California’s Mandatory Arbitration Agreement Ban Stopped In Its Tracks

Arbitration agreement resolution of commercial disputes on a desk.
Photo Credit: istock.com/designer491

Written by Alfredo Ortega

Last week, the U.S. District Court for the Eastern District of California granted a request for a preliminary injunction to prohibit the State of California from enforcing Assembly Bill 51 (AB 51) as to arbitration agreements governed by the Federal Arbitration Act (FAA).  AB 51 generally bars conditioning employment or employment-related benefits on the signing of an arbitration agreement covering claims under the California Fair Employment and Housing Act or the Labor Code.  The U.S. Chamber of Commerce and other business organizations filed this lawsuit, Chamber of Commerce of the U.S.A. v. Becerra, seeking to have AB 51 declared preempted by the FAA. The preliminary injunction will remain in place until the case is resolved on the merits.

For now, employers may continue to require employees to sign mandatory arbitration agreements (as long as they are subject to the FAA).  We will continue to keep an eye on the Chamber of Commerce case and will apprise you of any updates.

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