On October 20, 2021, the U.S. Chamber of Commerce filed a petition for rehearing en banc (a petition for the court’s multiple active judges to rehear a matter previously heard only by the court’s three-judge panel) to appeal the Ninth Circuit panel’s decision in Chamber of Commerce v. Bonta (September 15, 2021).
In that decision, the Ninth Circuit reinstated California Assembly Bill 51’s (AB 51) prohibition against requiring applicants or employees to sign arbitration agreements as a condition of employment. The court also determined that AB 51 did not violate the Federal Arbitration Act (FAA) because it allowed employees and applicants to choose to enter into arbitration agreements based on mutual consent. The court did conclude, however, that the criminal and civil sanctions attached to a violation of AB 51 were pre-empted by the FAA, since they presented an obstacle to the “liberal federal policy favoring arbitration agreements.” You can review our legal update on the Chamber of Commerce v. Bonta case here.
The U.S. Chamber of Commerce’s petition for en banc review asserts that the Ninth Circuit Panel’s decision violated U.S. Supreme Court precedent, created a circuit split on the reach of FAA preemption, and threatened to upend employment arbitration throughout California, negatively affecting “thousands of businesses” in California with “millions of workers.”
The district court’s injunction against the enforcement of AB 51 will remain in effect pending the en banc review. This means that the impact of AB 51 is once again on hold at this time. If the petition is denied, the U.S. Supreme Court will likely review the matter and stay the decision pending its review.
Though employers technically may continue to require applicants to sign mandatory arbitration agreements as a condition of employment pending the court’s review, these agreements may become unenforceable later if the appeal is not granted. Given the continued uncertainty of the enforcement of AB 51, employers may wish to refrain from presenting arbitration agreements to applicants, and instead present mutual and voluntary arbitration agreements to employees in the onboarding process, as an agreement of this nature can be enforceable regardless of the case’s outcome. This approach would require an update to the company’s offer letters and employment agreements, as well as several revisions to the arbitration agreement to ensure compliance with AB 51.
Remember that employers should always retain all previously-signed arbitration agreements in the employee's personnel file. It is possible that one version may be enforceable even if another version is not, depending upon the current state of the law. In addition, the fact that the employee has signed multiple arbitration agreements throughout employment may tend to demonstrate the employee's knowing and voluntary cooperation with the agreement to arbitrate, if challenged.
For questions regarding arbitration agreements, or to request assistance with revising offer letters, employment agreements and arbitration agreements, contact the employment attorneys at LightGabler.