California Labor Code Section 432.6, enacted through Assembly Bill 51, was written to bar employers from requiring arbitration agreements as a condition of employment, but federal courts have permanently blocked the state from enforcing it. The statute still sits in the Labor Code. It has no practical force. If a California employer asks you to sign an arbitration agreement to get or keep a job, that requirement is lawful today, with narrow exceptions for sexual harassment and assault claims under a separate federal law.
What Section 432.6 Was Supposed to Do
Governor Gavin Newsom signed AB 51 on October 10, 2019, adding Section 432.6 to the Labor Code with a January 1, 2020 effective date.1California Legislative Information. California Assembly Bill 51 – Employment Discrimination: Enforcement The law prohibited employers from forcing workers or applicants to arbitrate claims under the California Labor Code or the Fair Employment and Housing Act as a condition of employment. It covered the full range of wage, hour, discrimination, and retaliation claims that employees typically bring.
The statute also went after a common workaround. Under Section 432.6(c), an agreement that made employees take an affirmative step to preserve their right to sue, such as checking an opt-out box, counted as a prohibited condition of employment.2California Legislative Information. California Code LAB 432.6 Employers were barred from retaliating against workers who refused to sign. Violations carried civil remedies including injunctions and attorney’s fees, and Labor Code Section 433 made any violation a misdemeanor.3California Legislative Information. California Code LAB 433
None of those penalties have ever been enforced. Business groups sued immediately, and a federal court issued a preliminary injunction before the law’s effective date.
Why the Law Is Unenforceable
The Chamber of Commerce and several trade associations argued that AB 51’s penalty structure treated arbitration agreements with hostility, something the Federal Arbitration Act was designed to prevent. In February 2023, the Ninth Circuit Court of Appeals agreed. The court held that AB 51’s “penalty-based scheme to inhibit arbitration agreements before they are formed” was “the type of device or formula evincing hostility towards arbitration that the FAA was enacted to overcome.”4United States Court of Appeals for the Ninth Circuit. Chamber of Commerce of the United States of America v Bonta The court rejected California’s effort to save part of the law by striking only the criminal penalty, finding that “all provisions of AB 51 work together to burden the formation of arbitration agreements.”
California did not appeal. On January 1, 2024, the state stipulated to a permanent injunction barring enforcement of Section 432.6. The text remains in the Labor Code, but the state cannot use it against any employer.
What You Can Still Refuse to Arbitrate
One category of claims sits outside a California arbitration agreement no matter what you signed. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, signed in March 2022, amended the Federal Arbitration Act directly. Under 9 U.S.C. ยง 402, an employee alleging sexual assault or sexual harassment can reject a predispute arbitration agreement and take the claim to court.5Office of the Law Revision Counsel. 9 USC 402 – No Validity or Enforceability The law also invalidates class-action waivers for these claims.
Because this protection amends the FAA rather than fighting against it, it cannot be preempted the way Section 432.6 was. The choice belongs to the person making the allegation. Your employer cannot force you into arbitration on a sexual harassment or assault claim, even if you signed a broad agreement covering every workplace dispute. Whether the law applies to a specific case is decided by a court, not an arbitrator.5Office of the Law Revision Counsel. 9 USC 402 – No Validity or Enforceability
How Arbitration Affects PAGA Claims
California’s Private Attorneys General Act lets employees sue on the state’s behalf to recover penalties for Labor Code violations. Whether an arbitration agreement can pull those claims out of court was reshaped by two recent decisions.
In Viking River Cruises, Inc. v. Moriana (2022), the U.S. Supreme Court held that the FAA preempts California’s prior rule against splitting PAGA claims. An employer with a valid agreement can compel the employee’s individual PAGA claim into arbitration.6Supreme Court of the United States. Viking River Cruises Inc v Moriana The Supreme Court suggested that once the individual claim went to arbitration, the employee would lose standing to pursue representative claims for other workers in court.
The California Supreme Court disagreed on that last point. In Adolph v. Uber Technologies (2023), it held that an employee compelled to arbitrate an individual PAGA claim still has standing to pursue representative PAGA claims in court for other affected workers.7Justia Law. Adolph v Uber Technologies Inc So an arbitration agreement can move your individual PAGA claim out of court, but it cannot be used to shut down the broader representative action on behalf of other employees.
The Bottom Line if You’re Asked to Sign
A California employer can lawfully require you to sign an arbitration agreement as a condition of being hired or staying employed. Section 432.6 does not change that, because the state is permanently barred from enforcing it. If you refuse to sign, the employer can withdraw the offer or end the employment without violating any rule the state can enforce.
Two things the agreement cannot do to you. It cannot force you into arbitration on a sexual assault or sexual harassment claim if you decide to go to court instead.5Office of the Law Revision Counsel. 9 USC 402 – No Validity or Enforceability And it cannot strip your standing to pursue a representative PAGA action in court for other workers, even after your own individual PAGA claim is compelled to arbitration.7Justia Law. Adolph v Uber Technologies Inc Outside those two areas, a validly formed arbitration agreement in California is enforceable.