Employment Arbitration Agreements in California

California's AB 51 tried to ban mandatory arbitration as a condition of employment, but the Ninth Circuit held it preempted by the Federal Arbitration Act in Chamber of Commerce v. Bonta (2023). As a result, a properly drafted mandatory arbitration agreement is generally enforceable.

To survive an unconscionability challenge, an agreement generally should be:

• Mutual (binds both sides), not overly one-sided;
• Before a neutral arbitrator, with adequate discovery;
• Accompanied by a written decision allowing limited review;
• Structured so the employer pays the arbitration-specific costs.

An arbitration agreement can compel an employee's individual PAGA claim to arbitration, but under Adolph v. Uber the employee may keep standing to pursue the representative PAGA claims in court. Class-action waivers, by contrast, are generally enforceable under the FAA.

An unconscionable or poorly implemented agreement can be thrown out entirely. Because the law here keeps moving, have employment counsel draft and periodically review your arbitration program.