District Court Reiterates Endorsement for Utilizing Arbitration in Employment Matters

Evmark Business Solutions

In a recent ruling, the U.S. Court of Appeals for the 9th Circuit permanently upheld a preliminary injunction issued last year that prevents the state from enforcing legislation aimed at banning the use of arbitration in employment. This decision, made in Chamber of Commerce of the United States v. Bonta, ensures that arbitration can continue to be used as an efficient forum for resolving disputes between employees and employers in California.

The California Chamber of Commerce, along with a large coalition of employers, led the charge in challenging AB 51 (Lorena Gonzalez; D-San Diego), which sought to prohibit employers from requiring employees to arbitrate any disputes arising from their employment. The coalition argued that this legislation conflicted with federal law (the Federal Arbitration Act) and, if allowed to stand, would result in more litigation, significant delays in the state’s justice system, and increased costs for businesses and workers.

Furthermore, both the legislative analysis of AB 51 and the complaint itself acknowledged that the Supreme Court has consistently ruled that state laws targeting arbitration agreements for unfavorable treatment are preempted. This was the main reason why a previous bill, AB 3080 (Lorena Gonzalez; D-San Diego), was vetoed by Governor Jerry Brown in 2018.

The CalChamber and the employer coalition filed their initial motion to invalidate and halt enforcement of AB 51 on December 6, 2019. On December 30, 2019, Judge Kimberly Mueller issued a preliminary injunction, suspending the enforcement of AB 51 until the matter could be resolved. The U.S. Court of Appeals for the 9th Circuit upheld this temporary order on February 15, 2023.

A study comparing employment arbitrations and litigation found that employee-claimants were more than three times as likely to win in arbitration, more likely to receive higher monetary awards, and spent less time in arbitration than in litigation. Allowing arbitration to remain as a means of resolving disputes is beneficial for both employees and employers.

For more information, please contact Nicole Wasylkiw. 

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