November 5, 2021

California’s Mandatory Employment Arbitration Ban Headed for the Full 9th Circuit Court of Appeals

On December 30, 2019 an Eastern District of California federal court granted a temporary restraining order preventing the state of California from enforcing AB51. The lawsuit filed by the U.S. Chamber of Commerce and the California Chamber of Commerce sought an injunction stopping enforcement of AB 51; a bill that would have outlawed employment arbitration agreements that are required as a mandatory subject of the employee’s employment conditions.

Initially, the U.S. District Court granted the injunction at the request of the employer groups, but a subsequent decision from the 9th Circuit Court of Appeal recently dissolved the injunction.  As a result, in California, requiring employee arbitration agreements on a mandatory basis as a condition of employment is prohibited until such time that the 9th Circuit reverses its three-member panel of judges’ decision, or the U.S. Supreme Court grants a hearing and reinstates the injunctive relief.

According to the 9th Circuit’s current decision, pursuant to the Federal Arbitration Act (FFA), employers can continue to enforce signed arbitration agreements.  However, an employer will violate the California Labor Code if it conditions employment upon the execution of a mandatory arbitration agreement. 

Article courtesy of VCAA’s President/General Counsel Rob Roy