California is a fairly “employee-friendly” state, but that doesn’t always hold true – and it certainly doesn’t apply to a recent ruling by the Ninth Circuit Court of Appeals. The court reversed itself, ruling that the Federal Arbitration Act (FAA) trumps Assembly Bill 51.
That means that employers are, once again, able to require employees to sign mandatory arbitration agreements as a condition of their employment.
The rise and fall of AB 51
Governor Newson signed AB 51 into law back in 2019, but it’s been through a lot of legal twists and turns since then. AB 51 generally sought to shield employees from forced arbitration agreements by imposing criminal sanctions on employers who required employees to sign them. By targeting the employer’s actions, rather than the agreements themselves, the state aimed to avoid conflicts with the FAA and basic contract law.
Unfortunately, the law never really had a chance to make much difference before it was struck down. Challenges from business organizations were almost immediate.
The appellate court initially upheld part of AB 51 in 2021, before eventually deciding that the law was, in effect, illegal. While another appeal from the state is still possible, the recent ruling could very well result in AB 51’s death knell. This has been hailed as a victory by the coalition of businesses and the U.S. Chamber of Commerce that brought the challenge before the court.
Businesses tend to prefer arbitration because they say it’s quicker, less disruptive and cheaper than going to court. Opponents, however, point out that forced arbitration often leaves low-level workers at a disadvantage because such agreements can prohibit class action suits that would help them address violations in employment law.
For now, at least, your employer can force an arbitration agreement on you if they want (and you want to keep your position), but that doesn’t mean you’re entirely without rights. If you have any questions about whether an employer’s proposed contract or actions are fair, it’s wisest to get some experienced legal guidance.