February 17, 2023 • W. Baker Gerwig, IV
Category: Legal Updates
Avid readers of Stokes Wagner’s legal updates may be familiar with California’s Assembly Bill 51, a law that, until very recently, prohibited California employers from requiring employees or job applicants to sign arbitration agreements as a condition of employment or employment-related benefits. On Wednesday, a panel of judges of the U.S. Ninth Circuit Court of Appeals held in a 2 to 1 decision that AB 51 is unenforceable, as it is preempted by the Federal Arbitration Act. California employers are once again free to require their employees to sign arbitration agreements.
That this decision was reached in the most labor-friendly region in the United States conveys a larger lesson for employers and employees alike: federal law protecting and endorsing the arbitration process as an alternative to litigation takes precedent over state law to the contrary. In fact, the Ninth Circuit is the third Court of Appeals, preceded by the First and Fourth Circuits, to hold that laws prohibiting mandatory arbitration agreements as a condition of employment are unenforceable. While the case is still technically ongoing, and the California Attorney General could appeal the decision to the entire Ninth Circuit (as opposed to a panel) or to the Supreme Court of the United States, we predict that this is the final blow to AB 51, and it will not be making a return regardless of whether the Ninth Circuit panel’s recent decision is appealed. California employers who had historically mandated arbitration agreements and had to discontinue doing so due to AB 51, or who wish to institute these policies, should reach out to Stokes Wagner attorneys to ensure that their arbitration agreements are effective, thorough, and compliant with the law.
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