On June 30, 2026, California Governor Gavin Newsom signed Assembly Bill (AB) 2155, which changes how arbitration agreements are enforced under the California Arbitration Act (CAA). The law ties the enforceability of arbitration agreements under California law to federal law, meaning employers cannot enforce an arbitration agreement in California if federal law does not allow it.
This update applies to employers that use arbitration agreements in California, particularly employers with transportation-related workforces, employees engaged in interstate commerce, or employees who may bring sexual harassment or sexual assault claims. The law becomes effective January 1, 2027.
What Employers Should Do
Legal Requirements
- Employers may not enforce an arbitration agreement under the California Arbitration Act when federal law prohibits or limits enforcement of that agreement, including in situations covered by applicable federal arbitration exemptions and restrictions.
Practical Considerations
- Review existing arbitration agreements before January 1, 2027, to identify provisions that may be affected by federal arbitration exclusions and restrictions.
- Determine whether any employee groups, such as transportation, delivery, logistics, aviation, or other interstate-commerce workers, may fall outside mandatory arbitration requirements and assess whether related dispute resolution provisions, including class action waivers, remain enforceable.
- Consider engaging employment counsel, a Professional Employer Organization (PEO), or an Administrative Services Organization (ASO) to assist with agreement reviews, implementation planning, and workforce-specific compliance assessments.
Overview
Key Statutory Change: Prior California law permitted enforcement of arbitration agreements under the California Arbitration Act. The law changes that framework by aligning California law with federal arbitration restrictions, meaning arbitration agreements that cannot be enforced under federal law cannot be enforced under California law either.
Transportation Worker Exemption: This law applies to worker groups that may be excluded from arbitration under federal law, including certain transportation and interstate-commerce workers. Depending on the role and job duties, this may include employees involved in transportation, delivery, logistics, rideshare services, aviation, and similar industries.
Sexual Harassment and Sexual Assault Claims: This law also incorporates protections established under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA).
Employees bringing covered sexual harassment or sexual assault claims may pursue those claims in court rather than being required to arbitrate them. The new California law aligns state law with those federal protections and removes potential arguments that California law independently permits enforcement of arbitration provisions in covered disputes.
Why This Matters
Employers that rely on arbitration agreements may face greater litigation exposure when federal law limits or prohibits arbitration. This is particularly important for employers with transportation-related workforces and other employee groups that may fall within federal arbitration exemptions.
Employers should review existing arbitration agreements before the law takes effect to determine whether any provisions could be affected by the new California requirements.
Key Risks for Employers
- Employers may lose the ability to require arbitration of covered disputes, causing those claims to proceed through the court system rather than private arbitration, which may result in longer resolution timelines and higher legal costs.
Source References
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