Is Your Arbitration Agreement Ready for 2027?
Many small business owners believe that once an employee signs an arbitration agreement, every dispute with that employee is locked into arbitration for good.
That assumption is about to get tested.
On June 30, 2026, the Governor signed Assembly Bill 2155, which amends Code Civ. Proc. § 1281 so that a California arbitration agreement loses state-law enforceability wherever it would already fail under federal arbitration law. State law, in other words, now rides on the same track as federal law instead of running separately from it. It becomes effective January 1, 2027.
Here is the practical effect. Under federal law, certain categories of claims (most notably sexual harassment and sexual assault claims, which federal law already excludes from mandatory arbitration) cannot be forced into arbitration no matter what an agreement says. California’s own arbitration statute did not automatically mirror that exclusion. AB 2155 closes that gap by importing the federal exclusions directly into state law.
For an employer, the break point is simple.
An arbitration agreement drafted years ago, signed once, and never revisited may already reach claims that neither federal law, nor soon state law, will let an employer force into arbitration.
That is not a filing-cabinet problem. It is a live one.
If an employee brings a claim that falls inside the newly aligned exclusion and the agreement does not account for it, the employer can lose the arbitration forum entirely for that dispute, along with the confidentiality, cost allocation, and streamlined procedure the agreement was supposed to provide.
Employers sometimes assume the fix is broader language, covering every claim an employee could ever bring. AB 2155 points the other direction. An agreement written narrowly, limited to genuinely arbitrable employment claims, tends to hold up better than one that reaches for everything and, as a result, risks losing more.
Before January 1, 2027, an arbitration agreement deserves a fresh look, not a filed-and-forgotten one.
An arbitration agreement that has not been checked against AB 2155 can fail exactly when it matters most, in the middle of a dispute, with no way to fix it after the fact. A short review now costs far less than finding out mid-dispute.
Contact Michael Trust Law, APC for a no-charge initial consultation. The facts determine what needs to be addressed — and how much of a conversation that takes.
This post shares general information based on common patterns I see in California workplaces. It is not legal advice, does not create an attorney-client relationship, and outcomes depend on specific facts — no lawyer can guarantee a result. Past results do not guarantee or predict future outcomes. AI may have been used to create this post. All content reviewed by a CA attorney before publication.