Ninth Circuit Panel Rules That AB 51 Is Preempted by Federal Law and Unenforceable

By: Daniel J. McCoy

On the heels of more than three years of legal challenges (summarized here) to California’s AB 51, which prohibits employers from requiring employees to arbitrate disputes under the state’s Labor Code and Fair Employment and Housing Act (FEHA), a three-judge panel of the Ninth Circuit Court of Appeals completely struck down the law as preempted by the Federal Arbitration Act (FAA), in an opinion published on February 15, 2023.

While further appeals—an en banc rehearing by the Ninth Circuit and/or review by the U.S. Supreme Court—are possible, until further notice employers are no longer restricted by AB 51. As such, they may require employees to confidentially arbitrate, rather than litigate in open court, claims for unpaid wages, discrimination and many other claims covered by the Labor Code and FEHA.

The Ninth Circuit’s opinion has no bearing on the 2022 amendment to the FAA (summarized here), which prohibits employers from requiring employees to arbitrate sexual assault or sexual harassment claims.

In light of both Viking River, summarized here, and the Ninth Circuit’s AB 51 opinion, employers with California personnel are advised to take a fresh look at their existing employee arbitration agreements, and consult counsel about potential modifications.