Key facts
- On October 22, 2026, Division Four of California's Second District Court of Appeal published its decision in Molina v. Triumph Residential Services, affirming the trial court's denial of a motion to compel arbitration.
- The court held that an employer violates the California Labor Code when it makes signing an arbitration agreement a condition of employment; requiring an employee to take affirmative steps to opt out in order to keep the right to sue also counts as a condition of employment.
- Both parties agreed that the Federal Arbitration Act (FAA) did not apply, and the court held that such an agreement is unenforceable under California's general contract law.
- The court said that, as far as it had found, no published California decision had answered this question before. The ruling does not address agreements governed by the FAA.
On October 22, 2026, Division Four of California's Second District Court of Appeal published its decision in Molina v. Triumph Residential Services, holding that an employer that makes signing an arbitration agreement a condition of employment violates the California Labor Code, and that when the agreement is not governed by the Federal Arbitration Act (FAA), it cannot be enforced under California law. The court said that, as far as it had found, no published California decision had answered this question before.
The case: an arbitration agreement in the onboarding paperwork
Triumph is a residential property management company in Los Angeles. Tiffany Molina worked there from about April 2023 to September 2024 and filed a wage-and-hour class action in November 2024. Triumph moved to send Molina's individual claims to arbitration and dismiss the class claims. The company said the arbitration agreement was one of the documents in its onboarding process, stated that both sides signed it "voluntarily," and argued that Molina could accept the agreement, try to negotiate out of it, or work somewhere else.
The court's reasoning: arbitration as a condition of the job makes the agreement unenforceable
A provision of the California Labor Code prohibits employers from requiring employees to waive their right to sue as a condition of employment. Requiring an employee to take affirmative action to opt out in order to preserve that right is also treated as a condition of employment, and a violation is a misdemeanor. The provision also states that it does not affect arbitration agreements that are otherwise enforceable under the FAA. In 2023, the Ninth Circuit held in Chamber of Commerce v. Bonta that, in cases where the FAA applies, this provision is preempted by federal law.
In this case, both sides agreed that the FAA did not apply. The court held that the provision's exception protects only agreements enforceable under the FAA; an agreement outside the FAA that violates the provision is unenforceable under California's general contract law. Triumph's own evidence was enough to show the violation: "accept the agreement or work elsewhere" makes arbitration a condition of employment, and "try to negotiate out of it" requires the employee to take affirmative action. The court affirmed the trial court's order denying arbitration.
The court did not address the scope of FAA preemption, or when an agreement would otherwise be enforceable under the FAA.
Attorney guidance: employees should keep onboarding records; employers should review onboarding
Shenqi Cai, senior attorney at Lingtu Law, recommends that employees keep every document and email they signed or received when they were hired, and note whether they were told they could decline to sign. Employers should review their onboarding process and not make signing an arbitration agreement a prerequisite for starting work.
Cai noted that whether a particular agreement is governed by the FAA depends on the agreement's terms and the specific employment circumstances; there is no one-size-fits-all answer.
For employment arbitration agreements governed by the FAA, this decision does not provide an answer.
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Further reading: How Long Does a California Civil Lawsuit Take? The Full Process and Timeline from Filing to Judgment (2026) · Served With a California Lawsuit? What to Do in the First 30 Days