Arbitration Agreement California 2021: What You Need to Know

An arbitration agreement is a legal contract that requires two parties to resolve any disputes related to a contract through arbitration instead of going to court. These agreements are becoming increasingly common in many industries, including employment, banking, and consumer agreements. In California, there have been recent changes to the law that may impact how these agreements are enforced.

In January 2020, the California legislature passed AB 51, which prohibited employers from requiring employees to waive their right to pursue legal action for violations of California`s Fair Employment and Housing Act or the Labor Code. This law was set to take effect on January 1, 2020, but was temporarily blocked by a federal judge who ruled that it was preempted by the Federal Arbitration Act.

However, on January 14, 2021, the Ninth Circuit Court of Appeals lifted the injunction, allowing AB 51 to take effect. This means that California employers cannot require employees to sign arbitration agreements that waive their right to pursue legal action for violations of the state`s labor laws.

The ruling also impacts consumer arbitration agreements, which are often included in contracts for products or services. According to the California Consumer Privacy Act (CCPA), consumers have the right to opt-out of arbitration agreements. This means that if a consumer requests to opt-out, the company must not require arbitration as a means of resolving disputes.

It`s important to note that while AB 51 is currently in effect, there may still be legal challenges to the law`s enforcement. Employers and companies should consult with legal counsel to ensure that their arbitration agreements comply with California law.

In conclusion, the recent changes to California`s arbitration agreement laws are significant and may impact how businesses operate in the state. Employers and companies will need to carefully review their contracts and agreements to ensure compliance with the current legal landscape. As always, the guidance of legal counsel will be vital in navigating these complex issues.