Law prohibiting mandatory arbitration agreements in employment is temporarily put on hold

Published on



Employers who utilize employment arbitration agreements have been preparing to issue new arbitration agreement forms effective January 1, 2020 in light of the new law (AB 51), which prohibits employers from requiring employees or prospective employees to sign agreements mandating arbitration of claims under the Fair Employment and Housing Act (“FEHA”) or the Labor Code. But employers may hold off on issuing these new AB 51-compliant agreements for now.

What happened??

On December 29, 2019, a California federal court granted a temporary restraining order (“TRO”) of AB 51, which was supposed to take effect on January 1, 2020, but employer advocates successfully showed a likelihood of irreparable injury if the law were to take immediate effect. The TRO prohibits officers of the State of California from enforcing AB 51, and the TRO will remain in effect until the court issues an order on plaintiffs’ pending motion for a preliminary injunction.

What will happen next?

The court set an expedited hearing on the injunction motion for January 10, 2020. If the court grants the injunction motion, it will prevent AB 51 from taking effect before the court rules on the merits of plaintiffs’ case and a judgment is entered. If the court denies the motion, then AB 51 may proceed to take effect.

What should we do in the meantime?

Until the court rules on the motion for preliminary injunction, employers may continue to use mandatory arbitration agreements (provided they are otherwise lawful). However, employers should pay close attention to the court proceedings in this case, and they should be prepared to immediately stop implementing mandatory agreements and proceed with new voluntary arbitration agreements if the court denies the motion.

Scali Rasmussen will provide a further update once a decision on the preliminary injunction has been reached. Please reach out to your employment counsel for further guidance and advice.