Yesterday, February 15, 2023, the Ninth Circuit Court of Appeals struck down a California law, AB 51, that prohibited employers from requiring employees to sign an arbitration agreement as a condition of employment or continued employment. The Court ruled that a federal law—known as the Federal Arbitration Act (“FAA”) —preempts AB 51 because AB 51 “stands as an obstacle” to Congress’s “policy of encouraging arbitration.”
Background to the Ruling
AB 51 made it unlawful for California employers to require employees to sign an arbitration agreement as a condition of employment (or continued employment). The law took effect on January 1, 2020, but it was never without controversy from the start.
In fact, even before the Court’s ruling yesterday, legal observers and lawyers believed that AB 51 would ultimately be struck down. A federal district (trial) court did just that back in January 2020 when it issued an injunction barring enforcement of AB 51. That decision, however, was initially reversed on appeal by the Ninth Circuit last September.
Yesterday, in an about face, the Ninth Circuit effectively rescinded its prior September 2022 ruling and—at least for now—cleared the path for California employers to impose mandatory arbitration agreements on new employees (or continuing employees).
What Does the Ninth Circuit’s Ruling Mean for Employers?
For now, barring any judicial intervention by the U.S. Supreme Court or the full panel of Ninth Circuit judges, employers may now require applicants and employees to execute arbitration agreements as a condition of employment—or continued employment.
MNK Law will continue to monitor developments related to mandatory arbitration agreements in California. For more information on the Court’s ruling and to ensure you have an up-to-date arbitration agreement, 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.
