District Court Issues Preliminary Injunction in Business Groups’ Challenge to New California Law Restricting Employment PDAA Use and Enforcement
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By George H. Friedman, SAA Editor-in-Chief

A federal district court has issued a preliminary injunction staying California AB-51 implementation, pending final determination on the merits of a suit challenging the statute.

We had reported in SAAs 2019-48 (Dec. 18) & -47 (Dec. 11) that a coalition of business groups had filed suit in Chamber of Commerce of the United States v. Becerra, No. 2:19-at-01142 (E.D. Calif. Dec. 6, 2019), seeking declaratory and injunctive relief -- based on Federal Arbitration Act (“FAA”) preemption -- to block the planned January 1, 2020 effectiveness of AB-51. The new law essentially bans mandatory arbitration of employment discrimination, sexual harassment, and wage law disputes. The statute also provides that an employer can’t “threaten, retaliate or discriminate against, or terminate” an employee or job applicant who refuses to consent to waiver. There are both civil and criminal penalties for violations, but the law has some carve-outs seemingly included to avoid FAA and federal securities acts preemption. We later reported in SAA 2020-01 (Jan. 8) that a federal judge on December 30th temporarily enjoined AB-51’s implementation. The Motion for a preliminary injunction was heard January 10 and we reported most recently in SAA 2020-02 (Jan. 15) that District Court Judge Kimberly Mueller extended the TRO to the end of January (although she clarified that it was limited to PDAAs covered by the FAA).

Preliminary Injunction Issued

We can now report that the Court on January 31 granted in full the request for a preliminary injunction enjoining the State from enforcing the new law. Specifically, the Minute Order provides that California is: “Enjoined from enforcing sections 432.6(a), (b), and (c) of the California Labor Code where the alleged ‘waiver of any right, forum, or procedure’ is the entry into an arbitration agreement covered by the [FAA]; and … from enforcing section 12953 of the California Government Code where the alleged violation of ‘Section 432.6 of the Labor Code’ is entering into an arbitration agreement covered by the FAA.” Judge Mueller will issue a detailed written Order “in the coming days.” As of press time, the Order had not been published.

(ed: *We called this one. Our last editorial comment was: “We’re betting on the Plaintiffs here.” **As reported previously, the U.S. Chamber has a Webpage dedicated to this case.) (SAC Ref. No. 2020-05-02)

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