s position. Please reach out to a member of our Employment Law Group with any questions or concerns.