Labor Code 432.6: Hiring Arbitration Unenforceable in a Non-FAA Case

Labor Code 432.6: California Court Won't Enforce a Hiring Arbitration Agreement Where the FAA Does Not Apply

A California appeals court on October 22, 2026 affirmed the refusal to compel arbitration against a former property management employee, holding that Labor Code section 432.6 makes a hiring-condition arbitration agreement unenforceable when the Federal Arbitration Act is conceded not to apply.

Information last verified on November 1, 2026. This is a developing story; we update it as the record changes.

Jurisdiction scope: This article addresses California state law on employment arbitration agreements under Labor Code section 432.6, and California PAGA standing under Labor Code section 2698 et seq., as construed in two California Court of Appeal opinions filed in October 2026. It does not address arbitration agreements that are governed by the Federal Arbitration Act, arbitration outside the employment relationship, federal employment claims, or the law of any other state.

What Happened

Two California Court of Appeal panels published opinions one day apart in late October 2026. Both affirmed orders denying an employer's motion to compel arbitration. They reached that result on entirely separate legal grounds, and conflating them would misstate both.

Molina v. Triumph Residential Services, Inc.

The Second District Court of Appeal, Division Four, filed Molina v. Triumph Residential Services, Inc., No. B350252, on October 22, 2026, certified for publication. The appeal came from Los Angeles County Superior Court No. 24STCV29642, Judge Carolyn Kuhl. Justice Daum wrote the opinion; Presiding Justice Zukin and Justice Tamzarian concurred. The caption names one plaintiff, Tiffany Diane Molina.

Triumph is a Los Angeles property management company that employed Molina from roughly April 2023 to roughly September 2024. In November 2024 she filed a class action raising eight causes of action for wage-and-hour violations under the Labor Code and unfair business practices under Business and Professions Code section 17200. Triumph moved to compel arbitration of her individual claims and to dismiss the class claims.

One feature of the motion drove the whole appeal. Triumph itself asserted that California law applied rather than the Federal Arbitration Act, and it did not argue on appeal that the FAA applied. That concession took federal preemption off the table and left the court to decide what section 432.6 does on its own terms.

The trial court denied the motion, reasoning that a contract contrary to an express provision of law is unlawful under Civil Code section 1667 and that the object of this agreement was unlawful under section 432.6. The Court of Appeal reviewed the order de novo and affirmed, stating its holding in plain terms:

"In short, our holding is as follows. Requiring an employee to enter into an arbitration agreement as a condition of employment is illegal under section 432.6, subdivision (a). When this provision is violated, the resulting arbitration agreement is unenforceable under the ordinary California contract law barring the enforceability of unlawful contracts. The enforceability exception in section 432.6, subdivision (f) applies only to written arbitration agreements that are otherwise enforceable under the FAA." Source: Molina v. Triumph Residential Services, Inc., No. B350252 (Cal. Ct. App., 2d Dist., Div. 4, Oct. 22, 2026), at p. 13

On the factual question of whether the agreement really was a condition of employment, the court relied on the employer's own filings. A Triumph vice president declared that Molina received the arbitration agreement as part of hiring and onboarding, and Triumph's motion stated that she "was free to accept the Arbitration Agreement, attempt to negotiate out of it or look for other employment." The court held that the first and third options amount to conditioning employment on agreeing to arbitrate, and that the middle option, negotiating out, requires an affirmative act to preserve rights, which subdivision (c) deems a condition of employment. The court added that the invitation to "attempt to negotiate" suggests Molina would have had to give something up in exchange, and that requiring such a compromise would violate subdivision (b)'s bar on retaliating against an applicant who refuses to sign.

The court was careful about what it did not decide. It did not resolve whether a section 432.6 violation makes an agreement void or merely voidable, and it did not resolve which party bears the burden of proof, writing that it "need not resolve this dispute" because the moving party's own evidence established the violation either way (Molina, at p. 14). It also wrote that it was saying "nothing about the scope of FAA preemption" and was not deciding when an agreement is "otherwise enforceable" under the FAA (Molina, at p. 13). The disposition affirms the order denying arbitration and awards Molina her costs on appeal.

Castillo v. Belkorp AG, LLP, a PAGA case, not a section 432.6 case

The Fifth Appellate District filed Castillo v. Belkorp AG, LLP, No. F090527, on October 23, 2026, certified for publication, from Stanislaus County Superior Court No. CV-25-001186, Judge John R. Mayne. Justice Harrell wrote; Acting Presiding Justice Meehan and Justice Guerra concurred. The caption reads "Steven Castillo" and "Belkorp AG, LLP" while the body of the opinion refers to "Stephen Castillo" and "Belkorp AG, LLC"; we use the caption form and note the discrepancy because both spellings appear in the same published document.

Castillo worked for Belkorp as a service technician from May 2021 until his termination in late January 2024, and his onboarding documents included an arbitration agreement with a class and collective action waiver. He gave the Labor and Workforce Development Agency notice of Labor Code violations in November 2024 under section 2699.3, the agency did not respond within the 65-day waiting period, and in February 2025 he filed a single PAGA cause of action. His complaint said expressly that he sought "only to prosecute his non-individual PAGA claims."

Belkorp moved to compel arbitration. The trial court denied the motion, and the Court of Appeal affirmed on a question of statutory interpretation that has nothing to do with section 432.6:

"Because we detect no reason to depart from CRST, we conclude that an aggrieved employee may bring a PAGA action that consists only of nonindividual PAGA claims under the post-July 1, 2024 version of PAGA." Source: Castillo v. Belkorp AG, LLP, No. F090527 (Cal. Ct. App., 5th Dist., Oct. 23, 2026), at p. 9

The arbitration result follows from that interpretation rather than from any rule about how the agreement was signed. Because nonindividual PAGA claims are brought as the state's proxy and are not arbitrable under Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, the court held that Belkorp's arbitration agreement and its class and collective action waiver could not be enforced against him (Castillo, at p. 29). The opinion adds: "Because nonindividual PAGA claims are not subject to arbitration, there can be no violation of the FAA or public policy if an aggrieved employee pursues only nonindividual PAGA claims" (Castillo, at p. 30).

Castillo follows CRST Expedited, Inc. v. Superior Court (2025) 112 Cal.App.5th 872 and Galarsa v. Dolgen California, LLC (2025) 115 Cal.App.5th 1, and declines to follow Leeper v. Shipt, Inc. (2024) 107 Cal.App.5th 1001 and Williams v. Alacrity Solutions Group, LLC (2025) 110 Cal.App.5th 932. By the opinion's own account, every one of those four decisions is under California Supreme Court review, including CRST, the case Castillo chose to follow: Leeper (S289305, review granted April 16, 2025), Williams (S291199, review granted July 9, 2025), CRST (S292005, review granted September 17, 2025) and Galarsa (S293545, review granted December 17, 2025). One decision on that side is not under review: Castillo also relies on Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.App.5th 533, which the opinion cites without a review-granted notation (Castillo, at pp. 9, 29). The opinion also cites Rodriguez v. Packers Sanitation Services LTD., LLC (2025) 109 Cal.App.5th 69, review granted May 14, 2025, S290182.

What the Law Actually Says

Labor Code section 432.6 came out of Assembly Bill 51 in 2019. Subdivision (a) provides that a person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require an applicant or employee to waive any right, forum, or procedure for a violation of the California Fair Employment and Housing Act or the Labor Code. Subdivision (b) bars retaliation for refusing to sign, and subdivision (c) deems an agreement a condition of employment when it requires the employee to opt out or take any affirmative action to preserve their rights. Section 433 makes a violation of that article a misdemeanor. Because the California Legislative Information site blocked our requests, we rely on the verbatim reproductions of this text in the Ninth Circuit's Bonta opinion at pages 10 and 11 and in Molina at page 7.

The statute then does something unusual. Subdivision (f) states that nothing in the section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act. As Molina explains, the Legislature wrote that clause hoping to avoid federal preemption by regulating only the conduct of forming an agreement, not the enforceability of the agreement once signed.

That hope did not hold. In Chamber of Commerce of the United States v. Bonta (9th Cir. 2023) 62 F.4th 473, No. 20-15291, the Ninth Circuit framed the question as whether the FAA preempts a state rule that discriminates against the formation of an arbitration agreement even if the agreement is ultimately enforceable, and answered: "We hold that such a rule is preempted by the FAA" (Bonta, at p. 7). On that basis the panel affirmed the district court's preliminary injunction, holding that the challengers were likely to succeed on the merits. The litigation did not end there. On remand the case went to final judgment, and on January 1, 2024 the district court entered a permanent injunction barring the Attorney General, the Labor Commissioner, the Secretary of the Labor and Workforce Development Agency and the civil rights department director, together with their successors, from enforcing Labor Code section 432.6, subdivisions (a), (b) and (c), and Government Code section 12953, wherever the alleged waiver is entry into an arbitration agreement covered by the Federal Arbitration Act. The action was dismissed with prejudice and the court retained jurisdiction to enforce the judgment. California's Division of Labor Standards Enforcement states on its own site that the Labor Commissioner is enjoined from enforcing section 432.6 where the alleged waiver is entry into an arbitration agreement covered by the Federal Arbitration Act, and that it continues to enforce the statute for matters not covered by the injunction.

So the practical gate is whether the FAA applies, not section 432.6 standing alone. That is what makes Molina unusual: the employer disclaimed the FAA in its own motion and never argued it on appeal, which is why the court reached the state-law question at all. Whether any particular agreement falls outside the FAA is a separate inquiry that Molina expressly left open (Molina, at p. 13).

None of this touches the separate body of California law that governs the employment relationship itself. Our guide to California at-will employment and its exceptions covers that baseline, and the state-by-state at-will comparison shows how differently other states treat the same questions. Section 432.6 protects the right to notify a state agency or public prosecutor of an alleged violation, which overlaps the reporting channels described in our page on whistleblower protections in California.

PAGA, the statute at issue in Castillo, is a different mechanism entirely. Labor Code section 2698 et seq. lets an aggrieved employee recover civil penalties that the Labor and Workforce Development Agency could otherwise recover, acting as the state's proxy. Governor Newsom signed PAGA reform legislation on July 1, 2024 in Assembly Bill 2288 and Senate Bill 92, according to the California Labor and Workforce Development Agency. The agency's own FAQ states that for PAGA notices filed on or after June 19, 2024, any current or former employee who has experienced each of the Labor Code violations alleged may file a PAGA lawsuit, and that 65 percent of recovered penalties go to the agency while 35 percent go to the aggrieved employees. The same FAQ carries one exception: an employee represented by a non-profit legal service organization that litigated PAGA actions in court for at least five years before January 1, 2025 may file a PAGA lawsuit after experiencing at least one of the violations alleged. For notices filed before June 19, 2024 the split was 75 and 25 percent, and an employee needed to have experienced only one alleged violation.

Standing under the amended section 2699, subdivision (c)(1) generally requires that the employee personally suffered each alleged violation within a one-year limitations period keyed to Code of Civil Procedure section 340. Deadlines of that kind are easy to miss; our overview of California filing deadlines by case type sets out the general framework. PAGA standing turns on being an aggrieved employee, while section 432.6 reaches applicants for employment as well as employees, so classification can matter to both. Our explainer on the tests that separate contractors from employees sets out that threshold question.

Analysis: Why This Matters

The following is analysis from the Recording Law Editorial Team.

Molina is significant less for its breadth than for closing a logical gap. The Molina court noted that no published California opinion it found had answered whether a section 432.6 violation makes an agreement unenforceable when the FAA is out of the picture, and that several federal district courts had read Bonta to say it does not without engaging with why subdivision (f) is limited to FAA-enforceable agreements. Molina engages with that text and reads the specified exception as excluding others.

The evidentiary half of the opinion is arguably the more portable lesson. The employer lost on the strength of its own characterization of the hiring process. Describing a worker's choices as accept, negotiate out, or look elsewhere was treated as a description of a condition of employment, and the voluntariness recital inside the agreement did not change that. The trial court rejected the argument that the agreement's own "freely and voluntarily" language settled the question (Molina, at p. 6), and the Court of Appeal affirmed on the employer's description of the hiring process rather than on the recital (Molina, at pp. 14 to 15).

It is also worth being precise about what Molina leaves in place. The Ninth Circuit's preemption holding in Bonta still governs FAA-covered agreements in federal court within the circuit, California's labor and civil rights enforcement officials are permanently enjoined from enforcing section 432.6 against FAA-covered arbitration agreements under the January 1, 2024 final judgment in that case, and Molina disclaims any view on the scope of that preemption. Read together, these authorities describe a narrow lane rather than a general rule against employment arbitration in California.

Castillo sits in a genuinely unsettled area. Both sides of the headless PAGA split are now before the California Supreme Court, and the Supreme Court granted review in Leeper on its own motion, limiting briefing to whether every PAGA action necessarily includes both individual and nonindividual claims and whether a plaintiff can choose to bring only a nonindividual action. Until that decision issues, published appellate authority points in both directions, and trial courts may choose between them under the court's standing order implementing California Rules of Court, rule 8.1115(e)(3). We express no view on how that review will come out.

How This Affects You

A reader whose employer required an arbitration agreement at hiring should understand that the enforceability question in California usually turns first on whether the Federal Arbitration Act applies, not on whether the agreement was a condition of employment. Where the FAA applies, the Ninth Circuit has held that it preempts section 432.6, so the fact that signing was mandatory does not by itself defeat the agreement.

Molina addresses the narrower situation in which the FAA is established not to apply. In that setting the Second District held the agreement unenforceable. Whether any given agreement falls outside the FAA is a fact-specific question that Molina did not decide and that no article can answer for an individual contract.

Because Molina reviewed a denial of a motion to compel arbitration and not the merits of the underlying wage claims, nothing in it resolves whether Molina's wage-and-hour allegations are correct. It decides the forum question only, and the case returns to the trial court.

For PAGA, the state's own guidance is the practical starting point: for notices filed on or after June 19, 2024, standing generally requires having personally suffered each alleged violation within the one-year period, subject to the nonprofit-representation exception noted above, and the notice process under section 2699.3 precedes a lawsuit. Whether an employee may proceed on nonindividual claims alone is the precise question under review, so published California appellate authority currently points both ways and the answer may change.

What Happens Next

In Molina, the next procedural steps available to the employer are a petition for rehearing in the Court of Appeal and a petition for review in the California Supreme Court. We could not reach the California appellate courts case information system to check for post-filing docket activity, so this article reflects the opinion as filed on October 22, 2026 and nothing later. A grant of review would ordinarily affect the opinion's citable status under rule 8.1115.

In Castillo, the event that would resolve the underlying dispute is a California Supreme Court decision in Leeper v. Shipt, Inc., S289305, where review was granted on April 16, 2025 on the two framed issues. A decision there would govern the headless PAGA question for all California courts and would supersede the Court of Appeal split that Castillo joins.

This is general legal information, not legal advice. It covers California state law, with reference to Ninth Circuit federal precedent on Federal Arbitration Act preemption, and reflects sources verified on November 1, 2026. Laws change and this story is developing; consult a lawyer licensed in your jurisdiction about your specific situation.

Related articles

• California at-will employment and its exceptions
• How at-will employment differs from state to state
• Whistleblower protections for California workers
• California filing deadlines by case type
• Contractor or employee: the IRS, DOL and ABC tests

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Last updated: 2026-11-01. This is a developing story; details verified as of 2026-11-01.

Frequently Asked Questions

Are mandatory arbitration agreements enforceable in California?

It depends primarily on whether the Federal Arbitration Act applies. The Ninth Circuit held in Chamber of Commerce v. Bonta (9th Cir. 2023) 62 F.4th 473 that the FAA preempts Labor Code section 432.6 where the FAA applies, and the federal district court in that case permanently enjoined California's labor and civil rights enforcement officials, on January 1, 2024, from enforcing section 432.6 as to FAA-covered arbitration agreements. Molina addresses only the situation where the FAA is established not to apply.

What did Molina v. Triumph Residential Services actually hold?

The Second District, Division Four held on October 22, 2026 that requiring an arbitration agreement as a condition of employment violates Labor Code section 432.6, subdivision (a), and that the resulting agreement is unenforceable under ordinary California contract law because the savings clause in subdivision (f) reaches only agreements otherwise enforceable under the FAA (Molina, No. B350252, at p. 13).

Does Molina mean California arbitration agreements are now void?

No. The opinion states that it says 'nothing about the scope of FAA preemption' and does not decide when an agreement is otherwise enforceable under the FAA (Molina, at p. 13). All parties in Molina agreed the FAA did not apply, which is what made the section 432.6 question decisive there.

What is Labor Code section 432.6, subdivision (f)?

It provides that nothing in section 432.6 is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act. The Molina court read that as a single specified exception, so an agreement that violates subdivision (a) and is not FAA-enforceable falls under the general California rule against enforcing unlawful contracts.

Did the Molina court decide who has to prove the agreement was a condition of employment?

No. The court wrote 'We need not resolve this dispute' and held that the employer's own declaration and motion established the violation regardless of which party bore the burden (Molina, at p. 14).

Is Castillo v. Belkorp a section 432.6 case?

No. Castillo, No. F090527, filed October 23, 2026 in the Fifth Appellate District, is a Private Attorneys General Act case under Labor Code section 2698 et seq. It holds that an aggrieved employee may bring a PAGA action consisting only of nonindividual claims under the post-July 1, 2024 version of PAGA, and that arbitration was properly denied because such claims are not arbitrable (Castillo, at pp. 9, 30).

What is a headless PAGA action, and is the law settled?

It is a PAGA action pleading only nonindividual claims, with no individual PAGA claim. The law is not settled. The California Supreme Court granted review in Leeper v. Shipt, Inc., S289305, on April 16, 2025, limiting briefing to whether every PAGA action necessarily includes both individual and nonindividual claims and whether a plaintiff can choose to bring only a nonindividual action.

When did the 2024 PAGA amendments take effect?

The California Labor and Workforce Development Agency states that Governor Newsom signed the PAGA reform legislation, Assembly Bill 2288 and Senate Bill 92, on July 1, 2024. The agency's PAGA FAQ applies the new standing rule and the 65 and 35 percent penalty split to PAGA notices filed on or after June 19, 2024, with the prior rules and a 75 and 25 percent split for earlier notices. The Castillo opinion describes the Legislature as having amended PAGA effective July 1, 2024, calls these the July amendments, and applies the post-July 1, 2024 version of PAGA (Castillo, at pp. 4, 9).

Why does the Castillo caption say Steven Castillo and Belkorp AG, LLP?

The published opinion itself is inconsistent: the caption reads 'Steven Castillo' and 'Belkorp AG, LLP' while the body refers to 'Stephen Castillo' and 'Belkorp AG, LLC'. We cite the caption form. The discrepancy appears in the court's own document and we note it rather than silently choosing one.

Do these two rulings decide the underlying wage claims?

No. Both appeals reviewed orders denying motions to compel arbitration, and both dispositions affirm those orders and award costs on appeal. Neither opinion resolves whether the underlying Labor Code allegations are correct; each case returns to the trial court.