SACRAMENTO – Last week, a federal judge halted a new anti-arbitration bill hours before it was set to take effect on Jan. 1. Judge Kimberly Mueller of the U.S. District Court for the Eastern District of California cited that the CalChamber and other high-profile business groups and organizations had raised enough “serious questions” regarding the new, controversial law.
Assembly Bill 51, authored by Assemblywoman Lorena Gonzalez (D-San Diego), would ban employers from requiring arbitration in employment contracts, and, by writing the law into the existing labor code, potentially expose business owners to criminal liability.
California Attorney General Xavier Becerra filed a response following Mueller issuing a temporary restraining order on the bill.
“AB 51 does not conflict with the (Federal Arbitration Act) or pose any obstacle to the achievement of its purpose,” reads the response. “By regulating employment practices prior to entry into any agreement, AB 51 seeks to ensure that any waiver of rights and remedies in the employment context is consensual. This is fully consistent with the spirit and foundational principles of the FAA.”
Becerra addressed the Chamber’s arguments that the bill could lead to possible criminal prosecution.
“Finally, while plaintiffs sensationalize the potential for criminal penalties resulting from violations of AB 51, the same penalties adhere to nearly every violation of the Labor Code, and there is no evidence of a credible threat of imminent criminal prosecution of any person under AB 51…just like other provisions of the Labor Code, criminal penalties can be avoided by compliance, and the mere possibility that criminal penalties could be imposed does not establish immediate and irreparable harm,” the motion states.
The next hearing on the issue is set to take place today, Friday.
Last month a coalition of businesses and organizations, led by the California Chamber of Commerce, filed a lawsuit to stop AB 51. The law, the complaint states, is “preempted by the Federal Arbitration Act (FAA) and should be declared invalid.”
“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,” Allan Zaremberg, president and CEO of the California Chamber of Commerce, said in a statement. “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.”