District Court Judge Issues Preliminary Injunction Enjoining the State from Prohibiting Mandatory Arbitration Agreements (AB 51)

CATEGORY: Special Bulletins
CLIENT TYPE: Private Education
PUBLICATION: LCW Special Bulletin
DATE: Feb 03, 2020

Assembly Bill 51 (AB 51) prohibited mandatory arbitration agreements in employment.  The new law was set to take effect on January 1, 2020.  However, the California Chamber of Commerce and other business groups sued to block AB 51.  They sought to have AB 51 declared preempted by the Federal Arbitration Act, which allows for mandatory arbitration.  On December 30, 2019 a federal district court judge granted a temporary restraining order.  On Friday January 31, 2020 the court granted a preliminary injunction directing the State not to enforce the new law.  The preliminary injunction will remain in effect until the case is resolved on the merits.

The preliminary injunction provides a legitimate basis for schools to issue new mandatory arbitration agreements in employment (AB 51 did not apply to enrollment agreements).  However, we recommend seeking advice from legal counsel before taking any action.  The court’s order was sparse and the judge promised to provide further detail “in the coming days.”  Schools will need to weigh a number of factors before deciding how to proceed.  In any case, the preliminary injunction provides an opportunity for schools to refine their arbitration agreements to withstand a potential challenge.  We will continue to track the progress of the litigation regarding AB 51 and the expected appeals.

Chamber of Commerce of the United States of America et al. v. Becerra et al.,case number 2:19-cv-02456-KJM-DB, in the U.S. District Court for the Eastern District of California.