This Alert is a brief summary of Assembly Bill 51 ("AB-51") and its implications. The bill and its effects will be covered in more detail at Stradling's year-end employment law updates:

November 13 Santa Barbara Hilton Garden Inn

November 14 Santa Maria Country Club (Sponsored by Your People Professionals)

November 19 Newport Beach Stradling Office

On October 10, 2019, Governor Newsom signed AB-51 which prohibits employers from requiring their employees to enter into binding arbitration agreements. It also creates a private right of action against anyone who requires or coerces an employee to enter an arbitration agreement as a condition of their employment or retaliates against employees who refuses to do so. This new law applies to arbitration agreements entered into, modified or extended on or after January 1, 2020.

AB-51 does not apply to agreements that are voluntarily entered into or are entered into prior to January 1, 2020.

The law extends beyond prohibiting strictly mandatory arbitration agreements. It also expressly prohibits arbitration agreements that rely on opt out provisions: If an employer’s arbitration agreement is structured so that it applies unless the employee opts out, the agreement violates AB-51.

There is no doubt that AB-51 will be challenged in court, including based on the claim that it is preempted by the Federal Arbitration Act which favors the binding arbitration of disputes. Meanwhile, employers will be left to decide whether to comply with AB-51 or to continue to require that employees enter into mandatory employee arbitration agreements based on the presumed unenforceability of AB-51. Employers should consult with their legal counsel regarding what approach is right for them.