Assembly Bill 51 (“AB 51”) prohibits employers from requiring employees to execute arbitration agreements as a condition of employment. After being signed by California Governor Gavin Newsom on October 10, 2019, AB 51 was set to go into effect on January 1, 2020; however, on December 30, 2019, the Honorable Kimberly J. Mueller, Chief Judge in the Eastern District of California, granted a temporary restraining order enjoining its enforcement in a case brought by certain business groups, including the Chamber of Commerce of the United States of America and the California Chamber of Commerce.
On January 31, 2020, Judge Mueller issued a preliminary injunction enjoining the enforcement of AB 51 during the pendency of the litigation. On February 7, 2020, Judge Mueller issued her full 36-page order. In that order she provided a detailed analysis of the text of AB 51 along with its legislative history and the history of prior California legislation aimed at curtailing an employer’s ability to compel employees to waive certain rights. The heart of the order, however, is Judge Mueller’s conclusion that AB 51 was likely preempted by the Federal Arbitration Act (“FAA”) because AB 51 (1) “singled out arbitration by placing uncommon barriers on employers who required contractual waivers of dispute resolution options that bear the defining features of arbitration” and (2) interferes with the goals of the FAA.
The parties to the action will assuredly continue their fight in the courts. In the meantime, California employers can continue to require their employees to execute arbitration agreements as a requirement of employment.