Most employment arbitration agreements are governed by two separate statutes, one federal and one state, both of which employers can invoke to compel arbitration. For years, employers have relied on a procedural loophole under California state law to bypass federal worker protections and compel employees to arbitrate their claims. Certain claims, such as ones brought by transportation workers engaged in interstate commerce or sexual harassment or assault victims, are exempt under the Federal Arbitration Act (FAA), but not under the California Arbitration Act (CAA). Armed with this discrepancy, employers relied on the CAA in their arbitration agreements, successfully arguing that even if the FAA did not apply, the agreement could be governed and enforced under the CAA. This has allowed employers to compel arbitration under state law despite the employee falling within a qualifying federal exemption.
California Assembly Bill 2155 eliminates the use of the California Arbitration Act in this unintended manner. Signed into law on June 30, 2026, and effective January 1, 2027, AB 2155 amends Code of Civil Procedure section 1281 to remove an employer’s ability to compel arbitration under state law where the agreement is deemed exempt or unenforceable under the Federal Arbitration Act.
AB 2155 amends the CAA to include the following provision:
Notwithstanding subdivision (a), a written agreement to submit to arbitration is not enforceable under this section to the extent the agreement is not enforceable under the Federal Arbitration Act (9 U.S.C. Sec. 1 et seq.).
Civ. Proc. Code § 1281. The change is not retroactive; it governs disputes arising, or lawsuits filed, on or after January 1, 2027.
The Loophole: Two Statutes, One Workaround
Before AB 2155, the CAA provided that a written agreement to arbitrate was valid, enforceable, and irrevocable with the one exception of grounds for contract revocation. As a result, employers were able to use the CAA to compel arbitration where the claims would otherwise trigger federal exemptions. The two federal exemptions most often in question were:
- Transportation worker exemption (9 U.S.C. § 1 et seq.): seamen, railroad employees, and "any other class of workers engaged in foreign or interstate commerce" are excluded from FAA coverage entirely. Courts have extended this to include rideshare drivers, delivery and last-mile workers, and other transportation employees.
- EFAA (Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021) (9 U.S.C. § 401 et seq.): anyone asserting a sexual assault or sexual harassment claim against a party they've signed an arbitration agreement with can elect to litigate, rather than arbitrate, their claims.
Employers relied on this gap for years, treating the CAA as a fallback to compel arbitration whenever an employee successfully invoked an FAA exemption. AB 2155 removes that loophole entirely.
The Scope and Limits of AB 2155 Protections for Workers
- This protection extends beyond the two named exemptions. The legislative discussion of the bill focuses on transportation workers and EFAA claims, but the statutory language is not limited to these categories. The Legislature has extended this protection to every worker with a qualifying federal exemption.
- This abrogates the line of cases that, for years, have permitted employers to defeat federal worker protections through state law. Starting January 1, 2027, courts should no longer reach the CAA analysis for arbitration agreements, since a qualifying FAA exemption should end the inquiry as a matter of law.
- It applies prospectively. AB 2155 is not applicable to disputes or claims filed before January 1, 2027, making the filing date essential to flag early when assessing whether a worker’s claim is protected by AB 2155.
This means that, starting January 1, 2027, employers will no longer be able to use California's own arbitration statute against the workers Congress intended to protect.