California’s Credit Unions won a victory on Senate Bill 399 this week for credit unions statewide. The U.S. District Court for the Eastern District of California has granted our motion for a preliminary injunction, immediately blocking the enforcement of SB 399 while litigation proceeds.

SB 399, effective January 1, 2025, enacted new California Labor Code §1137, which prohibited public and private employers from subjecting, or threatening to subject, an employee “to discharge, discrimination, retaliation, or any other adverse action because the employee declines to attend an employer-sponsored meeting or affirmatively declines to participate in, receive, or listen to any communications with the employer or its agents or representatives, the purpose of which is to communicate the employer’s opinion about religious or political matters.”

Violations of SB 399’s prohibition against such communications, also known as captive audience meetings, are subject to enforcement by the Labor Commissioner or private right of action. California’s Credit Unions was part of a coalition led by the California Chamber of Commerce that challenged SB 399 in federal court on statutory and Constitutional grounds.

As a result of this decision, SB 399 is now unenforceable across California, which means the employer communication practices the bill sought to restrict can continue for the time being. The court agreed with the legal coalition’s arguments, striking down the statute on two grounds:

• The National Labor Relations Act (NLRA) must prevail. The court held that SB 399 is preempted by the NLRA. This is a ruling reaffirming that the power to regulate employer-employee communications concerning unionization rests with the federal government, specifically the NLRA and the National Labor Relations Board. California has no authority to regulate within this space.
• A content-based attack on free speech. The court concluded that SB 399 is a content and viewpoint-based restriction on employer speech. The judge rejected the notion that the bill merely regulated conduct (i.e., adverse action against an employee who refuses to participate), finding that SB 399’s prohibition turned solely on the subject being discussed at a required meeting. The prohibition against adverse action only applies when the employer engages in core expressive activity – communicating their opinions on religious and political matters, including unionization. SB 399 cannot survive the rigorous test of strict scrutiny under the First Amendment.

This is an important achievement in California Credit Union’s fight to protect your credit union’s right to communicate freely with employees.

The league would like to thank credit union leaders across California for their support as it remains committed to defending the First Amendment and federal labor law. California’s Credit Unions will keep credit unions informed as this litigation moves forward.