On January 1, the U.S. Court of Appeals for the 9th Circuit made permanent the preliminary injunction it issued last year prohibiting the state from enforcing legislation that sought to ban the use of arbitration in employment.
This year’s ruling in Chamber of Commerce of the United States v. Bonta ensures that arbitration can continue to be used as an efficient forum in resolving disputes by employees and employers in California.
The CalChamber led a large coalition of employers in challenging AB 51 (Lorena Gonzalez; D-San Diego), which prohibited employers from requiring employees to arbitrate any disputes arising from the employee’s employment.
In the successful lawsuit, the coalition argued that AB 51 conflicted with federal law (the Federal Arbitration Act), and if allowed to remain in effect, would have resulted in more litigation, significant delays in California’s justice system, and increased costs for businesses and workers alike.
Further, as stated in the legislative analysis of AB 51 and in the complaint itself, the Supreme Court has repeatedly held that state laws singling out arbitration agreements for disfavored treatment are preempted. This is the primary reason that a predecessor bill to AB 51, AB 3080 (Lorena Gonzalez; D-San Diego), was vetoed by Governor Jerry Brown in 2018.
CalChamber and the employer coalition filed their initial motion to invalidate and stop enforcement of AB 51 on December 6, 2019. On December 30, 2019, Judge Kimberly Mueller issued a preliminary injunction, halting enforcement of AB 51 until the matter could be resolved. The U.S. Court of Appeals for the 9th Circuit upheld the temporary order on February 15, 2023.
A study comparing employment arbitrations and litigation found that employee-claimants were greater than three times more likely to win in arbitration, more likely to receive high monetary awards in arbitration, and more likely to spend less time in arbitration than in litigation. Maintaining arbitration as a manner to resolve disputes is a benefit to employees and employers.