California’s AB 51, barring mandatory arbitration agreements in employment, is now facing preemption and injunction challenges. On December 6, 2019, the U.S. Chamber of Commerce, California Chamber of Commerce, and several other business organizations filed suit in federal court against the State of California, alleging that AB 51 is preempted by the Federal Arbitration Act (FAA).

AB 51 prohibits employers from requiring employees to sign mandatory arbitration agreements regarding disputes under the California Fair Employment and Housing Act (FEHA) or the California Labor Code. However, AB 51 includes a provision expressly protecting arbitration agreements otherwise enforceable under the FAA. The Chamber of Commerce’s complaint alleges the FAA preempts state law disfavoring the formation or enforcement of arbitration agreements. In the alternative, the suit seeks declaratory relief that AB 51’s express FAA carve-out provision applies to both implementation and creation of arbitration agreements.

A hearing on the motion for a preliminary injunction will be held on January 10, 2020. If granted, AB 51 will not be enforced while the preliminary injunction is in effect, and until the case is decided on the merits. The lawsuit is Chamber of Commerce of the United States v. Becerra, No. 2:19-cv-2456-KJM (DB) in the United States District Court for the Eastern District of California. For more information on AB 51, see our article, “California Governor Newsom Signs Landscape-Changing Worker-Friendly Bills”.

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