As we recently wrote here, on December 29, 2019, just days before California’s new arbitration statute known as AB 51 was to go into effect, a federal judge in the United States District Court of the Eastern District of California granted a temporary restraining order (“TRO”) to enjoin enforcement of AB 51.
The new law, which was set to go into effect on January 1, 2020, would outlaw mandatory arbitration agreements with employees.
AB 51 would also prohibit arbitration agreements that would require individuals to take affirmative action to be excluded from arbitration, such as opting out. The law would also appear to extend to jury waivers and class action waivers. And it would include criminal penalties.
In an action filed by a number of business groups, including the Chamber of Commerce, challenging the statute as being preempted by the Federal Arbitration Act (“FAA”), Judge Kimberly Mueller concluded that it would be disruptive if the statute went into effect for a brief period of time, only to have it later determined to be preempted.
Judge Mueller granted a TRO to keep the status quo in place until she conducted a preliminary injunction hearing on January 10, 2020.
During the January 10, 2020 hearing, Judge Mueller extended the TRO while she considers supplemental briefing to be submitted later this month on jurisdiction and standing issues.
And she acknowledged that the case could end up in front of the United States Supreme Court.
We will continue to monitor developments in this case.
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