Similarly, the court held that AB-51 is preempted by the FAA because it interferes with that federal statute’s goal of promoting arbitration. On February 20, 2020, the Court’s Order was appealed.īecause AB-51 singles out arbitration by placing uncommon barriers on employers who include, as a take-it-or-leave-it proposition, a mandatory arbitration clause, the court determined that AB-51 improperly placed arbitration agreements on unequal footing and that AB-51 was preempted by the FAA. In its order granting the motion, the court evaluated whether AB-51 interfered with the fundamental attributes of arbitration and whether AB-51 put agreements to arbitrate on unequal footing with other contracts in California. On February 7, 2020, the court granted the Chamber of Commerce’s Motion for Preliminary Injunction. On December 30, 2019, the court issued a temporary restraining order enjoining the State of California from enforcing AB-51 pending the court’s resolution of a pending motion for preliminary injunction that, if granted, would extend that injunction through the life of the case. District Court for the Eastern District of California on these preemption grounds, Chamber of Commerce of the USA, et al. Chamber of Commerce, joined by myriad other organizations, filed suit challenging the law in the U.S. Supreme Court based on preemption theories. State laws attempting to interfere with or otherwise standing as an obstacle to arbitration had been repeatedly struck down by the U.S. Similar anti-arbitration legislation had been vetoed previously by Governor Newsom’s predecessor, Jerry Brown, because of a breadth of case law suggesting a law of this type was preempted by the U.S. Violations are tantamount to a criminal misdemeanor, punishable by imprisonment, a fine, or both. AB-51 prohibits employers from entering into mandatory arbitration agreements for nearly all types of employment claims in California, including agreements with “opt-out” provisions.
#CALIFORNIA LAW ON ARBITRATION AGREEMENTS CODE#
AB-51 became effective on January 1, 2020, adding Section 432.6 to the California Labor Code and Section 12953 to the California Government Code. On October 10, 2019, California Governor Gavin Newsom signed Assembly Bill 51 (AB-51) into law.