The short answer
Not always. California employers routinely require workers to sign arbitration agreements as a condition of being hired but courts will refuse to enforce an agreement that is unconscionable, meaning it was imposed unfairly and contains terms that are one-sided against the employee. On May 26, 2026, the California Court of Appeal, Second Appellate District, affirmed a trial court order refusing to enforce one such agreement in a case litigated by Crosner Legal. The decision became final on August 7, 2026.
What happened in the case
Our client was hired in June 2023 by a Los Angeles area car dealership owned by a national automotive retail group.
The arbitration agreement was the very first document in his onboarding packet. He could not access any of the other hiring paperwork until he signed it. A company representative called him and stressed that the job offer was time-sensitive, and the offer letter itself said the company could revoke the offer at any time before his start date. He signed roughly 40 minutes after opening it.
He read it on his phone. When he tried to enlarge the text, it went blurry. The agreement was a single 46-line paragraph of dense text, and our client who has a trade school education was confronted with technical legal language and cross-references to outside rule sets that were never attached.
In November 2024, he filed a putative class action alleging unpaid minimum wages, unpaid overtime, missed meal and rest periods, inaccurate wage statements, untimely payment of wages, unreimbursed business expenses, and unfair competition. The defendants moved to compel arbitration. The Los Angeles Superior Court denied the motion. The defendants appealed. The Court of Appeal affirmed.
What the court found unfair
The Court of Appeal agreed the agreement carried a medium level of procedural unconscionability, the pressure to sign, the take it or leave it posture, the density of the text, and the disparity in bargaining power all mattered. It then identified three separate terms as substantively unconscionable:
1. The PAGA waiver. The agreement required the employee to give up any right to bring a representative action under the Private Attorneys General Act. The court held a blanket ban on representative PAGA actions is unconscionable. Critically, the employer’s hedge that the waiver applied only “to the maximum extent permitted by applicable law” did not save it, because an employee would have no way of knowing what the provision actually covered.
2. The cost-shifting provision. The agreement imported Federal Rule of Civil Procedure 68 into the arbitration, meaning an employee who turned down a settlement offer and later recovered less could be stuck paying the employer’s post offer costs. That is a risk a wage claimant would not face in court, where the Labor Code’s fee provisions generally protect employees from paying an employer’s costs. Making an employee bear costs they would not bear in court is unconscionable it puts an obstacle in front of a worker simply trying to be heard.
3. The unilateral modification clause. The separate at-will employment agreement said, all terms and conditions of my employment may be changed or withdrawn at Company’s unrestricted option at any time. The court read the two documents together they were part of one hiring transaction and held that giving the employer unfettered power to rewrite the arbitration terms later is substantively unconscionable. It declined to follow the line of cases holding that the implied covenant of good faith and fair dealing cures the problem, reasoning that an agreement’s validity is judged at the moment of signing, not by what a court might later prevent.
What the court found acceptable
An honest read of the opinion includes the parts that went the other way. The Court of Appeal disagreed with the trial court on two points and rejected a third argument:
- The discovery provision was upheld. Read together with the incorporated arbitration rules which require an up front exchange of documents, damages information, insurance information, and witness identities, and guarantee at least one deposition per side, it met minimum standards of fairness.
- A 60-day deadline to pay arbitration fees was upheld, rather than the 30-day default, because parties may contract for their own payment deadline.
- Staying non-arbitrable claims while arbitrable ones proceed was not unconscionable on its own.
None of that changed the result. Which is the real lesson.
Why the whole agreement fell, not just the bad clauses
The employer’s fallback argument was severance: strike the PAGA waiver and the cost-shifting clause with a “stroke of the pen”, keep the rest, and send the case to arbitration. The agreement even contained a severability clause.
The Court of Appeal held the trial court acted within its discretion in refusing. Under the framework California’s Supreme Court set out in Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478, a court asks not only whether the defects can be surgically removed but whether severing them would condone an illegal scheme and whether the pattern of defects shows a systematic effort to impose arbitration as an inferior forum rather than a genuine alternative to court.
Here, multiple substantively unconscionable provisions, layered on real procedural unfairness in how the agreement was presented, showed exactly that pattern. A severability clause is one factor a court weighs. It is not a safe harbor for an agreement that is unfair throughout.
What this means if you signed an arbitration agreement
Most California workers have signed one. Many assume it permanently closes the courthouse door. It does not always.
Signing under time pressure, on a phone, buried in an onboarding packet you could not proceed past, without a real chance to read or ask questions those facts matter. So do the terms themselves: waivers of representative claims, provisions exposing you to the employer’s costs, one sided carve outs, confidentiality requirements, shortened deadlines, and clauses letting the employer change the rules later.
Whether an arbitration agreement is enforceable is a fact specific question that turns on the exact language of your agreement and the circumstances under which you signed it. It is worth having reviewed before you assume you have no options.
Frequently asked questions
Can my employer make me sign an arbitration agreement to get a job in California?
Generally yes. California employers may condition employment on signing an arbitration agreement. But the fact that an agreement was presented on a take it or leave it basis is itself evidence of procedural unconscionability, and it can matter a great deal when a court evaluates whether the agreement is enforceable.
What makes an arbitration agreement unenforceable in California?
Courts apply a two part unconscionability test. Procedural unconscionability looks at how the agreement was formed pressure, surprise, unequal bargaining power, dense or hidden terms, limited time to review. Substantive unconscionability looks at whether the terms themselves are unreasonably one sided. Courts use a sliding scale: the more oppressive the terms, the less procedural unfairness is needed, and vice versa.
Can an arbitration agreement waive my right to bring a PAGA claim?
No. A blanket waiver of the right to bring a representative action under the Private Attorneys General Act is unconscionable under California law. Language limiting the waiver to what is “permitted by law” does not fix the problem, because the employee cannot tell what is actually being waived.
If one part of my arbitration agreement is illegal, does the whole thing get thrown out?
Sometimes. A court may sever an offending clause and enforce the rest, or it may refuse to enforce the agreement entirely. Where multiple provisions are unconscionable and the pattern suggests the employer built an inferior forum for itself, courts are more likely to refuse enforcement altogether, even where the agreement contains a severability clause.
Does it matter that I signed the agreement quickly?
It can. Courts consider how much time you had, what pressure was applied, how long and complex the document was, your education and experience, and whether you had a lawyer’s help. Signing within minutes, under a warning that the offer might be pulled, supports a finding of procedural unconscionability.
What if my employer can change the agreement whenever it wants? A provision letting an employer unilaterally modify the terms of an arbitration agreement can render the agreement substantively unconscionable. A California Court of Appeal reached that conclusion in 2026, reasoning that an employee signing today cannot know what the agreement will say tomorrow.
Crosner Legal, P.C. represented the plaintiff and respondent in this matter. The case is Olasaba v. Lithia Motors, Inc. (Cal. Ct. App., 2d Dist., Div. One, May 26, 2026, No. B348587) (nonpublished opinion), affirming an order of the Los Angeles County Superior Court, Case No. 24STCV31335. Because the opinion is not certified for publication, it may not be cited or relied on as authority under California Rules of Court, rule 8.1115(a).
This article is provided for general informational purposes only and is not legal advice. Prior results do not guarantee or predict a similar outcome in any other matter; every case depends on its own facts. Reading this article does not create an attorney-client relationship. If you believe your workplace rights have been violated, contact a licensed attorney in your jurisdiction.