For a contract to be valid and enforceable, parties must voluntarily assent to its terms. (1) This principle creates tension in employment contracts, which are prone to coercion given employers' steeply asymmetric bargaining power relative to that of typical employees. (2) Particularly in challenges to arbitration agreements, wherein employees waive the right to a judicial forum and agree to bring any legal claims in a private and often confidential proceeding, (3) courts must navigate the perceived friction between commercial needs and workers' reality. In 2019, the california legislature sought to challenge forced arbitration by passing Assembly Bill 51 (4) (A.B. 51), which prohibits employers from mandating that employees consent to arbitration or else face termination. (5) In Chamber of Commerce v. Bonta, (6) the Ninth Circuit partially upheld A.B. 51 against business groups challenging the law as preempted by the Federal Arbitration Act (7) (FAA). Although it rests on shaky doctrinal grounds, Bonta demonstrates how the judiciary can navigate the perceived tension between commercial needs and workers' rights to ensure arbitration agreements are in fact voluntary.
Congress, facing business-community pressure, passed the FAA in 1925 to quash "judicial hostility" toward enforcing arbitration agreements. (8) Section 2 of the FAA states that an agreement to resolve disputes via arbitration "shall be valid, irrevocable, and enforceable." (9) The Supreme Court has interpreted the FAA expansively: in the past thirty years, the Court has applied the FAA to employment contracts, (10) upheld waivers of the right to class actions, (11) and sanctioned arbitration of civil rights disputes. (12) Today, more than half of nonunion, private-sector employers mandate arbitration, up from as low as two percent in the 1990s; low-wage workers, particularly women and Black people, disproportionately comprise the workforce of industries leveraging mandatory arbitration. (13) Some state courts have responded to the Court's interpretations with outright hostility by undermining the FAA. (14) However, the Supreme Court has broadly rejected their attempts at workarounds. (15)
In October 2019, the California legislature passed A.B. 51, which prohibits an employer from requiring applicants or employees "to waive any right, forum, or procedure" provided as a condition of employment under the California Labor Code. (16) In other words, arbitration clauses may not be nonnegotiable, with violators subject to civil and criminal liability. (17) While the statute's text does not reference arbitration, its legislative history focuses primarily on forced arbitration. (18) Shortly after its passage, business lobbies filed suit in the United States District Court for the Eastern District of California, arguing A.B. 51 is preempted by the FAA. (19) The district court granted a temporary restraining order against A.B. 51 three days before it was to take effect. (20)
In February 2020, the same court issued a preliminary injunction, finding A.B. 51 was preempted by the FAA. (21) The district court noted the California legislature's history of circumventing the Supreme Court's interpretations of the FAA: the Governor has twice vetoed similar bills as preempted, with a third rejected by a California appellate court. (22) A.B. 51 fared...