Federal Court Halts Enforcement of California Arbitration Law

A California federal court has granted a preliminary injunction blocking enforcement of Assembly Bill 51, an expansive anti-arbitration law enacted in October and set to take effect on January 1, 2020.  Under this law, employers in the Golden State would be unable to require applicants and employees from waiving any right, forum, or procedure established by the California Fair Employment and Housing Act and the Labor Code, effectively banning mandatory arbitration of employment disputes.  Due to its particular placement in the Labor Code, violation of the law would constitute a misdemeanor.

In December, a coalition of national and state trade associations filed suit to enjoin the law from taking effect, arguing that AB 51 is preempted by the Federal Arbitration Act (FAA), the federal law that governs the use of arbitration in employment disputes.1

The court granted the plaintiffs’ motion for a temporary restraining order on December 30, 2019, and in a minute order issued on January 31, 2020, the court ordered that California’s Attorney General, Secretary of the California Labor and Workforce Development Agency, and Director of the California Department of Fair Employment and Housing, are:

  • Enjoined from enforcing sections 432.6(a), (b), and (c) of the California Labor Code where the alleged "waiver of any right, forum, or procedure" is the entry into an arbitration agreement covered by the FAA, and
  • Enjoined from enforcing section 12953 of the California Government Code where the alleged violation of "Section 432.6 of the Labor Code" is entering into an arbitration agreement covered by the FAA.

As a practical matter, this means the state cannot enforce AB 51’s anti-arbitration provisions while the parties seek a permanent ruling on the preemption issue.

See Footnotes

1  Littler Mendelson Shareholders Bruce Sarchet and Maury Baskin are representing five of the seven named plaintiff associations (National Retail Federation, the California Retailers Association, the National Association of Security Companies, the Home Care Association of America, and the California Association For Health Services At Home). The U.S. Chamber of Commerce and the California Chamber of Commerce are also plaintiffs.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.