On December 30, 2019, a District Court issued a temporary restraining order (TRO) to enjoin the State of California from enforcing Assembly Bill 51 (AB 51), which was set to go into effect January 1, 2020. The proposed law prohibits mandatory arbitration of most employment-related claims and bars employers from threatening, retaliating, or discriminating against any applicant or employee because they decline to sign arbitration agreements (or waive other rights under the Labor Code or Fair Employment and Housing Act).

The California Chamber of Commerce and other business groups filed suit against the State, seeking to block the law, arguing that the Federal Arbitration Act preempted the law. Two days prior to the law taking effect, a federal court granted the TRO, effectively pressing pause on the new law.

At a hearing on the preliminary injunction on January 10, 2020, the court left in place the TRO, and gave the State a week to supplement its argument against the injunction. On January 24, 2020, the court will hear the motion for preliminary injunction. If the court grants the preliminary injunction, AB 51 will not be enforced while litigation on the merits of the law continues. If it is denied, AB 51 will be immediately enforced. 

For now, it is still lawful to require employees to sign arbitration agreements. Given how quickly litigation around AB 51 is moving, however, we encourage employers to monitor developments closely. We will continue to monitor developments and also provide updates as they become available.

Employer Payment of Arbitration Fees

Senate Bill 707 incentivizes employers that use arbitration agreements to establish processes to ensure timely payment of arbitration fees. Effective January 1, 2020, this law imposes steep penalties on employers if they fail to pay required arbitration fees (pursuant to a pre-dispute arbitration agreement) within 30 days of the due date.[1] An employer will be in material breach of the arbitration agreement, in default of the arbitration and waive its right to compel arbitration. Additionally, the employer’s default entitles the employee to move the case to court or compel arbitration and require the employer to pay reasonable attorney’s fees and costs in the arbitration.

[1] Notably, this new law also applies in the context of consumer arbitration.

Author: Caitie Emmett, Associate.

The Maier Law Group helps companies ensure that their policies and practices comply with the relevant workplace regulations.  Please contact us at info@maierlawgroup.com for more information.

This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact the Maier Law Group directly.