Many of you know that California allows employers and employees to agree to waive wage and hour class actions via an enforceable arbitration agreement. In large part due to the significance of this rule on narrowing or eliminating class actions, we see a lot of activity in court cases around arbitration agreements.
First, a bit of history: AB 51, which was signed by Governor Newsom in 2019, prohibits employers from requiring employees to sign an arbitration agreement as a condition of their employment. Many employers celebrated this ruling. In 2020, a lower court granted an injunction that paused the implementation of AB 51. As a result, many employers stopped requiring arbitration agreements. Then, in September 2021, a panel of the Ninth Circuit Court of Appeals reversed the lower court’s injunction. Now employers aren’t sure what to do – require arbitration or make it voluntary?
This decision is highly contentious and therefore likely to be appealed to either a full Ninth Circuit review or be brought before the U.S. Supreme Court. Enforcement of the decision is on hold until the federal court issues a mandate to overturn the prior court-issued injunction on AB 51.
However, because the injunction may be lifted at any time, employers who required employees to sign mandatory arbitration agreements after January 1, 2020 may need to rethink those agreements.
Next steps: Do you have an arbitration agreement, either voluntary or mandatory?
- If the answer is no, we strongly suggests adopting one.
- If the answer is yes, and arbitration is voluntary, we recommend having that agreement reviewed because the law in this area changes so frequently;
- If you have mandatory arbitration, let's talk about next steps in response to the recent decision.
