Yes, for agreements covered by the Federal Arbitration Act. AB 51 added Labor Code section 432.6 to bar employers from requiring arbitration of FEHA and Labor Code claims as a condition of employment. In Chamber of Commerce v. Bonta (2023), the Ninth Circuit held that the FAA preempts it. Mandatory arbitration agreements governed by the FAA remain a defense tool for California employers. Whether a particular agreement holds up still depends on how it was formed, its terms, and how the employer handles arbitration once a claim is filed.
What did AB 51 try to do?
Stop arbitration agreements from being formed as a condition of the job. Labor Code section 432.6(a) says a person shall not, “as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure” for a violation of FEHA or the Labor Code.
The statute also targeted opt-out designs. Subdivision (c) says “an agreement that requires an employee to opt out of a waiver or take any affirmative action in order to preserve their rights is deemed a condition of employment.” And it tried to avoid a direct conflict with federal law. Subdivision (f) says “Nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.”
That design was the point. AB 51 punished the employer for requiring the agreement, through a separate misdemeanor provision in Labor Code section 433 and civil remedies, while claiming to leave signed agreements enforceable.
What did the Ninth Circuit hold?
That the design didn’t save it. In Chamber of Commerce of the United States v. Bonta (9th Cir. 2023) 62 F.4th 473, the court framed the question as “whether the FAA preempts a state rule that discriminates against the formation of an arbitration agreement, even if that agreement is ultimately enforceable.” Its answer was direct: “We hold that such a rule is preempted by the FAA.”
The court rejected the argument that the misdemeanor provision could be cut away from the rest of the law. The summary published with the opinion explains that “all provisions of AB 51 work together to burden the formation of arbitration agreements,” and the court affirmed the district court’s ruling that the Chamber of Commerce was likely to succeed on its claim for declaratory and injunctive relief.
The case came to the Ninth Circuit on a preliminary injunction, and the ruling binds federal courts in the circuit. California state courts aren’t bound by Ninth Circuit decisions on federal questions, but they generally give them weight, and the FAA’s preemptive effect is a federal question in any court.
Does section 432.6 still matter?
For some agreements, possibly. The Ninth Circuit’s holding rests on the FAA, which governs arbitration agreements in contracts involving interstate commerce. Most employers’ agreements qualify, and most well-drafted agreements say so. An agreement outside the FAA’s reach, like one covering an exempt transportation worker under the FAA’s section 1 exclusion, raises a different question, because the federal preemption rationale may not apply.
Section 432.6 also has exclusions that hold regardless. Subdivision (g) says the section “does not apply to postdispute settlement agreements or negotiated severance agreements,” and subdivision (h) limits it to contracts “entered into, modified, or extended on or after January 1, 2020.”
What still decides whether an arbitration agreement is enforced?
Everything other than AB 51. A California court asked to compel arbitration still looks at whether the employee agreed, whether the agreement is unconscionable, and whether the employer has preserved its right to arbitrate. Three issues come up again and again:
Formation. An electronic signature has to be authenticated, and an employer must be able to show the employee actually received and accepted the agreement.
Unconscionability. One-sided terms, limits on remedies or discovery, and confusing fine print give courts grounds to refuse enforcement or sever provisions.
Fee payment. California’s statutes on the employer’s duty to pay arbitration fees on time can lead to waiver if a payment is late, subject to ongoing litigation over FAA preemption of those rules.
The firm’s post on motions to compel arbitration in California employment cases covers those questions in more detail.
| Issue | Effect of Chamber of Commerce v. Bonta | What still needs attention |
|---|---|---|
| Requiring arbitration as a condition of hire | AB 51’s ban preempted for FAA-covered agreements | Clear FAA clause in the agreement |
| Opt-out programs | No longer required to avoid AB 51 for FAA agreements | Opt-outs can still help on unconscionability |
| Enforceability | Not decided by the case | Formation proof, fair terms, fee timing |
| PAGA and sexual harassment claims | Not addressed | Representative PAGA claims and federal limits on harassment arbitration |
Should employers still offer an opt-out?
Many do, for reasons that have nothing to do with AB 51. An agreement with a real chance to opt out is harder to attack as procedurally unconscionable, because the employee had a meaningful choice. The tradeoff is that some employees will opt out and keep the right to sue in court. For most employers, that tradeoff is worth weighing case by case and role by role, and the right answer can differ between a frontline hourly workforce and a small group of executives.
Whatever the choice, the program should be consistent. An employer that offers an opt-out to some employees but not others, or changes the terms from one hiring wave to the next, ends up litigating which version applies to which plaintiff. A single current agreement, a dated record of who received it, and a simple way to prove each employee’s acceptance or opt-out will make the motion to compel much easier to win.
Arbitration also doesn’t decide the merits. An enforceable agreement changes where a claim is heard. It doesn’t make a weak defense strong, and it doesn’t stop a representative PAGA claim from proceeding in court. Federal law also allows employees to keep sexual harassment and sexual assault claims out of pre-dispute arbitration.
When an employee sues despite an arbitration agreement
- Preserve the signed agreement, the electronic signature audit trail, the onboarding records, the handbook acknowledgment, and the emails and texts transmitting the agreement, under a litigation hold.
- Calendar the response date on the summons, and decide quickly whether to move to compel arbitration, because delay can waive the right. Check the EPLI policy’s notice and counsel terms.
- Identify the HR staff who can testify about how the agreement was presented and signed, and don’t take any action against the employee that could look like retaliation.
- Pull the version of the agreement in effect when the employee signed, and any later amendments.
- Get counsel’s review of the motion to compel, any fee invoices from the arbitration provider, and the payment deadlines before responding.
Arbitration fights often come first in a defense. The firm’s employment defense attorneys in California page describes how those cases are handled.
AB 51 questions employers ask
Is AB 51 still on the books?
Labor Code section 432.6 hasn’t been repealed, but the Ninth Circuit held that the FAA preempts AB 51 as applied to arbitration agreements governed by the FAA, and it affirmed an injunction against enforcement. For those agreements, the statute doesn’t prevent employers from requiring arbitration as a condition of employment. Employers should confirm that their agreements state they’re governed by the FAA.
Can we require current employees to sign a new arbitration agreement?
Generally yes, under the FAA, though the rollout matters. Courts look at how the agreement was presented, whether employees had time to review it, and whether the notice said, in simple terms, that continued employment meant acceptance. Rolling out an agreement during active litigation, or targeting employees who have complained, can create retaliation and unconscionability problems and should be reviewed with counsel first.
Does Chamber of Commerce v. Bonta help with PAGA claims?
No. The decision addressed AB 51’s restrictions on forming arbitration agreements. It doesn’t change how arbitration agreements affect PAGA claims, which turn on separate federal and California Supreme Court decisions. Individual PAGA claims may be compelled to arbitration in some cases, while non-individual claims often remain in court.
What about agreements signed before 2020?
AB 51, by its own terms, applies to contracts entered into, modified, or extended on or after January 1, 2020. Agreements signed earlier were never subject to it. Those older agreements still have to meet current standards on formation and unconscionability, and employers should check whether a later modification brought an older agreement within the statute’s date range.
If an employee has sued despite signing an arbitration agreement
If your company has been sued in court by an employee who signed an arbitration agreement, the agreement, the signature record, and how quickly the company moves usually decide where the case is heard. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving arbitration agreements and motions to compel. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statute is Labor Code section 432.6, added by Stats. 2019, ch. 711 (AB 51). The case is Chamber of Commerce of the United States v. Bonta (9th Cir. 2023) 62 F.4th 473.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.