Employment Law Alert: Federal Court Grants Preliminary Injunction Blocking Enforcement of New California Law Banning Mandatory Arbitration Agreements

As discussed in our November 8, 2019 Employment Law Alert, a new California law (Assembly Bill 51) prohibits employers from requiring workers to enter into mandatory arbitration agreements for claims under the California Fair Employment and Housing Act or the California Labor Code. After granting a temporary restraining order on December 30, 2019, as reported here, a federal court in California has now granted a preliminary injunction blocking enforcement of AB 51 as to mandatory arbitration agreements governed by the Federal Arbitration Act (“FAA”). Chamber of Commerce of U.S., et al. v. Xavier Becerra, et al., Case No. 2:19-cv-02456 (E.D. Cal. Jan. 31, 2020). The preliminary injunction will remain in effect until final judgment on the merits or if the order is reversed upon appeal.

For the time being, based on the preliminary injunction, the State of California will be barred from enforcing AB 51 as to mandatory arbitration agreements governed by the FAA. Employers utilizing employee arbitration agreements should consult with legal counsel as to how to handle arbitration agreements pending a final decision in the case and continue to monitor further legal developments regarding the status of AB 51.