Chamber files legal challenge to AB 51

Signal file photo of the state's Capitol building in Sacramento

The U.S. Chamber of Commerce, with the help of a coalition of businesses and led by the California Chamber of Commerce, has filed legal challenge to Assembly Bill 51.

AB 51, a bill signed into law by Gov. Gavin Newsom in October, prohibits arbitration with respect to workers, ensuring that new or current employees aren’t required to sign mandatory arbitration agreements that cover any claims under the California Fair Employment and Housing Act.

The chamber is seeking to overturn AB 51, which it describes as a “job killer bill,” according to a statement issued by CalChamber on Tuesday.

“Over the course of the last several years, I have been steering businesses away from arbitration agreements because they’re expensive,” said Brian Koegle, a partner in the employment and labor law department at Poole Shaffery & Koegle LLP. “But the fascinating thing about this is that AB 51 is substantially similar to AB 3080, which was vetoed by Gov. (Jerry) Brown (last year) because the Federal Arbitration Act is going to preempt this provision.”

In addition to the veto, the California Supreme Court has held that state laws are preempted by federal laws in prior decisions.

The lawsuit, which was filed in the Eastern District of California, asks the courts for an injunction that would pause the effective date in order to give the judicial system an opportunity to review the bill, as it wouldn’t be litigated by January.

“We shouldn’t implement a law until it has gone into a judicial review when there’s a viable challenge like this, and the law should be stayed while awaiting a decision by the judge,” Koegle said, adding that the legal argument that has been laid out seems strong.

The complaint states that not only will AB 51 result in more litigation and impose delays in California’s justice system, but it will also increase costs for businesses and workers alike.

“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 CalChamber, said in the 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.”

To view the complaint, visit bit.ly/AB51Suit.

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