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On October 10, 2023, Governor Gavin Newsom signed into law a bill that will allow plaintiffs in California to continue pursuing claims during the pendency of an appeal to an order denying a petition to compel arbitration.
Parties to an arbitration agreement sometimes choose to include a delegation clause, which is a provision that delegates to the arbitrator?rather than a court?gateway questions of arbitrability, such as whether the agreement covers a particular controversy or whether the arbitration provision is enforceable at all.
The current 2-1 decision, issued on February 15, 2023, now holds that AB 51 serves as an obstacle to arbitration by subjecting employers to possible criminal liability for requiring mandatory arbitration and is therefore fully preempted by the FAA.
Assembly Bill 51 (AB 51) was passed to protect employees from what the legislature termed "forced arbitration." The law imposed civil liability and criminal penalties on employers who require an existing employee or an applicant for employment to agree to arbitrate as a condition of employment.
Background of Assembly Bill 51 In October 2019, Governor Gavin Newsom signed Assembly Bill 51 into law. It went into effect January 1, 2020.
For this reason the court held that AB 51 was preempted by the FAA and affirmed the trial court's granting of the preliminary injunction. The result is that California employers remain able to require employees to execute arbitration agreements without risk of potential criminal liability.
California Employers Can Require Arbitration Agreements as a Condition of Employment. As of February 15, 2023, California employers can require employees to agree to arbitrate most employment disputes as a condition of employment after the Ninth Circuit Court of Appeals, in Chamber of Commerce of the U.S., et al. v.
The Ninth Circuit rejected California's argument AB 51 was intended to regulate ?employer conduct,? not the formation of the arbitration agreement, and thus was not in conflict with the FAA. California also argued AB 51 shielded employees from involuntary contracts ?forced upon them by employers? and protected them ...