Arbitrating Employee Disputes in California: A Thing of the Past?

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Employers in California are no longer able to require their employees to arbitrate work-related grievances. This stunning ruling was handed down yesterday by the United States Court of Appeals for the Ninth Circuit.

In its decision, the Ninth Circuit affirmed the legality of California’s anti-arbitration law known as Assembly Bill 51 (“AB 51”). Signed into law by Governor Newsom in 2019, AB 51 prohibits, among other things, employers from conditioning employment (or continued employment) on an employee’s agreement to ventilate work-related grievances in non-governmental or non-judicial dispute-resolution forums— such as arbitration.

From the get-go, AB 51 was controversial. Until its enactment in 2019, employers and employees in California routinely executed agreements conditioning employment (or continued employment) on an employee’s agreement to air work-related grievances in arbitration. Such agreements made practical sense for all involved. Arbitration is often quicker, more private, and cheaper than litigation in state or federal court. For years, employers and employees both benefited and relied on these sorts of arrangements. AB 51 changed that.

Following the passage of AB 51, a federal trial court in California issued an injunction against the law, holding that it violates a pro-arbitration federal statute known as the Federal Arbitration Act (“FAA”). The FAA, the trial court held, prohibits the very sort of arbitration bans contained in AB 51. Given the upheaval, the Ninth Circuit’s decision portends, MNK Law expects that the decision will be re-heard by the Ninth Circuit or taken to the U.S. Supreme Court.

Unless or until yesterday’s ruling is judicially reversed or stayed (that is legal lingo for “paused”), however, the lesson for California employers is clear: Do not condition employment (or continued employment) on your employee’s agreement to arbitrate work-related grievances against you.

For more information, please contact us at info@mnklawyers.com.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.

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