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Court injunction blocks California’s ban on mandatory arbitration agreements

February 25, 2020 4185

A new state law that would have prohibited employers from requiring employees in California to sign certain mandatory arbitration agreements as a condition of employment did not take effect Jan. 1, as scheduled, and is awaiting final judgment in court.

A new state law that would have prohibited employers from requiring employees in California to sign certain mandatory arbitration agreements as a condition of employment did not take effect Jan. 1, as scheduled, and is awaiting final judgment in court.

Assembly Bill 51, as CDA reported last November, bans employers from requiring employees or applicants to waive any right, forum or procedure under the Fair Employment and Housing Act or Labor Code as a condition of employment. But a federal judge on Jan. 31 issued a full preliminary injunction blocking California’s enforcement of the law. The injunction follows the temporary restraining order the court issued last December after the U.S. Chamber of Commerce and other business organizations filed a lawsuit against the state of California seeking to have the law preempted by the Federal Arbitration Act.

Had the law taken affect as scheduled, it would have applied to agreements entered into, modified or extended on or after Jan. 1. Violations would subject the employer to criminal prosecution under AB 51.

With the preliminary injunction in place, AB 51 is unenforceable, and employers are not banned from requiring employees to waive any right, forum or procedure under FEHA as a condition of employment.

Employers who wish to implement arbitration agreements and employers who currently have agreements in place are encouraged to review any current arbitration agreements with legal counsel.

CDA will inform members of the final court judgment or any developments that affect employer compliance with AB 51.