{"id":1037,"date":"2024-01-04T16:10:06","date_gmt":"2024-01-04T20:10:06","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1037"},"modified":"2024-01-04T16:10:06","modified_gmt":"2024-01-04T20:10:06","slug":"permanent-injunction-issued-precluding-enforcement-of-californias-ban-on-mandatory-arbitration-agreements","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/01\/04\/permanent-injunction-issued-precluding-enforcement-of-californias-ban-on-mandatory-arbitration-agreements\/","title":{"rendered":"Permanent Injunction Issued Precluding Enforcement Of California\u2019s Ban On Mandatory Arbitration Agreements"},"content":{"rendered":"

\"\"<\/a>By\u00a0 Eden Anderson, Rebecca Bjork, and Gerald Maatman, Jr.\u00a0 <\/b><\/p>\n

Duane Morris Takeaways: <\/i><\/b>Last year, the Ninth Circuit held in <\/b>Chamber of Commerce of the United States v. Bonta, 62 F.4th 473 (9th Cir. 2023), that California Assembly Bill (AB) 51 \u2014 a statute that attempted to criminalize employers\u2019 use of mandatory arbitration agreements \u2014 was preempted by the Federal Arbitration Act.\u00a0 In Bonta, the Ninth Circuit affirmed a preliminary injunction prohibiting the State of California from enforcing AB 51.\u00a0 On January 1, 2024, following remand in the case, the district court entered a permanent injunction<\/a>\u00a0that enjoins the State from enforcing the Labor and Government Code sections enacted as part of AB 51, and awarding the plaintiffs, as prevailing parties, $822,496.\u00a0 The district court\u2019s order brings finality, judgment, and ultimate success to a strong coalition of employer interests who banded together to challenge California\u2019s attempt to criminalize the use of mandatory arbitration agreements.\u00a0<\/i><\/p>\n

Case Background <\/b><\/p>\n

AB 51, effective January 1, 2020, added Section 432.6 to the California Labor Code and Section 12953 to the California Government Code.\u00a0 Labor Code Section 432.6 makes it a misdemeanor for employers to require employees or applicants to waive \u201cany right, forum, or procedure for violation of any provision of the California Fair Employment and Housing Act\u201d or the California Labor Code.\u00a0 Government Code Section 12953 makes it an unlawful employment practice to violate Labor Code Section 432.6.<\/p>\n

In December 2019, the U.S. Chamber of Commerce, California Chamber of Commerce, National Retail Federation, California Retailers Association, National Association of Security Companies, Home Care Association of America, and the California Association for Health Services at Home (\u201cPlaintiffs\u201d) filed a complaint against the State of California challenging AB 51 as preempted by the Federal Arbitration Act (FAA).<\/p>\n

The district court granted the Plaintiffs\u2019 motion for a preliminary injunction, finding that Plaintiffs were likely to succeed on the merits.\u00a0 California appealed, and challenged only the district court\u2019s holding that AB 51 was likely to be preempted by the FAA.\u00a0 A divided panel of the Ninth Circuit initially reversed the district court in a September 2021 opinion but, after a rehearing petition was filed, the Ninth Circuit withdrew its opinion and issued a new opinion, which affirmed the district court\u2019s preliminary injunction order and held that the FAA preempts AB 51.<\/p>\n

The District Court\u2019s Issuance Of A Permanent Injunction<\/b><\/p>\n

After the decision, the case was remanded to the district court and, on January 1, 2024, the district court issued an order permanently enjoining the State of California from enforcing Labor Code Section 432.6 and Government Code Section 12953.\u00a0 Additionally, the district court awarded the Plaintiffs, as prevailing parties, $822,496 in attorneys\u2019 fees.\u00a0 The order was obtained via stipulation of the parties whereby they agreed that the Ninth Circuit\u2019s decision in Bonta<\/i> was dispositive of the legal issues in the case and further agreed to the amount of attorneys\u2019 fees to be paid by the State.<\/p>\n

Implications For Employers<\/b><\/p>\n

The district court\u2019s order <\/b>brings finality, judgment, and ultimate success to a strong coalition of employer interests who banded together to challenge AB 51.\u00a0 Employers in California may permissibly use mandatory arbitration agreements.\u00a0 However, the use of mandatory arbitration agreements potentially can be problematic when it comes to enforcing the agreement.\u00a0 When an applicant or employee must sign an arbitration agreement as a condition of employment, the agreement is a contract of adhesion that will likely be found to be procedurally unconscionable.\u00a0 Thus, a court may refuse to enforce a mandatory arbitration agreement if there are also terms in the agreement that are substantively unconscionable and non-severable.<\/p>\n

\n","protected":false},"excerpt":{"rendered":"

By\u00a0 Eden Anderson, Rebecca Bjork, and Gerald Maatman, Jr.\u00a0 Duane Morris Takeaways: Last year, the Ninth Circuit held in Chamber of Commerce of the United States v. Bonta, 62 F.4th 473 (9th Cir. 2023), that California Assembly Bill (AB) 51 \u2014 a statute that attempted to criminalize employers\u2019 use of mandatory arbitration agreements \u2014 was … <\/p>\n

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