Closing the Door on the Criminalization of Arbitration

In early 2020, California criminalized the use of a mandatory arbitration agreement in employment agreements. The law, Labor Code Section 432.6, stated unlawful to require any applicant for employment (or employee) to waive the right to file and pursue a civil action. Similarly, it prohibited employers from threatening or retaliating against these people for asserting their rights under the law. Violations of this statute would be misdemeanor criminal offenses.

Needless to say, this legislation spurred litigation and a preliminary injunction was issued by the United States District Court based on preemption by the Federal Arbitration Act. The issue went up on appeal and the preliminary injunction was upheld by the Ninth Circuit US Court of Appeals.

Upon remand, the District Court issued its Permanent Injunction at the beginning of this year, effectively barring California's attempts to criminalize arbitration.

To read the Order, click here.