AB 51 Limiting Mandatory Arbitration Agreements Ruled Invalid

In an action filed by a number of business groups, including the Chamber of Commerce, challenging the statute as being preempted by the Federal Arbitration Act (“FAA”), Judge Kimberly Mueller concluded that it would be disruptive if the statute went into effect for a brief period of time, only to have it later determined to be preempted. Initially, Judge Muller granted a temporary restraining order (“TRO”) to enjoin enforcement of AB 51. Of particular concern to employers were provisions of the law that placed the extraordinary burden of criminal penalties punishable by imprisonment and fines.

The court recently made the invalidation of AB 51 final on January 31, 2020. After further briefing, Judge Mueller issued a preliminary injunction to enjoin enforcement of the new law. Her minute order indicates that a fuller order explaining her reasoning will be forthcoming.

The next step for the fate of AB 51 certainly appears to be the Ninth Circuit Court of Appeals. And as Judge Mueller herself originally stated, it may end up in the United States Supreme Court. 

What This Means for Employers:

Bottom line, California employers can still have mandatory arbitration agreements, or arbitration agreements with an opt-out provision.  AB 51 is not enforceable. For any questions or concerns involving arbitration agreements, contact Barsamian & Moody.

The goal of this article is to provide employers with current labor and employment law information. The contents should neither be interpreted as, nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at (559) 248-2360 for individual responses to questions or concerns regarding any given situation.