Sunday, November 27, 2022

Anti-Arbitration Lawsuit Update

As Alert went to print this week, a U.S. District Court judge was scheduled to hear arguments on whether to permanently stop a new California law banning arbitration agreements made as a condition of employment from taking effect.

The hearing was scheduled for January 10 at 10 a.m.

U.S. District Judge Kimberly J. Mueller issued a temporary restraining order on December 30, 2019 preventing the new law, AB 51 (Gonzalez; D-San Diego), from taking effect on January 1.


A business coalition led by the California Chamber of Commerce filed the AB 51 lawsuit, U.S. Chamber of Commerce v. Becerra, in December. Set to take effect on January 1, AB 51 forbids employers from offering and entering into arbitration agreements with their workers, even if the workers may opt out of arbitration.

The law sets substantial civil enforcement mechanisms, providing possible avenues for investigation and enforcement action by California state departments, and for lawsuits by individuals.

Especially problematic is that the law establishes the extraordinary burden of criminal penalties as well, making it a misdemeanor to violate any part of AB 51’s restrictions, which is punishable by imprisonment not exceeding six months, a fine not exceeding $1,000, or both.

Preempted by Federal Law

The complaint points out that AB 51 is preempted by the Federal Arbitration Act (FAA), which precludes any state from limiting, interfering with, or discriminating against the use of arbitration agreements to resolve claims.

In granting the temporary restraining order, Mueller echoed similar concerns, stating: “plaintiffs have raised serious questions regarding whether the challenged statute [AB 51] is preempted by the Federal Arbitration Act as construed by the United States Supreme Court.”

For more information on the U.S. Chamber of Commerce v. Becerra complaint, including lawsuit documents and recent news stories, visit and click on “CalChamber in Court” in the dropdown menu.

The California Chamber of Commerce is the largest, broad-based business advocate to government in California, working at the state and federal levels to influence government actions affecting all California business. As a not-for-profit, we leverage our front-line knowledge of laws and regulations to provide affordable and easy-to-use compliance products and services.

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