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AB 51 Update: Court Continues TRO on California’s Arbitration Statute

California Assembly Bill (AB) 51, which attempts to ban certain mandatory arbitration agreements, was scheduled to go into effect on January 1, 2020. However, a coalition of business organizations filed a suit on December 9, 2019 seeking to enjoin AB 51. On December 30, 2019, a federal court in California issued a last minute temporary restraining order blocking AB 51 from going into effect and scheduled a hearing on the motion for January 10, 2020.

At the hearing, Chief U.S. District Judge Kimberly Mueller of the Eastern District of California heard oral argument on the motion for preliminary injunction in the Chamber of Commerce’s challenge to AB 51. Judge Mueller had many questions—especially for the State. For now, the temporary restraining order remains in place and the matter has been taken under submission with supplemental briefing to be filed on January 17, 2020, and January 24, 2020, by the State and the Chamber of Commerce, respectively, on two issues: (1) jurisdiction / standing and (2) severability.

From the outset, the State argued that AB 51 does not target arbitration but rather focuses on the collective waiver of any “right, forum or procedure for a violation” of state law. The court immediately expressed skepticism on this point, asking the State how it can possibly ignore and in fact “divorce” the legislative history from the text of the statute that is so singularly focused on arbitration. When asked about the availability of traditional contract defenses, such as consent, duress, and unconscionability, the State argued that AB 51 would not create a new “defense” to arbitration agreements and argued that nothing in the statute invalidates their effect. Rather, according to the State, AB 51 is intended only to influence employer behavior and that it was not directed at limiting the formation of arbitration agreements. The Court again expressed concern and questioned the State on how one can draw the line between behavior and formation.

In commenting on the Chamber of Commerce’s arguments, the court called it an “overstatement” to suggest that AB 51 “forces” employers to do away with arbitration agreements altogether. The Chamber had focused on the penal aspect of criminal and civil penalties for violations, to which the State’s responded that the statute would not actually invalidate agreements.

The court requested supplemental briefing on the issues of jurisdiction and standing and severability. The State argued that a provision in the statute regarding retaliation toward employees and applicants who refuse to sign arbitration agreements should be excluded from the enjoined provisions, but the Court took exception. Finally, the court noted the possibility of this case making its way to the Supreme Court of the United States.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume X, Number 13

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About this Author

Paul Smith Employment Lawyer California Ogletree Deakins
Associate

Paul Smith is an associate in the Sacramento Office of Ogletree Deakins. He crafts a practical, client-based approach to the defense of his clients in employment disputes spanning state and federal court, administrative proceedings, and arbitration.

Paul has experience working with small and large employers in matters of single and multi-plaintiff wage and hour disputes. He has also represented employers against allegations of discrimination, harassment, retaliation, and unfair labor practices.

916 840-3146
Daniel E. Richardson Attorney Sacramento Ogletree Deakins Employment Litigation
Associate

Daniel (Dan) Richardson is an associate in the Sacramento office of Ogletree Deakins. His employment litigation practice focuses on representing employers in all stages of litigation in federal and state courts, as well as in administrative proceedings and arbitrations. Dan’s employment litigation experience includes handling wage and hour disputes, workplace harassment claims, and claims for wrongful termination. He also has experience advising clients on a wide range of employment-related matters, including, wage and hour law compliance, employment agreements, termination, and employee handbooks. Dan has represented clients in a broad array of industries, including construction, manufacturing, food processing, health care, and retail.

Prior to joining Ogletree Deakins, Dan worked at a Sacramento law firm where he represented businesses in a variety of civil actions, including breach of contract, employment, and business tort lawsuits.

Dan graduated cum laude from Gonzaga University School of Law. Prior to college, Dan served in the United States Army with the 10th Mountain Division and was deployed to Iraq.

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