In my post on November 12, 2019, I described new California laws impacting employers as of January 1, 2020.  See https://weinbergerlawblog.com/2019/11/12/preventive-maintenance-to-avoid-expanded-liability-risks-from-new-california-employment-laws-effective-january-2020/.  One of those laws, AB 51, prohibits employers from requiring new and current employees to enter into arbitration agreements as a condition of employment.

On December 6, 2019, the U.S. and California Chambers of Commerce, along with other business associations, filed a lawsuit in the U.S. District Court in Sacramento, asking the Court to declare AB51 is preempted by the FAA and therefore unenforceable as applied to arbitration agreements governed by the FAA and to enjoin California governmental from enforcing AB51 as applied to such agreements.

The plaintiffs filed a motion for temporary restraining order (TRO), which was heard on December 23, 2019.  On December 30, 2019, the Court granted the motion and issued a TRO prohibiting enforcement of AB51, because of the serious concerns raised about whether the statute is preempted by the FAA.  The Court also set a hearing for January 10, 2020 on a preliminary injunction.

In light of the Court’s ruling, AB51 cannot be enforced against employers that require current or new employees to sign an arbitration agreement as a condition of employment.  Employers should stay informed about the status of this case, and in particular the outcome of the January 10, 2020 hearing.