In September 2021, in Chamber of Commerce of the United States of America v. Bonta ("Bonta I"), the Ninth Circuit upheld, in a divided panel, parts of California Assembly Bill ("AB") 51-which prohibits employers from entering into mandatory arbitration agreements and includes criminal and civil penalties for violations-holding that portions of AB 51 are not preempted by the Federal Arbitration Act ("FAA").Specifically, the court in Bonta I held that the FAA does not preempt the portion of AB 51 that precludes employers from mandating arbitration agreements as a condition of employment (with respect to California Labor Code and Fair Employment and Housing Act claims) or from retaliating against employees or job applicants who refuse to sign such an agreement. For more details regarding the decision, please review our previous advisory, available here.
Revisiting its September 2021 decision, the Ninth Circuit decided earlier this month in Bonta II-again in a divided decision-that employers in California can require workers to sign arbitration agreements as a condition of employment. Reversing course, the Bonta II court ruled that the FAA entirely preempts AB 51 and that arbitration agreements should be treated on equal footing (as other contracts are treated under the FAA).
Implications and Action Items for California Employers
- For now, California employers can use mandatory arbitration agreements for employees and new hires, recognizing that Bonta II may be subject to further appeals.
- Employers who adopted voluntary arbitration agreements or other hybrid approaches since September 2021 should contact legal counsel to discuss the pros and cons of revising their arbitration agreements.
- Employers implementing mandatory arbitration agreements must work with counsel to ensure that such agreements are drafted correctly and comply with other prevailing requirements and considerations
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