On September 15, 2021, the Ninth Circuit Court of Appeals issued a ruling regarding AB 51, the California law prohibiting employers from requiring employees or applicants to execute arbitration agreements waiving their right to sue under state employment laws as a condition of employment.
Prohibition on Mandatory Arbitration
The Ninth Circuit overturned a lower court’s 2020 ruling blocking enforcement of the law on the grounds that it violated the Federal Arbitration Act. The Ninth Circuit also dissolved the injunction staying enforcement of AB 51. This means that, absent further appeal, AB 51 is now in effect and employers must cease any mandatory arbitration policies.
Under AB 51, employees can voluntarily consent to submit employment disputes to arbitration, but the voluntary nature of the option and the fact that employees are free to reject it must be clear. While the decision will likely be appealed by October 15, California employers should review their current practices and consult with legal counsel to determine the extent to which modifications are needed to comply with AB 51.
