District Court Temporarily Enjoins Enforcement of California's AB 51 Anti-Arbitration Provision

Alerts / December 31, 2019

A federal judge has issued a temporary restraining order halting the enforcement of Assembly Bill 51, California’s latest attempt to prevent arbitration of claims brought under the California Fair Employment and Housing Act. We initially wrote about this statute, which sought to criminalize the use of arbitration agreements, on Oct. 11, 2019.

AB 51, slated to take effect on Jan. 1, 2020, had three main aspects. It provided that:

  1. An employer cannot require that an employee agree to arbitrate any potential claim under FEHA as a condition of employment;
  2. An employer cannot threaten, retaliate or discriminate against an applicant for employment or an employee for refusing to consent to arbitration of a potential claim under FEHA; and
  3. An agreement that requires an employee to opt-out of a waiver or to take action to retain their rights “is deemed a condition of employment.”

AB 51 sought to proclaim even the use of arbitration agreements to be an “unlawful employment practice” under California law and to make employers who did so criminally liable. We, like many others, predicted that the bill would be found to be preempted by the Federal Arbitration Act, and the United States Chamber of Commerce brought suit in district court to prevent its enforcement. Chamber of Commerce of the USA et al v. Becerra et al, no. 2:19-cv-02456-KJM-DB (E.D. Cal.).

On Dec. 30, 2019, the Eastern District of California issued a temporary restraining order against the bill’s enforcement. In granting the request for a temporary restraining order, the judge found that the “plaintiffs have raised serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act as construed by the United States Supreme Court.” The temporary restraining order is in effect until the court can receive a full briefing and a hearing on the plaintiffs’ motion for a preliminary injunction, now set for Jan. 10, 2020.

The bottom line: California remains hostile to mandatory arbitration of employment disputes, but this latest attempt, at least for now, will not take effect until the court hears more about the merits, most likely in January.

Authorship Credit: Joseph Persoff, John Lewis and Greg Mersol

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