Written by Te’Aira Law and Gary McLaughlin

California Assembly Bill 51 (“AB 51”), codified as California Labor Code section 432.6 and California Government Code section 12953, was signed by Governor Newsom in 2019 and went into effect January 1, 2020.  AB 51 prohibits California employers from requiring employees to agree to mandatory arbitration as a condition of employment. In early 2020, multiple business associations, including the California Chamber of Commerce and the U.S. Chamber of Commerce, filed suit to challenge AB 51 as preempted by the Federal Arbitration Act (“FAA”). In February 2020, a California federal district court agreed, and enjoined enforcement of AB 51.

In September 2021, in Chamber of Commerce of United States v. Bonta, the Ninth Circuit reversed in a 2-1 decision, finding that the FAA only preempts AB 51 once an employee has actually signed an arbitration agreement.  Thus, an employer could still be liable with respect to an employee who declines to sign an arbitration agreement that is presented to him or her as a condition of employment. (See our prior post on Bonta here.)

In October of 2021, the California and U.S. Chambers of Commerce petitioned for rehearing en banc, which the Ninth Circuit deferred pending the U.S. Supreme Court’s decision in Viking River Cruises v. Moriana.  (See our prior post on Viking River here.)  However, on August 22, 2022, the original three-judge panel in Bonta voted sua sponte to grant panel rehearing and withdrew its September 2021 decision, rendering the petition for rehearing en banc moot. Judge Fletcher, who was part of the 2-1 majority in the original decision, and Judge Ikuta, who dissented in the original decision, voted in favor of rehearing. Judge Lucero, who authored the majority opinion, voted against rehearing.

Given these developments, the original injunction against enforcement of AB 51 remains in effect, and employers may continue to require employees to sign arbitration agreements as a condition of employment for the time being. There is also now the possibility that the Ninth Circuit will reverse course and uphold the injunction. Employers with questions about their arbitration agreements and practices should seek guidance from employment counsel.