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California Appeals Order Barring Enforcement of New Anti-Arbitration Law

Posted in Employment Contracts and Agreements, Labor Law, Wage & Hour

The State of California filed an appeal last week to challenge a federal court’s order barring California from enforcing a new state law that would curtail workplace arbitration agreements.  Unless the State takes some additional action, the lower court’s ban on enforcement of the new law, AB 51, will remain in effect during the appeal.

The new law would prohibit employers from requiring employees to agree to arbitrate claims alleging violations of the California’s Fair Employment and Housing Act and Labor Code.  Many employers are especially concerned that AB 51 could impose imprisonment and fines on those who try to condition employment on workers signing arbitration agreements.  However, proponents of the new law contend that it is needed to prevent employers from depriving mistreated workers of having their day in court (or in administrative agencies created to remedy workplace violations).

In rulings on January 31 and February 7, 2020, U.S. District Judge Kimberly Mueller (of the Eastern District of California, in Sacramento) issued a preliminary injunction barring the State from enforcing AB 51.  That preliminary injunction is not permanent, but would remain in place until the district court decides whether to issue a permanent injunction.  On February 19, 2020, the State filed its notice asking the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) to reverse the preliminary injunction.

Now that its appeal is on file, the State may ask either Judge Mueller or the Ninth Circuit to suspend enforcement of the preliminary injunction until the outcome of the appeal.  If the State were to proffer such a request, and if the courts were to grant it, such a ruling would allow the State to enforce the ban on arbitration agreements while the appeal is pending.

Regardless of whether the State seeks or obtains such a stay, employers who wish to secure arbitration agreements from employees should consult with competent legal counsel.  The district court case is Chamber of Commerce of the USA et al. v. Becerra et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-02456-KJM-DB.  The Ninth Circuit case is Chamber of Commerce of the USA et al. v. Becerra et al., Case No. 20-15291.