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Ninth Circuit Delivers Employers a Valentine – Blocks California’s Bar to Mandatory Employment Arbitration Agreements
Feb 16, 2023

Ninth Circuit Delivers Employers a Valentine – Blocks California’s Bar to Mandatory Employment Arbitration Agreements

Topics: Arbitration Agreements, Court Decisions

The Ninth Circuit gave California employers a belated Valentine’s Day present by upholding the District Court’s injunction against enforcement of California Assembly Bill 51 (“AB 51”) because it inhibited arbitration contrary to the Federal Arbitration Act’s (“FAA”) policy of encouraging arbitration of disputes.  

In an attempt to avoid federal preemption, AB 51 provided that employment arbitration agreements would be enforced but it created a criminal offense and civil liability against employers who required existing employees or applicants for employment to consent to arbitration as a condition of employment. Chamber of Commerce v. Bonta relied on Supreme Court precedent that concluded that states’ rules burdening the formation of arbitration agreements, or making arbitration agreements more difficult to enforce, ran afoul of the FAA. Chamber of Commerce v. Bonta concluded that AB 51 discouraged the formation of arbitration agreements because the criminal penalties and civil liability presented a severe burden to the formation of arbitration agreements, all antithetical to the Federal policy favoring arbitration. As a result, it held that AB51 was federally preempted by federal law. 

It is too early to know whether the State of California will attempt a further appeal. However, last summer’s Viking River Cruises v. Moriana opinion indicates that SCOTUS will likely be hostile to the State of California’s position.

The Viking River Cruises and Chamber of Commerce decisions provide employers with greater confidence that arbitration agreements will be enforced in California. However, employers need to remember that there are also new Federal limitations to mandatory arbitration. Earlier this year, President Biden signed an amendment to the FAA to prohibit mandatory arbitration of employee claims of sexual harassment or sexual assault.

Many practitioners believe that there are pros and cons to using mandatory arbitration agreements in California. Employers who are not currently using mandatory arbitration and seek a better understanding of the advantages and disadvantages should consider contacting their favorite CDF attorney to discuss the benefits and costs mandating arbitration of disputes with employees and, if they choose mandatory arbitration, how best to draft and present the agreement to employees so that it is enforceable.  

California employers who currently use arbitration agreements should enjoy the sweet kiss of this Valentine’s Day present. Because of frequent change in the laws regarding such agreements employers who have not updated their arbitration agreements recently may wish to contact a CDF lawyer, such as the author, to ensure that their arbitration agreement is best positioned for enforcement.

About CDF

For over 25 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor in Chief

Sacramento Office Managing Partner and Chair of CDF’s Traditional Labor Law Practice Group. Mark has been practicing labor and employment law in California for thirty years. His practice has a special emphasis on the representation of California employers in union-management relations and handling federal and state court litigation and administrative matters triggered by all types of employment-related disputes. He is also adept at providing creative and practical legal advice to help minimize the risks inherent in employing workers in California. He recently named “Sacramento Lawyer of the Year” in Employment Law-Management for 2021 by Best Lawyers®.
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