U.S. District Judge Kimberly Mueller, in Sacramento on December 30, 2019, issued a temporary restraining order (TRO) blocking the state of California from enforcing AB 51, and on January 10 extended the TRO until January 31, 2020. The new law bans forced arbitration of a significant majority of claims that employees could bring against their employer.

The plaintiffs in the case are a coalition of business groups led by the California Chamber of Commerce. Through their lawsuit against the state, the plaintiffs seek a declaration that AB 51 is invalid with respect to employer-employee arbitration agreements governed by the Federal Arbitration Act, and an injunction preventing the state from enforcing the new law.

The TRO enjoins the state only, i.e., it prevents California from enforcing AB 51 (including its aggressive civil and criminal penalty provisions) but does not expressly enjoin private citizens from invoking the law’s protections.

The court may convert the TRO into a preliminary injunction (that could stay in place for the life of the case) covering some or all of AB 51’s material provisions. Or, the court could lift the TRO and impose no, or only a limited, injunction, in which case the state may be free to enforce some or all of the new law. In either case, emergency appeals are likely, with the possibility of review by the U.S. Supreme Court.

We will continue to keep you updated on AB 51 developments. In the meantime, during this period of uncertainty, we urge employers to consult employment counsel to discuss their options—both conservative and aggressive—regarding mandatory arbitration with their 2020 new hires.

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