The Sept. 16 decision is a mixed bag for California employers. The court held that the Federal Arbitration Act does not prejudge the part of the law that prevents employers from entering into arbitration agreements as a condition of employment or from retaliating against employees or candidates who refuse to sign an arbitration agreement. However, the court emphasized in its decision that the law does not invalidate arbitration agreements that are otherwise enforceable under the FAA, including agreements that violate the new law. The Ninth District also upheld the lower court`s decision invalidating the enforcement mechanisms contained in AB 51 that had imposed civil and criminal penalties on employers who violated the new law. The request to resume the hearing is largely based on Justice Sandra Ikuta`s fierce opposition to the committee`s underlying decision. The petition asks the entire court to hear and reconsider the case, as the panel`s decision – which the board said is based on an erroneous distinction between the formation and enforcement of an arbitration agreement – violates the authority of the U.S. Supreme Court and creates a split between the 9th District on the one hand and the 1st District and the 4th District on the other. The petition argues that the FAA preempts state laws that interfere with the application or formation of arbitration agreements, and rejects the panel`s assertion that the FAA has no effect on state laws governing the formation of arbitration agreements. AB 51 was signed into law by California Governor Newsom in October 2019 and created Section 432.6 of the Labor Act, which would have prohibited employers from requiring workers to have rights, a forum, or procedures related to an alleged violation of california`s Fair Employment and Housing Act (FEHA) or California Labor Code as a condition of employment, maintaining employment or receiving an employment-related benefit. renounce.
In other words, California employers could no longer require employees to sign arbitration agreements as a condition of employment. It is important to note that AB 51 also created civil and criminal penalties for employers who violated this law, including up to six months in prison and a fine of up to $1,000. AB 51 is expected to come into force on January 1, 2020. California Assembly Bill 51, which went into effect in October 2019, would make it illegal for California employers to require applicants and employees to sign arbitration agreements as a condition of employment. Violations of the law could not only result in civil and criminal penalties, but would also be considered an “illegal employment practice.” This means that employers would be subject to private actions under the Employment and Housing Equity Act (“FEHA”, as set out in Article 12960 of the Government Code). The law is expected to become enforceable from 1 January 2020. The Court noted that paragraph 432.6(f) expressly provides for the validity and enforceability of arbitration agreements — “[t]he article is not intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.” Callus. Rennet. Code § ۴۳۲٫۶(f). For example, the Ninth Circuit ruled that section 432.6 governs only the employer`s conduct prior to the agreement, which goes beyond the scope of the FAA`s right of first refusal. Although section 432.6 prohibits employers from requiring arbitration agreements as a condition of employment, this does not affect the applicability of such agreements. This warning provides additional details about AB 51 and the implications of the Ninth Circle`s decision.
California employers who have entered into arbitration agreements with their California employees after January 1, 2020, who intend to enter into such arbitration agreements in the future, or who otherwise plan to use arbitration agreements for their California employees, should carefully review this warning and consult with legal counsel about the impact of the Ninth District decision on their arbitration agreements and practices. AB 51 attempted to impose criminal sanctions for violation of Article 432.6 of the Labour Code under Articles 433 and 23 of the Labour Code and to impose civil liability on employers by adding violations of Article 432.6 of the Labour Code as “illegal employment practices” under FEHA. Unlike the regulation of conduct prior to the agreement, the Court noted that these enforcement mechanisms are anticipated by the FAA because they necessarily penalize employers for the performance of an arbitration agreement. Overall, the tribunal reinstated section 432.6 as separate law, but maintained the right of first refusal of enforcement mechanisms contained in AB 51 and confirmed that section 432.6 cannot be used to invalidate an arbitration agreement. If the other provisions of AB 51 are not suspended until further appeal, employers should consider how to proceed with respect to the use of arbitration agreements in California. The majority opinion of the committee first focused on whether AB 51 is fully or partially anticipated by the FAA. The majority opinion agreed with the District Court that imposing criminal and civil penalties on employers for entering into arbitration agreements would be an impediment to the FAA`s objectives, but that such sanctions are not provided for to the extent that they apply only to conduct prior to the agreement. In other words, the majority view held that employers cannot be punished criminally or otherwise for signing an out-of-court arbitration agreement, but that they can be punished if they make an arbitration agreement a condition of employment. The majority read that AB 51 focused on whether arbitration agreements are consensual, which is a matter the FAA leaves to state law. Thus, Section 432.6 after the Ninth Circuit governs only conduct prior to the agreement and cannot conflict with the FAA, which takes effect upon the conclusion of an agreement.
In doing so, the Court distinguished the precedent of the U.S. Supreme Court, which concluded that similar recent attempts to restrict arbitration contradicted strong federal policies that favor it. Given the ongoing uncertainty until the landscape crystallizes on the applicability of AB51, employers who wish to enforce labor arbitration agreements in California should contact an experienced employment consultant. In a somewhat surprising (and certainly creative) decision, a divided panel in the 9th District Court ruled that parts of California Assembly Bill 51 (“AB 51”) of 2019 were not anticipated by the Federal Arbitration Act (“FAA”). The September 15, 2021 decision has the potential to reshape California`s mandatory labor arbitration agreement law. However, other challenges and a revision of the law remain. .