Challenging the Block: Analyzing the Bar Against California’s Enforcement of AB 51

By Natalie Pearson

As of 2024, the U.S. District Court for the Eastern District of California issued a permanent injunction, barring the enforcement of California’s Assembly Bill 51 (“AB 51”).[1]  California’s AB 51 was a state law aimed at prohibiting California employers from requiring arbitration agreements as a condition of employment, protecting workers from being forced into arbitration.[2]  The law was set to take effect in 2020 but was delayed by immediate legal challenges.[3]  After four years of litigation, the state law was permanently enjoined.[4]

The U.S. District Court for the Eastern District of California was the first to hear the issue, granting a preliminary injunction that temporarily blocked AB 51’s enforcement.[5]  The Ninth Circuit later reversed the District Court’s preliminary injunction,[6] and after rehearing the case, eventually reaffirmed that AB 51 was fully preempted by the Federal Arbitration Act (FAA).[7]  Ultimately, the District Court issued a permanent injunction against the enforcement of AB 51, significantly impacting employment protections, because the law was deemed to violate the FAA’s preemption of state laws that disfavor arbitration agreements.[8] 

While arbitration in and of itself is beneficial for efficiency, cost, and privacy,[9] mandatory arbitration–especially in employment contracts–and the injunction against AB 51 raise several significant concerns.  First, AB 51 was intended to protect employees from being coerced into arbitration.[10]  However, with the FAA overriding state law, the injunction against AB 51 highlights the limitations states face in protecting worker rights.[11]  Second, arbitration often favors employers, leaving employees at a disadvantage due to power imbalances.[12]  Third, the confidentiality of arbitration can shield employer misconduct, reducing public accountability.[13] 

One of the most critical issues with forced arbitration is the power imbalance it perpetuates between employers and employees.[14]  AB 51 attempted to equalize bargaining power between parties by enabling employees to negotiate or reject proposed arbitration clauses.[15]  However, large corporations often hold substantially more bargaining power, having greater experience and resources to manage arbitration processes.[16]  These clauses also allow employers to select the arbitrator and dictate the rules of the process, leaving the employee at a disadvantage with little ability to challenge or negotiate the terms.[17]  

Another issue with arbitration in these agreements is the confidentiality it affords to employers.  In terms of corporate accountability, “there is no doubt that much more of the arbitral process is shielded from public view.”[18]  In the context of employment agreements, arbitration not only reduces employers’ legal exposure but also allows for workplace misconduct to remain hidden from the public.[19]  This lack of transparency hinders accountability and is particularly problematic in reducing the public’s awareness of broader workplace issues.[20] 

In conclusion, the effect of the permanent injunction poses serious concerns for employees in California.  The significant power imbalance between employers and employees, coupled with the lack of transparency in mandatory arbitration, raises questions about the fairness and accountability of workplace dispute resolution processes.  By curbing AB 51, workers face increased challenges in seeking fair resolutions.  The enforcement of AB 51 would have provided greater protections for California employees against forced arbitration.
_____________________

[1] Chamber of Com. of United States v. Bonta, No. 2:19-CV-02456-KJM-DB, 2024 WL 3564626 (E.D. Cal. Jan. 2, 2024).

[2] Gluck, Henry, Will Other States Adopt California’s Ab 51 After Its Validation by the Ninth Circuit?, Benjamin N. Cardozo School of Law Journal of Conflict Resolution Blog (Nov. 30, 2021),  https://larc.cardozo.yu.edu/cgi/viewcontent.cgi?article=1016&context=cjcr-blog [https://perma.cc/B79L-Y4GR].

[3] Id.

[4] See Chamber of Com. of United States v. Becerra, 438 F. Supp. 3d 1078 (E.D. Cal. 2020); Chamber of Com. of United States v. Bonta, 13 F.4th 766 (9th Cir. 2021); Chamber of Com. of the United States of Am. v. Bonta, 62 F.4th 473 (9th Cir. 2023); see supra note 1.

[5] See Becerra, 438 F. Supp. 3d 1078.

[6] See Bonta, 13 F.4th 766.

[7] See Bonta, 62 F.4th 473.

[8] See supra note 1.

[9] Amanda R. James, Because Arbitration Can Be Beneficial, It Should Never Have to Be Mandatory: Making a Case Against Compelled Arbitration Based upon Pre-Dispute Agreements to Arbitrate in Consumer and Employee Adhesion Contracts, 62 Loy. L. Rev. 531 (Summer 2016).

[10] Tyler Blackington, Circuit Split Analysis: Involuntary Arbitration Agreements, 9 Emory Corp. Governance & Accountability Rev. 91, 109 (2022).

[11] Id.

[12] Alexander J. S. Colvin, Mandatory Arbitration and Inequality of Justice in Employment, 35 Berkeley J. Emp. & Lab. L. 71, 78 (2014).

[13] Cynthia Estlund, The Black Hole of Mandatory Arbitration, 96 N.C. L. Rev. 679, 680 (2018).

[14] Colvin, supra note 11.

[15] Employment Law-Federal Arbitration Act--Ninth Circuit Upholds Statute Prohibiting Forced Arbitration in Employment--Chamber of Commerce v. Bonta, 13 F.4th 766 (9th Cir. 2021), 135 Harv. L. Rev. 1664, 1670 (2022).

[16] Kendra Robbins, Ethical Issues in Employment Arbitration, 34 Geo. J. Legal Ethics 1261, 1269 (2021).

[17] Alexander J.S. Colvin, The Metastisization of Mandatory Arbitration, 94 Chi. Kent L. REV. 3, 4 (2019).

[18] Estlund, supra note 12.

[19] Gluck, supra note 2.

[20] Id.