Ninth Circuit Rules in Favor of California’s New Arbitration Agreements Law

A ruling in California has overturned an injunction against a new law preventing employers in California from making employees sign arbitration agreements as a condition of employment.

The Ninth Circuit Court of Appeals recently vacated a preliminary injunction issued in 2020 that prohibited California from enforcing Assembly Bill 51, signed by Gov. Gavin Newsom last year.

The U.S. Chamber of Commerce and numerous business groups filed suit in U.S. District Court for the Eastern District of California before the law was to take effect, arguing AB 51 is preempted by the Federal Arbitration Act and they sought a preliminary injunction halting the enforcement of the law.

In the case, Chamber of Commerce v. Becerra, a U.S. District judge issued the injunction.

Then on Sept. 15, the Ninth Circuit Court in a split decision gave its opinion:

“The panel reversed, in part, the district court’s conclusion that California Assembly Bill 51 is preempted by the Federal Arbitration Act; affirmed the district court’s determination that the civil and criminal penalties associated with AB 51 were preempted; vacated the district court’s preliminary injunction enjoining AB 51’s enforcement; and remanded for further proceedings.”

The court ruled that California Labor Code does not conflict with the language of the FAA or

create a contract defense by which executed arbitration agreements could be invalidated or not enforced.

“A thorough review of the historical context of the FAA, its legislative history, and subsequent Supreme Court jurisprudence demonstrated that Congress was focused on the enforcement and validity of consensual written agreements to arbitrate and did not intend to preempt state laws requiring that agreements to arbitrate be voluntary,” the court ruled.

Topics California