Labor & Employment Law Daily California’s A.B. 51—effectively banning mandatory arbitration in employment—is preliminarily enjoined
Wednesday, February 5, 2020

California’s A.B. 51—effectively banning mandatory arbitration in employment—is preliminarily enjoined

By Pamela Wolf, J.D.

A TRO issued on December 29, 2020, was set to expire the same day the judge issued the preliminary injunction.

Following a hearing on the U.S. Chamber of Commerce’s and other plaintiffs’ motion for a preliminary injunction that would enjoin enforcement of California’s controversial new law that effectively outlaws mandatory arbitration in the employment context, a federal district court in California on January 31 granted the motion in full. A full written order on the preliminary injunction against A.B. 51 will soon follow.

Effective immediately, Xavier Becerra, as the Attorney General of the State of California, Lilia Garcia Brower, as the Labor Commissioner of the State of California, Julia A. Su, as the Secretary of the California Labor and Workforce Development Agency, and Kevin Kish, as Director of the California Department of Fair Employment and Housing are:

  • Enjoined from enforcing Sections 432.6(a), (b), and (c) of the California Labor Code where the alleged “waiver of any right, forum, or procedure” is the entry into an arbitration agreement covered by the Federal Arbitration Act (FAA); and
  • Enjoined from enforcing Section 12953 of the California Government Code where the alleged violation of “Section 432.6 of the Labor Code” is entering into an arbitration agreement covered by the FAA.

Because there is no realistic likelihood of harm to defendants from preliminarily enjoining enforcement of AB 51, the court did not require any security bond.

TRO previously entered. On December 29, 2019, the court had previously entered a temporary restraining order in the case, finding there were serious questions about whether the new law was preempted by the FAA and that the balance of hardship tipped in the favor of the U.S. Chamber of Commerce and other plaintiffs, particularly in light of the potential for the imposition of criminal penalties. In addition to granting a temporary restraining order, the court at that time had set an expedited hearing on the plaintiffs’ motion for a preliminary injunction for January 10, 2020.

On January 10, 2020, the court had ordered the TRO previously imposed to remain in effect until January 31, 2020.

Reaction. The National Retail Federation, one of the plaintiffs in the case, quickly reacted to what it clearly saw as the good news. “The judge has taken the proper step of keeping this misguided law on hold,” NRF Vice President for Government Relations and Workforce Development Lizzy Simmons said in a statement. “This measure clearly conflicts with federal law and would deprive California employers and workers from benefiting from the advantages of arbitration. Employment disputes should not be forced into the expensive and overburdened court system when the easier and more flexible mechanism of arbitration offers the exact same remedies.”

The lawsuit, Chamber of Commerce of the United States v. Becerra, was filed in the Eastern District of California; the case is No. 2:19-cv-02456-KJM-DB.

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