Federal Judge Temporarily Halts New Californian Mandatory Employee Arbitration Law

Assembly Bill 51, which would have made mandatory employment arbitration agreements stemming from the California Fair Employment and Housing Act (FEHA) or California Labor Code illegal, was halted by a federal judge before implementation.

The U.S. Chamber of Commerce and other business groups such as the California Chamber of Commerce (CalChamber) had filed suit against California in December over conflict with the Federal Arbitration Act, the unconstitutionality of forced arbitration laws, and how many employment contracts would be rocked by such a law.

AB 51, which was authored by Assemblywoman Lorena Gonzalez (D-San Diego), now faces another hearing to decide whether or not it is implemented in California.

“AB 51 was trying to do a lot of change in one new law,” said attorney Ben Cruz. “If there was a labor code or discrimination violation, employees who were wronger would automatically have been thrown to an arbitrator to settle the dispute on hand. AB 51 would have made forcing employees to agree to this be illegal, Without AB 51 any discrimination case or labor issue, if not voluntarily signed to go to arbitration, could go right to court in the form of a lawsuit.”

“You can see why many companies want to keep this. They want to keep disputes in-house or at least semi-private rather than in the courts for all to see. If AB 51 wasn’t just stopped, employers would have to ask employees to sign it, and we know that not every employee would.”

U.S. District Judge Kimberly Mueller agreed with the points made by the Chambers of Commerce and said that the “plaintiffs have raised serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act.”

Further, Judge Mueller pointed out that “allowing the statute to take effect even briefly, if it is preempted, will cause disruption in the making of employment contracts, particularly given the criminal penalties to which violators of the law may be exposed.”

The ruling has put many rewritten contracts that were made with AB 51 in mind to be halted as the temporary ruling faces another hearing later this month on a more final decision.

“This is only stopped for a little bit,” noted Ben Cruz. “But it gives time for everyone to figure it out. Like the judge said, they raised good points on whether or not this clashes with federal law.”

“Plus, whenever uncertainty over ‘criminal penalties’ arises, you can be certain that everyone wants to work out all the kinks.”

The next hearing over the mandatory employment arbitration lawsuit is scheduled for January 10th.