Pre-Certification Conduct That Waives Arbitration: The Villalobos Warning
Class Action Defense
You signed arbitration agreements with your employees. That doesn't mean the right to use them survives. But you still have to handle the lawsuit that follows. California courts can now enforce a waiver of arbitration that happens entirely before a class is certified, through conduct that, at the time, looks like ordinary litigation strategy.
Here's what actually triggers it, the case that just confirmed it applies pre-certification, and what protects your arbitration rights from the moment a complaint is filed.
Key Takeaways
Quach v. California Commerce Club (2024) eliminated the requirement that a party opposing arbitration show prejudice from the other side's delay.
Pre-certification conduct like delayed agreement production, participation in class discovery, and omitting arbitration as a defense can support a waiver finding on its own.
Villalobos v. Maersk (2025) held that generically incorporating arbitration rules doesn't automatically delegate arbitrability questions to the arbitrator, and that waiting-time-penalty claims aren't arbitrable under the California Arbitration Act.
Reviewing delegation clause language and confirming clear FAA coverage are separate, drafting-level protections independent of litigation conduct.
What Counts as Waiving the Right to Arbitrate?
A waiver happens when a party with the right to compel arbitration engages in conduct so inconsistent with an intent to arbitrate that it amounts to an intentional relinquishment of that right. Under California contract law, courts require clear and convincing evidence that the party knew of the right and acted in a way inconsistent with keeping it. The inquiry focuses entirely on the waiving party's own conduct.
In Quach v. California Commerce Club, Inc. (2024), the California Supreme Court eliminated the requirement that the party opposing arbitration show they were prejudiced by the delay, aligning California with the U.S. Supreme Court's 2022 decision in Morgan v. Sundance, Inc., which reached the same conclusion under federal law.
Before Quach, a business owner facing a waiver argument had a real defense available: "even if I was slow, you weren't actually harmed by it." That defense is gone. The analysis now looks exclusively at what you did, not what it cost the other side.
Does Waiver Only Happen After a Class Is Certified?
No. A California Court of Appeal decision in the Sierra Pacific Industries Wage and Hour Cases (decided in late 2025) confirmed that pre-certification conduct can support a waiver finding on its own.
In that case, the employer's prolonged refusal to produce signed arbitration agreements, its active participation in class-wide discovery and mediation involving employees who had signed those agreements, and its failure to plead arbitration as an affirmative defense in its answer were found together to constitute intentional relinquishment, even though no class had yet been certified.
The employer argued it couldn't have moved to compel arbitration before certification anyway, so its conduct during that period shouldn't count against it. The court rejected that argument directly, holding that waiver analysis looks at the totality of a party's conduct, and that pre-certification behavior is fully part of that picture. In practice, this means the clock on protecting your arbitration rights starts the moment a complaint is filed.
What Specific Conduct Puts Your Arbitration Rights at Risk?
Based on Sierra Pacific and the broader body of California waiver case law, these are the recurring fact patterns courts treat as inconsistent with an intent to arbitrate:
Conduct | Why It's Treated as Inconsistent With Arbitration |
|---|---|
Delaying production of signed arbitration agreements | Signals you aren't treating the agreement as something you actually intend to rely on |
Participating in class-wide discovery covering signatory employees | Engaging fully in the litigation process undercuts a later claim that you wanted arbitration all along |
Omitting arbitration as an affirmative defense in your answer | Courts treat this as an early, documented signal of your litigation posture |
Waiting to move to compel arbitration until late in the case | Delay remains one of the most commonly cited factors, and Quach removed the "no harm, no foul" defense to it |
None of these require an outright statement of "we're not going to arbitrate." Courts look at what you actually did across the entire case, and a pattern that reads as full participation in litigation even without a stated intent to abandon arbitration can be enough.
Watch: Arbitration Agreements Under Attack - a broader look at the range of ways courts are finding arbitration agreements unenforceable right now, of which conduct-based waiver is one significant piece.
A Separate, Real Risk: Delegation Clauses That Don't Actually Delegate
In Villalobos v. Maersk, Inc. (2025) 114 Cal.App.5th 1170, the Court of Appeal held that simply incorporating AAA arbitration rules by reference into your agreement isn't automatically enough to "clearly and unmistakably" delegate questions of arbitrability to the arbitrator rather than the court. The court found the plaintiff would have needed to go through a multi-step process, disconnected from the agreement itself, even to discover that delegation was intended, which fell short of the required notice standard.
Villalobos also confirmed something separately important for California employers specifically: Labor Code §229 prohibits arbitration of waiting-time-penalty claims under §203 when the California Arbitration Act, rather than the Federal Arbitration Act, governs the agreement.
If your arbitration agreement doesn't clearly establish FAA coverage, a waiting-time-penalty claim may proceed in court regardless of what your agreement otherwise says. Because waiting-time penalty allegations are so common as an add-on to other wage claims, it's worth confirming this drafting detail specifically.
Our guide on waiting time penalties under Labor Code §203 explains how this claim type behaves in court, not before an arbitrator.
How Should Employers Protect Their Arbitration Rights?
1.
Plead arbitration as an affirmative defense in your very first responsive pleading.
Sierra Pacific treated its omission as meaningful evidence of waiver. This is a low-cost, high-value step that costs you nothing to include even if you're still evaluating whether to move to compel.
2.
Move to compel arbitration at the earliest practical stage,
rather than participating fully in discovery first and raising arbitration later. Delay remains one of the most consistently cited waiver factors, and it no longer requires the other side to show harm.
3.
Produce signed arbitration agreements promptly when requested.
A prolonged refusal, even one grounded in a genuine litigation strategy, reads to courts as inconsistent with an intent to arbitrate.
4.
Review your delegation clause language specifically.
A general reference to AAA or JAMS rules may not meet the "clear and unmistakable" standard Villalobos requires; the agreement itself should state plainly who decides arbitrability questions.
5.
Confirm your agreement clearly establishes FAA coverage,
particularly given Villalobos's holding on waiting-time-penalty claims under the CAA.
6.
Track every fee deadline and procedural requirement from day one.
A waiver argument built on inconsistent conduct is far easier to defend against when your record shows consistent, documented intent to arbitrate from the start of the case.
If you're currently facing a wage and hour class action and are evaluating whether to move to compel arbitration, our Class Action Defense team reviews exactly this kind of conduct-and-timing analysis before a waiver argument has a chance to take hold.
Conclusion
Under Quach v. California Commerce Club (2024), a California employer can waive arbitration rights through conduct inconsistent with an intent to arbitrate, without requiring the opposing party to show prejudice. A separate 2025 decision, Villalobos v. Maersk, adds two further drafting-specific risks: a generic incorporation of arbitration rules may not properly delegate arbitrability questions to the arbitrator, and waiting-time-penalty claims aren't arbitrable under the California Arbitration Act specifically.
Plead arbitration as a defense immediately, move to compel without delay, produce agreements when requested, and confirm your delegation and FAA-coverage language actually says what you think it says because the conduct that waives your right to arbitrate often looks, in the moment, like ordinary litigation strategy rather than a decision to abandon arbitration at all.
If you have an active claim and want your arbitration strategy reviewed, DefendMyBiz offers a free 15-minute consultation. Book a call with our employer defense team today.
Frequently Asked Questions
What is a waiver of arbitration?
Are arbitration waivers legal in California?
Can arbitration rights be waived before a class action is certified?
Is mandatory arbitration mandatory in California?
What happens if my arbitration agreement doesn't clearly delegate arbitrability to the arbitrator?
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