Key takeaways
- Reported in legal media on July 1, 2026, the California Governor signed Assembly Bill 2155 into law.
- The legislation amends California Code of Civil Procedure Section 1281.
- Written arbitration agreements that are unenforceable under the Federal Arbitration Act will no longer be enforceable under California law.
- The change directly impacts businesses and employers drafting dispute resolution agreements in the state, eliminating a dual-track enforcement system.
The Legislation
Reported in legal media on July 1, 2026, the California Governor signed AB 2155 (California) into law. The new legislation directly concerns the enforceability of written arbitration agreements in California. By amending Code of Civil Procedure Section 1281, the law establishes a strict standard: agreements that are unenforceable under the Federal Arbitration Act are now unenforceable in California. This statutory change harmonizes the state's procedural code with federal arbitration mandates.
Why It Matters
The amendment removes the ambiguity that arises when state and federal arbitration laws diverge. Historically, the Federal Arbitration Act sets a baseline policy favoring the enforcement of arbitration agreements. However, parties litigating in state courts sometimes attempt to enforce arbitration clauses under state law when federal law might not apply or might render the agreement unenforceable. By explicitly tying California law to the Federal Arbitration Act, AB 2155 (California) prevents parties from using state law as a fallback mechanism to save defective arbitration agreements.
This alignment creates a single, unified standard for enforceability. Litigants challenging an arbitration agreement in California state court can now rely directly on federal precedent to invalidate the contract. If a specific type of contract or a specific clause violates the Federal Arbitration Act, state courts must deny motions to compel arbitration. This prevents forum shopping and ensures consistency regardless of whether a dispute lands in state or federal court. The legislation ultimately reduces the procedural friction that often delays the resolution of underlying substantive claims, as parties will no longer need to litigate separate state and federal enforceability tracks.
Who Should Care
For lawyers
Corporate counsel and litigators must immediately review their standard arbitration agreements. Because AB 2155 amends Code of Civil Procedure Section 1281 to mirror the Federal Arbitration Act's enforceability limits, lawyers can no longer rely on California's previously independent statutory framework to enforce agreements that fail federal scrutiny. Drafters must ensure that their arbitration provisions comply with all federal requirements, including those related to interstate commerce and statutory exemptions. Litigators defending against motions to compel arbitration should prepare to brief federal enforceability standards even in purely state-level disputes.
For consumers and parties
Individuals who sign contracts containing mandatory arbitration clauses—such as employment agreements, software terms of service, or consumer purchase contracts—now face a streamlined legal standard. If a worker or consumer believes they are being unfairly forced into arbitration, they can challenge the agreement knowing that California courts will apply the exact same enforceability rules as federal courts. This limits the legal hurdles required to keep a dispute in a public courtroom rather than a private arbitration forum.
Legal Background
Arbitration agreements in the United States are governed by a complex interplay of state and federal law. The Federal Arbitration Act generally preempts state laws that discriminate against arbitration, establishing a strong national policy favoring the resolution of disputes outside of traditional courtrooms. However, states retain the authority to regulate contracts through general principles of contract law, such as fraud, duress, or unconscionability.
In California, Code of Civil Procedure Section 1281 has long served as the state's primary statutory authority declaring that written agreements to submit controversies to arbitration are valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract. Before the enactment of AB 2155 (California), Section 1281 operated independently of the federal statute. This independent operation occasionally allowed for arguments that an agreement exempt from the Federal Arbitration Act could still be enforced under California law.
For example, certain categories of workers—such as those engaged in foreign or interstate commerce—are explicitly exempt from the Federal Arbitration Act. In disputes involving these workers, employers often argued that even if the federal statute did not apply, state law still required arbitration. This created a bifurcated legal environment where the enforceability of a contract depended heavily on whether the dispute was analyzed under state or federal frameworks.
What the Legislature Did
With the passage of AB 2155 (California), the California legislature eliminated the dual-track system for enforceability. The bill specifically amends Code of Civil Procedure Section 1281 to state that agreements unenforceable under the Federal Arbitration Act are unenforceable in California.
The legislature effectively closed the gap between federal exemptions and state enforcement. By embedding the federal standard into the state code, the legislature ensured that any protections, exemptions, or invalidating conditions recognized under the Federal Arbitration Act automatically apply to contracts governed by California law. The statutory text does not create new, California-specific exemptions; rather, it imports the federal boundaries wholesale.
How It May Be Applied
The practical application of this amendment will likely center on disputes over the Federal Arbitration Act's scope. When a party files a motion to compel arbitration in a California Superior Court, the opposing party will likely raise federal enforceability defenses. State judges will have to interpret and apply federal case law to determine whether the agreement holds up.
One immediate area of application involves workers exempt from the Federal Arbitration Act. If a transportation worker falls outside the federal statute's enforcement provisions, California courts applying the amended Code of Civil Procedure Section 1281 must declare the arbitration agreement unenforceable under state law as well. This will likely generate extensive briefing on federal definitions of interstate commerce and exempt worker categories in state court proceedings. Trial courts will be tasked with parsing federal appellate decisions to resolve state-level contract disputes.
Additionally, courts will need to determine how this applies to contracts drafted before the law's enactment. While the legislation amends the procedural code, disputes over retroactivity and the specific timing of contract formation will inevitably arise as parties test the new statutory language. Businesses will likely argue that the amendment should only apply prospectively, while opposing parties may contend that the procedural nature of Section 1281 dictates immediate application to all pending motions to compel arbitration.
Comparison of Arbitration Enforcement
| Feature | Prior California Law | Under AB 2155 |
|---|---|---|
| Statutory Authority | Code of Civil Procedure Section 1281 operated independently. | Code of Civil Procedure Section 1281 incorporates federal limits. |
| Federal Exemptions | Parties could argue state law enforced agreements exempt from federal law. | Agreements unenforceable under federal law are unenforceable under state law. |
| Enforceability Standard | Dual-track system depending on state vs. federal jurisdiction. | Unified standard tied directly to the Federal Arbitration Act. |
The Bottom Line
California has simplified the rules governing arbitration agreements by tying state law directly to federal standards. By amending its civil procedure code, the state ensures that if an arbitration contract cannot be enforced under the Federal Arbitration Act, it cannot be enforced in California courts. This change requires businesses to ensure their contracts meet federal requirements and gives individuals a clearer path to challenge mandatory arbitration clauses.
This article is general legal information and commentary about legal developments. It is not legal advice, does not address your specific situation, and is not a substitute for advice from a licensed attorney. Reading this article and contacting us through this website do not create an attorney-client relationship.
Sources & authorities
- AB 2155 (California) — source
Further reading
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