{"id":10212,"date":"2026-04-08T16:38:23","date_gmt":"2026-04-08T16:38:23","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/ab-51-update-ninth-circuit-issues-final-decision-striking-down-california-ban-on-mandatory-arbitration-agreements\/"},"modified":"2026-04-08T16:38:23","modified_gmt":"2026-04-08T16:38:23","slug":"ab-51-update-ninth-circuit-issues-final-decision-striking-down-california-ban-on-mandatory-arbitration-agreements","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/ab-51-update-ninth-circuit-issues-final-decision-striking-down-california-ban-on-mandatory-arbitration-agreements\/","title":{"rendered":"AB 51 Update: Ninth Circuit Issues Final Decision Striking Down California Ban on Mandatory Arbitration Agreements"},"content":{"rendered":"\n
\n
\n

The Ninth Circuit upheld the District Court\u2019s injunction against enforcement of California Assembly Bill 51 (\u201cAB 51\u201d), a law that prohibited employers from requiring mandatory arbitration agreements as a condition of employment or employment-related benefits for claims arising under California\u2019s Labor Code or Fair Employment Housing Act (\u201cFEHA\u201d).\u00a0 The Ninth Circuit held that AB 51 was an obstacle to \u201cCongress\u2019s policy of encouraging arbitration\u201d and was therefore preempted by the Federal Arbitration Act (\u201cFAA\u201d), reversing its prior opinion.<\/p>\n

AB 51 Background<\/h3>\n

AB 51 was enacted in October 2019 and prohibited employers from requiring mandatory arbitration agreements as a condition of employment, continued employment, or receipt of employment-related benefits for claims arising under California\u2019s Labor Code or FEHA.<\/p>\n

On December 9, 2019, a coalition of business groups sued the California Attorney General, the California Labor Commissioner, the Secretary of the California Labor and Workforce Development Agency, and the Director of the California Department of Fair Employment and Housing.\u00a0 Plaintiffs argued that they were likely to succeed on the merits of their challenge to AB 51 because Supreme Court precedent makes clear that the FAA preempts laws like AB 51.\u00a0 A previous blog post on the lawsuit is available\u00a0here.\u00a0 In February 2020, Judge Mueller of the Eastern District of California issued a preliminary injunction barring AB 51 from taking effect.\u00a0 Following the District Court\u2019s order, the State appealed to the Ninth Circuit Court of Appeals.<\/p>\n

On September 15, 2021, the Ninth Circuit panel issued an opinion authored by Judge Lucero, which held that AB 51\u2019s restrictions are valid but cannot be enforced if an unlawful agreement is entered into.\u00a0 This holding had puzzling practical implications, which were the subject of a dissenting opinion by Judge Ikuta.\u00a0 As Judge Ikuta explained, the \u201cholding mean[t] that an employer\u2019s attempt to enter into an arbitration agreement with employees is unlawful, but a completed attempt is lawful,\u201d and is similar to \u201ca statute [that] can make it unlawful for a dealer to attempt to sell illegal drugs, but if the dealer succeeds in completing the drug transaction, the dealer cannot be prosecuted.\u201d\u00a0 A previous publication on the now withdrawn September 15, 2021 opinion and additional background is available\u00a0here.<\/p>\n

On August 22, 2022, the Ninth Circuit voted sua sponte to grant a panel rehearing and the District Court\u2019s preliminary injunction blocking enforcement of AB\u00a051 was reinstituted.\u00a0 In its new\u00a0decision<\/a>, issued on February 15, 2023, the Ninth Circuit held that the FAA preempts AB 51 and affirmed the District Court\u2019s injunction against enforcement of AB\u00a051 in its entirety.<\/p>\n

Reasoning<\/h3>\n

In reaching this conclusion, the Court relied on\u00a0Kindred Nursing Centers Limited Partnership\u00a0<\/em>v.\u00a0Clark<\/em>, 137 S. Ct. 1421 (2017), and\u00a0Doctor\u2019s Associates, Inc.\u00a0<\/em>v.\u00a0Casarotto<\/em>, 517 U.S. 683 (1996), which \u201cmake it clear that state rules that burden the formation of arbitration agreements stand as an obstacle to the FAA,\u201d and explained that allowing a state to criminalize \u201cthe conduct of entering into an arbitration agreement\u201d would allow the state to \u201centirely defeat the FAA\u2019s purpose.\u201d<\/p>\n

Applying these principles to AB 51, the Ninth Circuit found that, even though AB 51 did not \u201cexpressly bar arbitration agreements,\u201d AB 51 did impose a severe burden on their formation through the threat of criminal and civil penalties that were clearly \u201cintended to have a deterrent effect.\u201d\u00a0 The Ninth Circuit also found AB 51 discriminated against arbitration provisions as California law does allow employers to include other non-negotiable terms as conditions of employment such as compensation requirements and drug usage requirements.<\/p>\n

The Ninth Circuit rejected arguments that AB 51 was merely a prohibition against forced arbitration and thus should be allowed, explaining that a contract is not invalid under California law \u201ceven if the contract was a product of unequal bargaining power\u201d so long as the terms are not unconscionable and conform to other general contract principles.\u00a0 The Court also rejected the argument that it could sever portions of the California Labor Code in order to \u201cuphold the balance of AB 51.\u201d\u00a0 \u201cBecause all provisions of AB 51 work together to burden the formation of arbitration agreements, we conclude that the FAA preempts AB 51 as a whole to the extent it applies to arbitration agreements.\u201d<\/p>\n<\/p><\/div>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

The Ninth Circuit upheld the District Court\u2019s injunction against enforcement of California Assembly Bill 51 (\u201cAB 51\u201d), a law that prohibited employers from requiring mandatory arbitration agreements as […]<\/p>\n","protected":false},"author":1,"featured_media":10213,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[718,1713,524,1434,610,1521,1365,2684,7688,3912,3451,5544],"class_list":["post-10212","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lawyers","tag-agreements","tag-arbitration","tag-ban","tag-california","tag-circuit","tag-decision","tag-final","tag-issues","tag-mandatory","tag-ninth","tag-striking","tag-update"],"_links":{"self":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/10212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/comments?post=10212"}],"version-history":[{"count":0,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/10212\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media\/10213"}],"wp:attachment":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media?parent=10212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/categories?post=10212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/tags?post=10212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}