By Eden E. Anderson, Rebecca Bjork, and Gerald L. Maatman, Jr.
Duane Morris Takeaways: On October 22, 2026, the California Court of Appeal held in Molina, et al. v. Triumph Residential Services, Inc., Case No. B350252, that requiring an employee to sign an arbitration agreement as a condition of employment is illegal under California Labor Code section 432.6. Thus, when an arbitration agreement is not otherwise enforceable under the FAA, an arbitration agreement that is a condition of employment is unenforceable under California law. The Court of Appeal further found that, even though the arbitration agreement at issue stated on its face that it was voluntary, it actually was not.
The Molina decision is a must read for any employer seeking to compel arbitration under California law, as it teaches important lessons on the evidence an employer should submit with its motion.
Case Background
At the time of her hire with Triumph Residential Services (Triumph), Tiffany Molina signed an arbitration agreement which stated that she was “freely and voluntarily” agreeing to arbitration of claims arising out of her employment. Id. at 4. After her employment ended, Ms. Molina filed a wage and hour class action lawsuit against Triumph. Triumph moved to compel individual arbitration and to dismiss the class claims pursuant to a class action waiver in the arbitration agreement. The parties agreed that their arbitration agreement was not governed by the Federal Arbitration Act (FAA), and thus Triumph sought to enforce the arbitration agreement under California law. With its motion to compel, Triumph submitted a declaration asserting that Ms. Molina “was free to accept the Arbitration Agreement, attempt to negotiate out of it or look for other employment.” Id. at 4.
In opposing the motion, Ms. Molina argued that California Labor Code section 432.6 made her arbitration agreement unlawful. Labor Code section 432.6 makes it illegal (indeed, criminal) for an employer to impose an arbitration agreement on an employee as a “condition of employment.” It also prohibits an employer from requiring an employee to take any affirmative action to opt out of an arbitration agreement. Usually, when the FAA governs an arbitration agreement, Labor Code section 432.6 is preempted. However, as noted, here the parties agreed the FAA did not apply. Ms. Molina asserted, without any evidentiary support of her own, that her arbitration agreement had been forced upon her as a condition of employment.
The trial court denied Triumph’s motion, concluding that Labor Code section 432.6 invalidated the arbitration agreement. Even though the arbitration agreement on its face stated it was “freely and voluntarily” signed, the trial court deemed that insufficient to show the agreement was voluntary and not a condition of employment. It determined that the employer bears the burden of proof to establish a valid an enforceable agreement to arbitrate, and that Triumph failed to offer evidence that its employees were not required to sign the arbitration agreement.
The Decision
In a decision certified for publication, the Court of Appeal affirmed. It held that the only exception to Labor Code section 432.6’s application is when an arbitration agreement is otherwise enforceable under the FAA. Because Ms. Molina’s arbitration agreement was not enforceable under the FAA, then the agreement had to be voluntary to be enforceable under California law.
Without addressing which party bears the burden of proof, the Court of Appeal further held that the evidence established Ms. Molina’s arbitration agreement was not voluntary even though it said on its face that it was. And on this point, Triumph’s declaration proved fatal because it stated that Ms. Molina’s choices were to either “accept the Arbitration Agreement . . . or look for other employment.” Id. at 4. That meant the agreement was unlawfully a condition of employment. Id. at 15. Additionally, Triumph’s declaration stated that Ms. Molina could “negotiate out of” the agreement, which too violated Labor Code section 432.6 because it signified that Ms. Molina had to take affirmative action to avoid signing the arbitration agreement presented to her. Id. Because Ms. Molina’s arbitration agreement was not voluntary and not enforceable under the FAA, it was “illegal (indeed, criminal)” and unenforceable under California law. Id. at 8.
Implications For Employers
The Molina decision teaches an important lesson to any employer seeking to enforce an arbitration agreement that is not governed by the FAA. Even if an arbitration agreement states that it is voluntary, the employer should proffer additional evidence to confirm that employees are not required to sign, e.g., a declaration indicating that some employees do not sign. In this instance, the employer offered a declaration stating the exact opposite, and sandbagged its own motion as a result.