Last month, a split Ninth Circuit panel ruled that certain portions of California's Assembly Bill 51 (2019) were not preempted by the Federal Arbitration Act (FAA) and held that employers are prohibited from requiring employees to execute an arbitration agreement as a condition of employment. However, the panel enjoined the implementation of civil or criminal penalties against employers that violate the law and also found that its ruling does not invalidate arbitration agreements that are otherwise enforceable under the FAA or are already in effect, even if they violate AB 51. An in-depth summary of the panel's decision can be found here.
Unsurprisingly, given the less-than-clear directive from the panel, the U.S. Chamber of Commerce now seeks a full rehearing of its case challenging the ban on mandatory arbitration agreements. If the Ninth Circuit denies the petition, the Chamber will likely seek review by the Supreme Court. While employers await the court's decision, they should continue to consult with counsel to ensure their current policies are up to date as the law remains in flux.
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