Court of Appeal clarifies “clear and unmistakable” standard for arbitrability delegation: Villalobos v. Maersk, Inc.

In Villalobos v. Maersk, Inc. (2025) 114 Cal.App.5th 1170, the Court of Appeal (Second Appellate District, Division Eight) held that a general incorporation of arbitration rules that permit the arbitrator to determine jurisdiction is insufficient to constitute clear and unmistakable intent to delegate arbitrability to the arbitrator, and affirmed that Lab. Code § 229 prohibits arbitration of waiting time penalty claims (§ 203) when the California Arbitration Act applies.

Plaintiff filed a putative class action alleging UCL and various wage and hour claims, later consolidated with a PAGA claim. Defendants moved to compel arbitration, arguing that the agreement’s incorporation of AAA rules required the arbitrator to determine arbitrability. The trial court denied the motion, finding no clear and unmistakable intent to delegate. It ruled the California Arbitration Act (CAA) applied (not the FAA), and consequently denied the motion to arbitrate Plaintiff’s minimum wage, waiting time penalty (§ 203), and non-individual PAGA claims, while compelling his remaining claims. Defendants appealed.

The Court of Appeal affirmed the trial court’s order. Citing First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944, for the “clear and unmistakable” delegation standard, the court found that while incorporation of AAA rules can sometimes meet this test, the agreement here was insufficient. The court noted that Plaintiff would have only discovered the intent to delegate through a multi-step process removed from the agreement itself. Citing Gilbert Street Developers, LLC v. La Quinta Homes, LLC (2009) 174 Cal.App.4th 1185, 1192, the court emphasized that Plaintiff needed sufficient notice of the delegation.

The Court of Appeal rejected Defendants’ argument regarding the waiting time penalty claim, holding that Lab. Code § 229, which shields unpaid wage claims from arbitration, encompasses § 203 waiting time penalty claims when the CAA governs. Finally, the court held that the preemption principles from Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 do not apply where the FAA is inapplicable. Thus, the trial court correctly ruled that no part of Plaintiff’s PAGA claim was arbitrable under the CAA.

Full opinion

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