Employment Arbitration Agreements Remain Legal in California – At Least for Now!
Saturday, August 27, 2022

As we previously reported here, in Chamber of Commerce of the U.S.A. v. Bonta, 13 F.4th 766 (9th Cir. 2021), a three-member panel of the Ninth Circuit Court of Appeals resurrected California Labor Code Section 432.6, which prohibited employers from requiring California employees to agree to arbitrate their employment-related disputes.

In a new twist, however, the same Ninth Circuit panel that upheld the law has now withdrawn and decided to reconsider that ruling.  While the panel reconsiders its ruling, California employers are free to require employees and applicants to sign arbitration agreements since a lower court previously struck down the anti-arbitration statute (signed by Gov. Gavin Newson in 2019) on the utterly predictable ground that it is preempted by the Federal Arbitration Act.

One unusual aspect of the panel’s decision to reconsider the Bonta decision is that no new decision has been issued to replace it.  Although a date has not been announced for a further hearing, the panel is expected to eventually issue a revised opinion.

Reading tea leaves, it would appear that Judge William A. Fletcher (who joined the original opinion written by Tenth Circuit Judge Carlos F. Lucero (sitting by designation)) may have changed his mind about the statute’s viability because, in this latest order, Judge Fletcher joined Judge Sandra S. Ikuta in deciding to withdraw the opinion so that it could be reconsidered.  Judge Ikuta wrote a fiery dissent to the original opinion that would have affirmed the lower court’s order striking down the statute.

A revised opinion could again alter the arbitration landscape in California, with a determination that employers must follow Section 432.6 (prohibiting arbitration agreements) or, alternatively, ruling that Section 432.6 is preempted by the Federal Arbitration Act and, therefore, unenforceable – or, maybe something in between those two possibilities!

Stay tuned…  We will continue to monitor developments regarding this issue.

 

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