The Ninth Circuit Court of Appeals has held a California law designed to inhibit arbitration of employment disputes violated the Federal Arbitration Act. Chamber of Commerce of the United States of America et. al. v Rob Bonta, Case No. 20-15291 (February 15, 2023).
California enacted Assembly Bill 51 to protect employees from what it called forced arbitration by making it a criminal offense (misdemeanor) for an employer to require an existing employee or applicant for employment to waive rights to judicial resolution of certain disputes and rather require agreement to arbitrate the claims as a condition of employment.
To avoid conflict with Supreme Court precedent, the law specifically does not prohibit enforcement of an agreement to arbitrate disputes rather than going into court, rather it makes it a criminal offense for the employer to require an employee to enter into the agreement.
While the restriction on arbitration agreements is indirect (an agreement would be enforceable but it is a crime for the employer to require the employee to enter into the agreement), nevertheless the court finds this burden imposed on the formation of an arbitration agreements is antithetical to the Federal Arbitrator Act’s liberal federal policy favoring arbitration agreements. The decision notes two sister courts (the First Circuit and the Fourth Circuit) have reached similar conclusions. There is dissent.
This decision may not be the final word since it is subject to appeal for determination by the Ninth Circuit en banc or appeal to the United States Supreme Court.
If this decision holds, states may be powerless to prevent employers from conditioning employment or continued employment on agreements to arbitrate rather than litigate workplace disputes.
This decision should have no bearing on the Speak Out Act signed by President Biden on December 7, 2022 which prohibits pre-dispute agreements to arbitrate sexual assault or sexual harassment claims. I have blogged about this law in the present.
Comments