Recently, the Ninth Circuit Court of Appeals ruled Assembly Bill 51 (AB 51) is preempted by the Federal Arbitration Act (“FAA”) and upheld a preliminary injunction that blocks California’s ban on mandatory arbitration in employment. Therefore, California employers may require mandatory arbitration agreements as a condition of employment.

The Court of Appeals held that “under California law, an employee can ‘consent’ to an employment contract by entering into it, even if the contract was a product of unequal bargaining power, and even if it contains terms (such as an arbitration provision) that the employee dislikes, so long as the terms are not invalid due to unconscionability or other generally applicable contract principles.

It is still possible California may choose to petition for the case to be taken up by the Ninth Circuit en banc or for review by the United States Supreme Court.

Based on the Ninth Circuit’s ruling, employers may require employees to sign arbitration agreements as a condition of employment. To decide whether to do so, and to ensure the arbitration agreement will be enforceable if they do, employers should consult with their business attorneys.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.