Today a federal court issued a temporary restraining order prohibiting the state of California from enforcing Assembly Bill 51, the state’s new anti-arbitration law, at least until another hearing scheduled for January 10, 2020. The new law was scheduled to take effect January 1, 2020.
The temporary restraining order was issued in the federal lawsuit filed earlier this month by the U.S. Chamber of Commerce and other pro-business organizations seeking a permanent injunction against enforcement of AB 51. The business groups argue that AB 51 is preempted by the Federal Arbitration Act (“FAA”).
In the order, the U.S. District Court for the Eastern District of California found the “plaintiffs have raised serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act” and that allowing the new law to take effect even temporarily could “cause disruption in the making of employment contracts” in California.
Today’s order means California employers can continue, at least until January 10, 2020, to require employees to sign mandatory arbitration agreements as a condition of employment. It also means the Court found the plaintiffs’ argument that AB 51 is preempted by the FAA to be persuasive.