Arbitration Agreements in California: What You Need to Know

Arbitration agreements are becoming increasingly common in the workplace, particularly in California. These agreements can have significant implications for employees’ rights, including the ability to bring a lawsuit against their employer. As a professional, it`s important to understand the basics of arbitration agreements in California.

What is an Arbitration Agreement?

An arbitration agreement is a contract that requires parties to resolve disputes through arbitration rather than through the court system. While arbitration has some benefits, such as providing a more streamlined and cost-effective process, it also has significant disadvantages, particularly for employees. For example, arbitration typically limits an employee’s ability to collect evidence and limits the options for appeal.

California Law on Arbitration Agreements

In recent years, California has been at the forefront of restricting the use of arbitration agreements in the workplace. In 2019, California passed AB 51, which prohibited employers from requiring employees to sign mandatory arbitration agreements as a condition of employment. However, this law was subsequently blocked by a federal court.

Despite this setback, California courts have continued to push back against mandatory arbitration agreements. In February 2021, a California court of appeals invalidated an arbitration agreement that was presented to an employee as a “take-it-or-leave-it” offer. The court held that this type of agreement was no different from a condition of employment, which is prohibited under AB 51.

What This Means for Employees

The invalidation of mandatory arbitration agreements is good news for employees in California. When employees are not required to sign arbitration agreements, they retain their right to sue their employer in court, where they can collect evidence and present their case before a judge and/or jury.

However, employees should still be cautious when signing employment contracts that include arbitration agreements. These contracts may use confusing language or bury the arbitration clause in fine print, making it difficult for employees to understand what they are agreeing to.


Arbitration agreements can be a significant hurdle for employees seeking justice in the workplace. While California has made progress in limiting the use of mandatory arbitration agreements, employees should remain vigilant when reviewing employment contracts. By understanding the basics of arbitration agreements and California law, employees can better protect their rights and ensure they are not signing away their ability to bring a lawsuit in court.