January 21, 2020
Category: Legal Updates
The temporary restraining order (“TRO”) which prevents the enforcement of AB 51 remains in effect until January 31, 2020. As a reminder, California’s AB 51 bars mandatory arbitration agreements in employment agreements. Click here for background on AB 51 and the challenges it faces.
On January 10, 2020, the U.S. District Court for the Eastern District of California heard oral argument from both sides as to whether the Court should enjoin the enforcement of AB 51 until the Court decides the challenge on the merits.
The U.S. Chamber of Commerce and other business coalitions reiterated that AB 51 violates the Federal Arbitration Act (FAA) by unlawfully applying different terms of contract law to arbitration agreements. Likewise, they maintained that the State of California is holding arbitration agreements to higher standards than other contracts through AB 51.
The State of California, in opposition, argued that AB 51 reaches beyond arbitration agreements and governs employers’ agreements with employees more generally, in that it could also apply to nondisclosure agreements and other agreements not under the auspice of the FAA. The State also called into question the Chamber’s standing to bring the challenge to AB 51.
In the minute entry from January 10, 2020, the Court granted the parties leave to file supplemental briefing to address issues of “jurisdiction, including standing, and the parties positions with respect to the severability of any provisions of AB 51, if the court grants the motion for preliminary injunction at least in part.” The State must submit supplemental briefing by January 17, 2020, while the Chamber of Commerce’s response is due by January 24, 2020. The court also modified the TRO to apply only to arbitration agreements covered by the FAA. The modified TRO will remain in effect until January 31, 2020.
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