9th Circuit: California Can't Ban Arbitration Agreements

The state legislature had made it a crime to require job seekers and employees to agree to arbitrate workplace disputes.  But California law is preempted by the Federal Arbitration Act.

“Because the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and AB 51 stands as an obstacle to that purpose, AB 51 is therefore preempted,” wrote Judge Sandra Ikuta for the majority.

The result:  California employers can indeed require employees to sign mandatory arbitration agreements as a condition of employment. But even signed arbitration agreements are unenforceable if they are procedurally or substantively unconscionable.