All For Naught: California Employers Can Continue To Require Workers to Sign Arbitration Agreements

After more than three years of legal challenges, California’s Assembly Bill 51 was completely struck down as preempted by the Federal Arbitration Act in a Ninth Circuit ruling on February 15, 2023.

California employers can now rest easy and continue to require workers to sign arbitration agreements as a condition of employment.

How Did We Get Here?

Beginning in January 2020, AB 51 attempted  to make it unlawful for California employers to require job applicants and employees to enter into arbitration agreements as a condition of employment. When the bill took effect in early 2020, enforcement was immediately paused by a California federal district court.  More recently, the Ninth Circuit reversed and held that the FAA did not completely preempt AB 51, but later decided to reconsider its ruling.  Last week, that reconsideration resulted in the Court finding that AB 51 is unlawful and preempted by the FAA.

What’s Next?

While further appeals are still possible, until further notice employers are no longer restricted by AB 51 from requiring employees to confidentially arbitrate, rather than litigate in open court, their claims against the Company. However, there are nuanced considerations that may limit this ability and vary by employer and industry. As such, competent employment counsel is recommended.

Stradling attorneys will keep continue to keep a close eye on any potential developments related to AB 51. We are well versed in guiding employers through these matters and are ready to assist when and where needed.  Don’t hesitate to reach out if you have questions or need assistance complying with these new requirements.