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On February 15, 2023, the Ninth Circuit Court of Appeals struck down a California law that prohibited employers from requiring applicants and employees to sign an arbitration agreement as a condition of employment. 

Assembly Bill 51 was passed in 2019, prohibiting employers from requiring an applicant or employee as a condition of employment to agree to waive any right, forum, or procedure for a violation of the Fair Employment Housing Act (FEHA) or the Labor Code beginning January 1, 2020. The law was quickly challenged and endured a lengthy litigation battle. In 2021, the Ninth Circuit upheld portions of the law, explaining that those portions do not conflict with the Federal Arbitration Act (FAA). However, last summer, the Ninth Circuit agreed to re-examine its 2021 ruling. 

In its February 15 decision, the Ninth Circuit explained that “. . . the FAA preempts a state rule that discriminates against arbitration by discouraging or prohibiting the formation of an arbitration agreement.” Thus, the Court held that “[b]ecause the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and AB 51 stands as an obstacle to the purpose, AB 51 is therefore preempted.” 

As a result of the Ninth Circuit’s ruling, California employers can require applicants and employees to sign arbitration agreements as a condition of employment. However, given the litigious nature of this law, further legal action may be anticipated, including an appeal. If your organization has questions about the enforceability of its employment arbitration agreements, please contact our California Legal Services team at CAinfo@employerscouncil.org.