Federal Court Blocks (Temporarily) California's 2020 Arbitration Prohibition
The United States District Court for the Eastern District of California (in Sacramento) has blocked California's new law that would prohibit most mandatory employment arbitration agreements.
We discussed the new law and attempts to block it in a previous blog post (available here).
The court's stay is temporary until it considers a full motion for preliminary injunction that could suspend the statute throughout the entire lawsuit. That motion was moved to January 10, 2020.
It is significant that the court did not discuss either side's eventual "likelihood of success" - often a significant factor in granting an initial stay - instead noting only that the plaintiffs had raised "serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act as construed by the United States Supreme Court." A court's view on the parties' ultimate chance of success is often a first glimpse of how the case will turn out, but the order does not take a firm position one way or another.
It's possible that the state could appeal the stay to the federal appellate court (and ultimately to a circuit justice of the U.S. Supreme Court), but that is unlikely given the stay's short timeframe. We will continue monitoring the statute and its effect on employer arbitration agreements as the litigation continues. For now, employers do not have to eliminate or change their arbitration agreements to accommodate the new law.
A copy of the federal court's order can be viewed here.