Practice Guide · Arbitration of Employment Claims

Compelling Arbitration of FEHA Claims

A practitioner’s synthesis of when and how FEHA claims may be compelled to arbitration — the Armendariz minimum requirements, the unconscionability defense and severance, the reach and limits of FAA preemption (including AB 51), waiver by litigation conduct after Quach, and the arbitration-fee–default rules after Hohenshelt. Written for the employee’s side of the motion. A research starting point you can cite from.

2026 update — unconscionability. In Fuentes v. Empire Nissan, Inc. (2026) 19 Cal.5th 93, the Supreme Court held that a contract’s format — small, blurry, nearly illegible print — bears on procedural, not substantive, unconscionability, but that high procedural unconscionability obligates courts to “closely scrutinize” the agreement’s terms for one-sidedness, construing ambiguities against the drafting employer, with no interpretive presumption favoring arbitration. (Id. at pp. 100, 107, 110.) Layered contract stacks — arbitration agreements alongside confidentiality or restrictive-covenant agreements that contemplate court enforcement — are now a primary Armendariz mutuality battleground. See our full analysis of Fuentes.

Practice Guide
Arbitration
FEHA
Armendariz
Unconscionability
Authorities current to June 2026

By Jonathan J. Delshad, Editor-in-Chief · Last reviewed June 22, 2026

In brief. FEHA claims are arbitrable, but a mandatory employment arbitration agreement is enforceable only if it satisfies the minimum fairness requirements of Armendariz v. Foundation Health Psychcare Services, Inc. and survives ordinary unconscionability analysis. The Federal Arbitration Act preempts state rules that single out arbitration for disfavor — and has been held to preempt California’s AB 51 ban on mandatory arbitration — but it does not displace generally applicable contract defenses. Two newer fronts matter: a defendant can waive arbitration by litigating (Quach), and a drafting party that fails to pay arbitration fees on time risks losing the forum it chose (Hohenshelt; Code Civ. Proc., §§ 1281.97–1281.98). This guide collects the governing authority from the employee’s perspective.

1. Arbitrability and the Armendariz minimum requirements

FEHA statutory claims may be subject to arbitration, but only on terms that let the employee fully vindicate the statutory rights. The California Supreme Court held in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 that such claims are arbitrable “if the arbitration permits an employee to vindicate his or her statutory rights.” (Id. at p. 90.) To do so, a mandatory employment arbitration agreement must provide for: (1) a neutral arbitrator; (2) more than minimal discovery — enough to vindicate the claim; (3) a written award sufficient to permit limited judicial review; (4) all types of relief that would otherwise be available in court; and (5) no requirement that the employee bear costs or fees unique to arbitration, such as the arbitrator’s fees. (Id. at pp. 102–103.) An agreement that fails any of these requirements is unenforceable as to the FEHA claim. Of the five, the cost-shifting requirement is the most exposed to a federal-preemption challenge (discussed below), so it is best framed as an application of generally applicable unconscionability principles.

Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83

Core holding

FEHA claims are arbitrable “if the arbitration permits an employee to vindicate his or her statutory rights” (p. 90); a mandatory agreement must meet five minimum requirements and is subject to unconscionability review (pp. 102–103, 114).

Browse related arbitration decisions in the case index →

2. Unconscionability and severance

Independent of the Armendariz requirements, an arbitration agreement is unenforceable if it is unconscionable. Unconscionability “is a reason for refusing to enforce contracts generally,” so “it is also a valid reason for refusing to enforce an arbitration agreement.” (Armendariz, supra, 24 Cal.4th at p. 114; see Civ. Code, § 1670.5.) The doctrine has procedural and substantive components, evaluated on a sliding scale: the more procedurally oppressive the circumstances of formation, the less substantive harshness is needed to render the agreement unenforceable, and vice versa. The procedural prong examines oppression and surprise — a contract of adhesion presented on a take-it-or-leave-it basis as a condition of employment is the paradigm. The substantive prong examines whether the terms are overly harsh or one-sided. The California Supreme Court applied these principles to an employment arbitration agreement in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125, reaffirming that unconscionability analysis “must rely on the same principles that govern all contracts.” Recurring substantive problems include lack of mutuality, truncated discovery, fee-splitting, shortened limitations periods, one-sided carve-outs (e.g., carving out the employer’s likely claims while compelling the employee’s), and confidentiality clauses that disadvantage the employee.

Severance. A court that finds one or more unconscionable terms may sever them and enforce the remainder, or may refuse to enforce the agreement altogether. (Civ. Code, § 1670.5, subd. (a).) Where the agreement is “permeated” by unconscionability — multiple unlawful provisions reflecting a systematic effort to impose arbitration on unfavorable terms — the court should decline to enforce it rather than rewrite it. (Armendariz, supra, 24 Cal.4th at pp. 121–124.) Identifying multiple defects, not just one, therefore matters to the remedy.

3. FAA preemption — and its limits (AB 51)

Where the Federal Arbitration Act applies, it requires courts to “place arbitration agreements on an equal footing with other contracts … and enforce them according to their terms,” and it preempts state rules that obstruct arbitration. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.) That principle defeated California’s most direct attempt to curb forced arbitration: in Chamber of Commerce of the United States v. Bonta (9th Cir. 2023) 62 F.4th 473, the Ninth Circuit held the FAA preempts AB 51 (Lab. Code, § 432.6), which had sought to bar employers from requiring arbitration agreements as a condition of employment. Following that decision, AB 51 was permanently enjoined as to FAA-governed agreements; the statute remains on the books but is unenforceable in that scope.

Preemption has limits, however. The FAA preserves “generally applicable contract defenses” (9 U.S.C. § 2), so unconscionability remains available, and Armendariz’s vindication-of-statutory-rights requirements continue to apply — though the cost-shifting requirement should be argued on the ground that it polices unconscionable cost terms applicable to all contracts, not arbitration alone. AB 51 may also retain force as to agreements outside the FAA’s coverage — for example, the contracts of certain transportation workers engaged in interstate commerce, who are exempt from the FAA under 9 U.S.C. section 1. For those workers, a California court may apply state arbitration law without FAA preemption.

4. Waiver by litigation conduct

A party that litigates in court before moving to compel may waive its right to arbitrate. California formerly required the opposing party to show it had been prejudiced by the delay, but the California Supreme Court abandoned that arbitration-specific requirement in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, aligning state law with Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 418–419, which held that the FAA’s “policy favoring arbitration” does not authorize arbitration-preferring procedural rules and does not support a freestanding prejudice requirement. Under Quach, waiver is now analyzed like the waiver of any contract right: the party opposing arbitration must show, by clear and convincing evidence, that the moving party “knew of the contractual right and intentionally relinquished or abandoned it.” (Quach, supra, 16 Cal.5th at p. 584.) Quach overruled St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 to the extent it had required prejudice. Litigation conduct such as answering without asserting the right, propounding or responding to extensive merits discovery, demurring, or otherwise invoking the judicial process before moving to compel now carries real waiver risk — a development that cuts in the employee’s favor when an employer delays.

5. The arbitration-fee default

The Legislature has armed employees with a powerful tool where the employer drafted the agreement and then fails to fund the arbitration. Under Code of Civil Procedure sections 1281.97 (fees due to initiate) and 1281.98 (fees due to continue), if the drafting party does not pay required fees within 30 days after they are due, it is in “material breach,” is in default, and waives the right to compel the employee to arbitrate. The employee may then, at the employee’s election, withdraw the claim from arbitration and proceed in court (with the limitations period tolled), continue in arbitration, or compel payment — and the statute provides for mandatory monetary sanctions against the breaching party. (Code Civ. Proc., §§ 1281.98 [as amended by Stats. 2023, ch. 478 (AB 1756)], 1281.99.)

In Hohenshelt v. Superior Court (2025) 18 Cal.5th 310, the California Supreme Court held that section 1281.98 is not preempted by the FAA, but rejected a rigid reading under which any late payment automatically forfeits the right to arbitrate. The Court held that nonperformance “automatically extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent”; a good-faith, inadvertent, or excusable late payment may instead support relief from forfeiture, which the trial court must evaluate. The decision disapproved several Court of Appeal decisions that had applied an automatic-forfeiture rule. The practical upshot: calendar the 30-day deadlines and move promptly when a drafting party misses one, but be prepared for the employer to argue its default was excusable, and develop facts showing the nonpayment was willful or grossly negligent where the record supports it.

Read the Review’s full case analysis of Hohenshelt v. Superior Court →

6. The petition to compel

A motion to compel arbitration is governed by Code of Civil Procedure section 1281.2. The court must order arbitration if it determines an agreement to arbitrate the controversy exists, unless it finds: that the right to compel was waived (subd. (a)); that grounds exist for rescission of the agreement (subd. (b)) — the gateway for unconscionability, fraud, and similar contract defenses; or that a party to the arbitration is also a party to pending litigation with a third party arising from related facts, creating a possibility of conflicting rulings (subd. (c)). The third-party-litigation exception is frequently overlooked but valuable: where the employee’s related claims involve non-signatories (for example, individual harassers, or a staffing agency and a client employer), subdivision (c) gives the trial court discretion to deny or stay arbitration to avoid inconsistent results. On the motion, the moving party bears the burden of proving the existence of an agreement by a preponderance, after which the employee bears the burden on defenses such as unconscionability.

7. Practice pointers

  • Audit the agreement against Armendariz. Neutral arbitrator, adequate discovery, written award, full remedies, and no arbitration-unique costs — any failure is a ground to defeat the FEHA portion of the motion.
  • Stack the unconscionability defects. Multiple one-sided terms support refusing enforcement altogether rather than severance (Armendariz; Civ. Code, § 1670.5).
  • Press waiver after Quach. No prejudice is required; document every step the employer took in court before moving to compel.
  • Watch the fee clock. Sections 1281.97–1281.98 can return the case to court when the employer misses a 30-day payment, with mandatory sanctions; move promptly, but expect an excusable-neglect argument after Hohenshelt.
  • Invoke section 1281.2(c) where related litigation with non-signatories risks conflicting rulings.
  • Check FAA coverage. For transportation workers engaged in interstate commerce (9 U.S.C. § 1), the FAA may not apply — and AB 51 and state law may govern.

Frequently asked questions

Can my employer force my discrimination claim into arbitration in California?

Often yes, if you signed an arbitration agreement — but a mandatory employment arbitration agreement covering FEHA claims is enforceable only if it meets the Armendariz fairness requirements and is not unconscionable (Armendariz v. Foundation Health Psychcare Services (2000)).

What makes an employment arbitration agreement enforceable?

Under Armendariz, it must provide a neutral arbitrator, adequate discovery, a written decision allowing limited judicial review, and all remedies available in court — and it cannot make the employee pay unreasonable arbitration costs. An agreement that is both procedurally and substantively unconscionable can be struck down.

Is California’s ban on mandatory arbitration (AB 51) enforceable?

No. The Ninth Circuit held that the Federal Arbitration Act preempts AB 51 (Labor Code section 432.6), so employers may still require arbitration agreements that are covered by the FAA (Chamber of Commerce v. Bonta (9th Cir. 2023)).

Can my employer lose the right to arbitrate by waiting too long?

Yes. An employer that litigates in court before moving to compel arbitration can waive the right to arbitrate, and California no longer requires the employee to show prejudice from the delay (Quach v. California Commerce Club (2024), following Morgan v. Sundance (2022)).

What happens if my employer doesn’t pay the arbitration fees on time?

If an employer fails to pay required arbitration fees within 30 days of the due date, that is a material breach under Code of Civil Procedure sections 1281.97–1281.98. The employee can then withdraw from arbitration and return to court, and the statute provides for monetary sanctions against the employer.

Key authorities

Browse related decisions in the case index →

See also: Ramirez v. Charter Communications