The new year brought some good news for California employers. On January 1, 2024, U.S. District Court Judge Kimberly Mueller issued a decision permanently enjoining California state officials from enforcing AB 51, the contested law that sought to prohibit employers from “forcing” job applicants or employees to enter into pre-dispute employment arbitration agreements covering certain discrimination and retaliation claims. The permanent injunction reaffirmed the ability of employers to mandate arbitration for most employment disputes.
This decision comes less than a year after the Ninth Circuit found that the Federal Arbitration Act (FAA) preempts AB 51 in Chamber of Commerce of the United States v. Bonta. As noted in our blog post on the Bonta decision, the Ninth Circuit ultimately upheld a temporary injunction against AB 51, allowing California employers to continue to use employment arbitration agreements while the matter was litigated, and which—given Judge Mueller’s permanent injunction—now can continue indefinitely.
The Lead Up: Recap of the AB 51 Litigation Battle
Here is a quick summary of the AB 51 litigation leading up to the January 1, 2024 permanent injunction:
- In December 2019, Judge Mueller issued a temporary restraining order, prohibiting California from enforcing AB 51.
- In September 2021, the Ninth Circuit struck down Judge Mueller’s decision to temporarily restrain California from enforcing AB 51, holding that AB 51 was not largely preempted by the FAA.
- In August 2022, the Ninth Circuit withdrew its September 2021 decision and voted to take another look at the case through a panel rehearing.
- In February 2023, the Ninth Circuit, backtracking on their September 2021 decision, held that AB 51 is preempted by the FAA because the deterring penalties that AB 51 imposes on employers is antithetical to the FAA’s policy of favoring arbitration agreements.