A coalition of businesses led by the California Chamber of Commerce has filed a legal challenge seeking to overturn a recently enacted California law that precludes employers from enforcing arbitration agreements made as a condition of employment—and making it a crime for businesses to do so—even if workers may opt out of arbitration.
The subject of the lawsuit is AB 51 (Gonzalez; D-San Diego), a job killer bill signed into law in October 2019 by California Governor Gavin Newsom.
The lawsuit, filed in the Eastern District of California, asks for declaratory and injunctive relief from AB 51, which includes criminal penalties for businesses that attempt to use arbitration to resolve a broad range of labor and employment issues.
“It doesn’t make sense to place businesses at risk for criminal penalties for a practice that has been favored by California and federal law and consistently upheld by the courts,” said Allan Zaremberg, president and CEO of the California Chamber of Commerce. “While it may not serve the best interests of the trial lawyers, expeditious resolution through the arbitration process serves the interests of employees and employers.”
According to the complaint, AB 51 will result in more litigation, impose significant delays in California’s justice system and increase costs for businesses and workers alike. Further, as stated in the legislative analysis of AB 51 and in the complaint itself, the Supreme Court has repeatedly held that state laws singling out arbitration agreements for disfavored treatment are preempted. This is the primary reason that a predecessor bill to AB 51, AB 3080 (Gonzalez; D-San Diego), was vetoed by Governor Jerry Brown in 2018.
Named in the complaint in their official capacities are California’s Attorney General Xavier Becerra, State Labor Commissioner Lilia Garcia Brower, Secretary of the California Labor and Workforce Development Agency Julie Su, and Director of the California Department of Fair Employment and Housing Kevin Kish.
The complaint can be found at https://advocacy.calchamber.com/wp-content/uploads/2019/12/19-AT-1142-1-Complaint-and-civil-cover-sheet.pdf.
The California Chamber of Commerce (CalChamber) is the largest broad-based business advocate to government in California. Membership represents one-quarter of the private sector jobs in California and includes firms of all sizes and companies from every industry within the state. Leveraging our front-line knowledge of laws and regulations, we provide products and services to help businesses comply with both federal and state law. CalChamber, a not-for-profit organization with roots dating to 1890, promotes international trade and investment in order to stimulate California’s economy and create jobs. Please visit our website at www.calchamber.com.