U.S. District Judge Kimberly Mueller has temporarily blocked a new California labor law that would prevent the use of arbitration agreements as a condition of employment. The judge ruled that the Federal Arbitration Act (FAA) preempts the state law. The U.S. Chamber of Commerce and other groups filed suit, raising the preemption challenge along with questions about burdens business will face.
The new bill, AB 51, was set to take effect on January 1, 2020, but on December 30, 2019, Judge Mueller granted a motion for a temporary restraining order, preventing officials from enforcing the law temporarily. Judge Mueller later granted the motion for a preliminary injunction in a minute order, noting a written order would be coming in the next few days.
The ban prevents state officials from enforcing the law. Judge Mueller granted the Chamber of Commerce’s preliminary injunction. The banned section states, “[a] person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right…including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.”
The law also allows workers to seek damages and attorney fees, and employers could potentially be subject to liability. California argued it is an effort to reduce employer advantage and shield workers from discrimination and retaliation for refusing to sign an arbitration contract; while the Chamber of Commerce and other plaintiffs claimed it was a bid to threaten arbitration contracts. Workers can have voluntary arbitration agreements.
It is unclear if California intends to appeal the decision.
The plaintiffs are represented by Mayer Brown and Littler Mendelson.
