Federal Appeals Court Clears Path for California Employers to Mandate Arbitration

Since 2015, the California Legislature has attempted to hinder employers’ attempt to resolve disputes with employees though mandatory arbitration. Assembly Bill (AB) 51, effective January 1, 2020, prohibited employers from making mandatory arbitration a condition of employment. However, several industry groups, including the California Chamber of Commerce, sued to prevent enforcement of AB 51 immediately when it became effective.

Three years of circuitous litigation followed, culminating in the decision by the federal Ninth Circuit Court of Appeals, in Chamber of Commerce v. Bonta, affirming a district court injunction striking down California Assembly Bill (AB) 51 as preempted by the Federal Arbitration Act (FAA). As a result, for now at least, California employers may continue to implement mandatory employment arbitration agreements for employee claims for unpaid wages, discrimination, and other causes of action under the Labor Code and the Fair Employment and Housing Act (FEHA).