U.S. District Court Prohibits Enforcement of AB 51, the New CA Law that Would Ban Arbitration Agreements as a Condition of Employment

Standard

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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s