nal appeals, and should consult with their attorneys on the implementation process.Employers should review existing employee arbitration agreements in light of this decision.Footnotes1Chamber of Commerce v. Bonta, No. 20-15291 (Ninth Cir. Feb. 15, 2023). Littler represents a broad coalition of business associations in this case who sued to prevent the law from taking effect.2Chamber of Commerce v. Bonta, No. 20-15291 (citingAT&T Mobility LLC v. Concepcion, 563 U.S. 333, 342 (2011).3Chamber of Commerce v. Bonta, No. 20-15291 (citingConcepcion, 563 U.S. at 345.)4See, e.g.,Concepcion, 563 U.S. at 352 (holding the FAA preempted a California rule finding contract provisions disallowing classwide arbitration are unconscionable);Preston v. Ferrer, 552 U.S. 346, 349–50 (2008) (holding the FAA preempted a California law giving a state agency primary jurisdiction over a dispute involving the California Talent Agency Act despite the parties’ agreement to arbitrate such disputes);Perry v. Thomas, 482 U.S. 483, 484, 491 (1987) (holding the FAA preempted a statute permitting collection actions, despite a valid arbitration agreement).5Chamber of Commerce v. Bonta, No. 20-15291, pg. 8.6AB 51 also prohibits employers from implementing an arbitration agreement with an “opt out” clause, whereby an employee has an opportunity to affirmatively chose to not enter into the agreement.7FollowingViking River, individual PAGA claims can be arbitrated and “non-individual” PAGA claims of other alleged aggrieved employees are not subject to arbitration.SeeSupreme Court Permits Arbitration of Individual PAGA Claims | Littler Mendelson P.C.8Kindred NursingLtd. P’ship v. Clark, 137 S. Ct. 1421 (2017) andDoctor’s Assocs., Inc. v. Casarotto, 517 U.S. 683 (1996).

appellate court. The Court is left confronting the question, therefore, of what it should do in light of (a) the Second Circuit's holding that the FAA preempts the New York Rule and (b) the conflicting existence of subsequently issued First Department decisions continuing to apply the New York Rule even while simultaneously acknowledging that the FAA governs.In Progressive, the Second Circuit addressed that conflict as follows:We agree with the district court that New York law governs here. That law provides that parties will not be held to have chosen arbitration "in the absence of an express, unequivocal agreement to that effect."Marlene Indus. Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 413, 380 N.E.2d 239 (1978)(citations omitted). …However, New York law requires that nonarbitration agreements be proven only by a mere preponderance of the evidence.See,e.g.,Fleming v. Ponziani, 24 N.Y.2d 105, 299 N.Y.S.2d 134, 139, 247 N.E.2d 114 (1969).BecausePerry[v. Thomas, 482 U.S. 483 (1987)] prohibits such discriminatory treatment of arbitration agreements, the rule set forth inMarlene Industries is preempted. Accordingly, in determining whether the parties have agreed to arbitrate, we apply the ordinary preponderance of the evidence standard.The Court added a parting-shot in a footnote: "[g]iven the well-settled law surrounding the Supremacy Clause of the U.S. Constitution and the preemption doctrine, it is unlikely a state court could overrule or disregard a federal appellate court on a matter of federal statutory preemption."That's intestinal fortitude.What Next?After its careful analysis, the court decided to hedge its appellate bet, concluding that the court "need not decide that issue or resolve the underlying conflict, however, as Uber demonstrates the existence of an agreement to arbitrate under either the New York Rule or the more lenient preponderance standard." Nonetheless, if this decision is appealed, how, if at all, the First Dept. grapples with Progressive

The FAA preempts state law if it “interferes with fundamental attributes of arbitration and obstructs the purpose of the FAA”. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).Preston v. Ferrer, 552 U.S. 346 (2008) (holding that the FAA preempted a California law invalidating agreements to arbitrate a certain class of disputes).Perry v. Thomas, 482 U.S. 483 (1987) (holding that the FAA preempted a state statute permitting litigation of wage collection actions despite the existence of any private agreement to arbitrate. “When faced with a principle of state law, whether of legislative or judicial origin, that burdens arbitration and that takes its meaning precisely from the fact that a contract to arbitrate is at issue, we must strike it down as preempted by the FAA”).DIRECTV, Inc. v. Imburgia, 577 U.S. 47 (2015) (overruling the California court’s refusal to enforce an arbitration provision contained in a unilaterally promulgated consumer contract because it prohibited class arbitration.)As correctly noted by the dissenting opinion in Bonta:Like a classic clown bop bag, no matter how many times California is smacked down for violating the FAA, the state bounces back with even more creative methods to side-step the FAA.

The U.S. Supreme Court has intervened in the past to remind the California Courts that the FAA preempts such attempts to curtail arbitration. See e.g. Perry v. Thomas, 482 U.S. 483 (1987); ATT Mobility v. Concepcion, 563 U.S. 333 (2011).In recent years, the California Court has attempted to carve out special exceptions to the applicability of the FAA for the California Private Attorneys General Act inIskanian, the California Business and Professions Code inMcGill, and now, in OTO, the “Berman Hearing” under the California Labor Code.

The result is that even though arbitration takes place under a federal statute, and even though the Supreme Court has repeatedly claimed that courts should construe arbitration decisions with a decided preference toward arbitration (FAA “Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1(1983); see also Perry v. Thomas, 482 U.S. 483, 489 (1987)), there is at present no consistent body of precedent that serves as a guidepost to practitioners. There are no set standards.

Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017); see alsoAT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (holding that the FAA preempted a California rule that invalidated class arbitration waivers); Perry v. Thomas, 482 U.S. 483 (1987) (holding that the FAA preempted a California law permitting employees to sue for unpaid wages even where the parties had entered into an enforceable agreement to arbitrate). Therefore, the Federal Arbitration Act may preempt this aspect of the Act.

The U.S. Supreme Court has made clear that under the Federal Arbitration Act (“FAA”), arbitration contracts must be placed on “equal footing” as other contracts generally, and that state law, “whether of legislative or judicial origin,” cannot interfere with this federal policy. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011) and Perry v. Thomas, 482 U.S. 483, 493, n.9 (1987). Those who would argue that AB 3080’s ban on arbitration agreements should survive a challenge under the FAA, rely on the “savings clause” in the FAA, which provides that written agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

5 is not a generally applicable contract defense that applies to any contract, but only to forum selection clauses in franchise agreements. We therefore hold that, under the reasoning of [Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681] and [Perry v. Thomas (1987) 482 U.S. 483], as well as the language of 9 U.S.C. § 2 itself, § 20040.5 is preempted by the FAA.”)

See Concepcion, 563 U.S. at 341 (“[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”); see also, e.g., Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530, 533 (2012)(FAA preempted state prohibition against pre-dispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes because this was a categorical rule prohibiting arbitration of a particular type of claim); Preston v. Ferrer, 552 U.S. 346, 356 (2008) (FAA pre-empted state law granting state commissioner exclusive jurisdiction to decide issue the parties agreed to arbitrate); Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 56 (1995) (FAA pre-empted a state law requiring judicial resolution of claims involving punitive damages); Perry v. Thomas, 482 U.S. 483, 491 (1987) (FAA pre-empted state-law requirement that litigants be provided a judicial forum for wage disputes); Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)( FAA pre-empted state financial investment statute’s prohibition of arbitration of claims brought under that statute). Further, while “[s]tates may regulate contracts, including arbitration clauses under general contract law principles[,]” states may not single out arbitration clauses for special treatment.

The appeals court’s refusal to apply that maxim to an agreement that deals with arbitration also runs counter to federal law, which requires that contracts to arbitrate be placed on the same footing as all other types of contracts.Imburgia, 136 S. Ct. at 471; see also id., citing Perry v. Thomas, 482 U.S. 483, 493, n. 9 (1987) (noting that the Federal Arbitration Act preempts decisions that take their “meaning precisely from the fact that a contract to arbitrate is at issue”).Conclusion Employers seeking to establish mandatory arbitration programs must take the Morgan decision into account and draft disclaimer language that does not undermine arbitration.