To the surprise of few, Judge Kimberly Mueller has enjoined California from beginning enforcement of its law (Assembly Bill 51) prohibiting employers from requiring employees to waive their right to jury trials in favor of arbitration. In her three page
order, Judge Mueller noted that the plaintiffs (which included the U.S. Chamber of Commerce, the National Retail Federation, the National Association of Security Companies, and the Home Care Association of America) had satisfied their burden of showing that the law raised serious questions as to preemption under U.S. Supreme Court
precedent, that even a brief effective period for the Act would cause disruption, and that other factors, including the fact that the law provides criminal penalties for its violation, mitigate in favor of preventing it from taking effect.
Also finding that no harm would come to the defendants (California’s Attorney General, Labor Commissioner, and Director of the Department of Fair employment and Housing), the Court declined to require any security bond. While this decision is preliminary, it bodes well for employers’ ability to continue to use arbitration as a means to obtain prompt, objective resolutions to workplace disputes. A preliminary injunction hearing is scheduled for January 10, 2020.
Frantz Ward will stay on top of this litigation. If California succeeds in making criminals of employers who maintain arbitration programs, several other states are likely to follow suit, creating a confusing patchwork of regulations.