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  • Writer's picturePaul Peter Nicolai

Law Imposing Criminal Liability Against Employers Requiring Arbitration Agreements Struck Down

Updated: Apr 19

The Ninth Circuit found a California law that prohibited employers from requiring employees to sign an arbitration agreement as a condition of employment and attempted to impose criminal liability against employers to be preempted by the Federal Arbitration Act (“FAA”). The court found employers could require employees to sign arbitration agreements as a condition of employment and that employers could include waiver provisions of class and representative actions in employment agreements.

The lower court noted that the law was an attempt by the California legislature to work around the FAA by focusing on pre-agreement behavior to impose penalties. Over the years, the Supreme Court has consistently found that the FAA is intended to promote arbitration and has relied upon the FAA as a basis to strike down laws that create an imbalance with the FAA’s policy favoring arbitration.

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