On June 30, 2026, Governor Gavin Newsom signed Assembly Bill 2155, which changes California law governing the enforceability of arbitration agreements. This bill amends the California Arbitration Act (CAA), specifically California Civil Code section 1281, to state that arbitration agreements are unenforceable under the CAA “to the extent” they would be unenforceable under the Federal Arbitration Act (FAA). This law takes effect on January 1, 2027.
Both the FAA and CAA favor enforcing valid arbitration agreements. Under these laws, employers may choose to require employees to sign arbitration agreements for employment disputes that may arise in the future. In recent years, however, California has tried to restrict arbitration agreements in various ways, often prompting legal challenges on the grounds that the FAA preempts the restrictive state law.
AB 2155 reverses that trend and expressly incorporates FAA exemptions into state law. What this means is, in circumstances where the CAA applies to an arbitration agreement and the FAA doesn’t, the FAA exemptions will apply under California law, making certain agreements unenforceable. The bill states that its purpose is to incorporate “any and all exclusions” under the FAA into California law, including the following:
- The FAA exemption for transportation workers engaged in interstate commerce; and
- The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA).
Section 1 of the FAA (9 U.S.C. section 1) states that the law doesn’t apply to “contracts of employment for seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.” This is commonly referred to as the transportation exemption. The scope of the exemption is often the subject of litigation, including recent challenges involving airline workers, independent contractors, delivery drivers and last-mile workers, among others.
Prior to AB 2155, the CAA didn’t have a transportation worker exemption, so in circumstances where the FAA doesn’t apply to a transportation worker, an employer could seek to enforce their arbitration agreement under California law. Now, AB 2155 effectively eliminates that option. If an agreement is unenforceable under the FAA because of the transportation worker exemption, it will be unenforceable under the CAA, too.
Additionally, AB 2155 expressly incorporates the EFAA, a 2022 law that amended the FAA to make arbitration agreements unenforceable for claims of sexual harassment or sexual assault. The EFAA allows employees with such claims to bring their case in court even if an otherwise valid arbitration agreement exists between the parties. By incorporating the EFAA into state law, California eliminates any argument for enforcing arbitration agreements under state law that would otherwise be unenforceable under the EFAA.
AB 2155 takes effect on January 1, 2027. Before then, employers should work with their legal counsel to review their arbitration agreements and identify employees that may be impacted by the change, particularly transportation workers.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
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