Federal Court Enters (Confusing) Injunction Against California's Arbitration Prohibition
A federal court in Sacramento has extended its injunction against California's A.B. 51, a new law prohibiting most mandatory employment arbitration agreements. This development follows our prior posts discussing A.B. 51 (here) and the court's initial temporary restraining order blocking its enforcement (here).
The full injunction has not been drafted yet and will be released in the coming days. For now, the draft injunction is a positive but confusing development.
On the one hand, the injunction does prohibit most enforcement of the new law. But on the other, it applies only to agreements "covered by the Federal Arbitration Act." This leaves some employers to determine whether any argument exists that their particular agreement is not covered by the FAA.
In practice this will not make much difference; most employment agreements are covered by the federal law. We now suggest, however, that arbitration agreements contain express language incorporating the FAA and - possibly - that language referring to state or "any other applicable law" be removed. As the plaintiffs in the case have argued, confusion caused by the law (and the court's injunction) remains dangerous due to its substantial civil and criminal penalties.