AB 51 Challenged — Can Employers Mandate Arbitration Agreements with their Employees

The battle of whether an employer can mandate an employee to sign an arbitration agreement as a condition of employment continues! Assembly Bill 51 (“AB 51”), that was set to take effect on January 1, 2020, makes it unlawful for employers to impose arbitration agreements on an employee as a condition of employment. Since the bill was signed into law, challenges have been percolating.

On December 6, 2019, a lawsuit was filed by the U.S and California Chambers of Commerce along with several trade organizations, seeking declaratory and injunctive relief on the grounds that enforcement of AB 51 is unconstitutional as it is preempted by the Federal Arbitration Act (FAA).

Just days before AB 51 was set to take effect, the court granted the motion for a temporary restraining order (TRO), which temporarily bars the State’s enforcement of AB 51. The court found that the TRO was warranted because serious questions exists about whether AB 51 is preempted by the FAA, and that if AB 51 was temporarily enforced, it would cause disruption in the formation of employment contracts.

Despite the court granting the TRO, it is important to note that the TRO is limited in time and scope. We must wait until January 10, 2020 to see if the court grants a preliminary injunction, which would bar enforcement of AB 51 until the case has been decided.

As the challenge to AB 51 works its way through the courts, now is the time for employers to review their current arbitration agreement practice, understand the pros and cons of binding arbitration with your employees, as well as other employment practices to ensure that you are legally compliant. For more information on this law, how to ensure your policies, hiring documents and employment practices are California Labor Compliant, please contact the Employer Lawyers at Chauvel & Glatt.

The material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes.  For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500.

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