In Chamber of Commerce v. Bonta, 2021 WL 4187860 (9th Cir. 2021), the Ninth Circuit held, in a 2-1 decision, that the Federal Arbitration Act does not preempt a California Labor Code provision prohibiting employers from requiring any applicant or employee “to waive any right, forum, or procedure” for certain claims. According to the majority, preemption does not apply because the Labor Code does not create a special arbitration-specific rule; it instead focuses on regulating “pre-agreement” behavior (as opposed to the agreements themselves).
Bonta could have ramifications outside the labor context. The California law prohibits employers from relying on voluntary opt-out clauses to establish consent to arbitration. The Legislature may be emboldened to adopt similar rules for arbitration agreements outside the employment context, such as in agreements with financial services or technology companies.
The Ninth Circuit, however, may not have the last word. The majority’s conclusion created a split with the First and Fourth Circuits, which have held that the FAA preempts state laws that amount to de facto bans on mandatory arbitration agreements in the employment context. And as the Ninth Circuit dissent pointed out, Bonta is difficult to reconcile with the Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017), which struck down Kentucky’s “clear-statement rule” imposing a special rule banning arbitration agreements made between a nursing home and an attorney-in-fact unless the attorney-in-fact had received express authority to agree to arbitration.