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California employers are cleared to use mandatory arbitration agreements — for now

Dentists who have and use arbitration agreements should have them reviewed

February 25, 2020 8816

Updated March 14, 2023: Employers in California may continue to use mandatory arbitration agreements as a condition of employment following a decision issued Feb. 15 by the Ninth Circuit Court of Appeals in a long-running case challenging state legislation that would have prohibited such use. 

Passed in 2019, Assembly Bill 51 would have taken effect Jan. 1, 2020, and immediately banned California employers from requiring applicants or employees to sign an agreement to arbitrate any dispute stemming from employment and waive any right to a court or other procedure allowable under the Fair Employment and Housing Act.

As CDA originally reported here in February 2020, a federal judge halted California’s enforcement of AB 51 after the Chamber of Commerce and other business organizations challenged the law; the law’s enforcement had been held up until the Ninth Circuit decided last month that AB 51 is unenforceable against employers.

Legal counsel should review or draft arbitration agreement

Many legal and employment experts caution employers to watch for and be prepared to respond to further appeals to Chamber of Commerce of the United States of America, et al. v. Bonta, et al. that could result in a reinstatement of the ban. CDA will keep members informed of any such proceedings or outcomes.

For now, California dentists who currently have an arbitration agreement should ask their legal counsel to review the agreement to determine if revisions are required, especially if the dental practice implemented a voluntary agreement in anticipation that the state law’s ban on mandatory arbitration agreements would take effect.

Similarly, dentists who wish to implement a mandatory arbitration agreement should have consult legal counsel to ensure the agreement is drafted in compliance with existing requirements.

Feb. 25, 2020: 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 effect 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.

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