California Employment Law: What Happened in August 2026

August was unusually active. The California Supreme Court issued two significant decisions, the Court of Appeal published several employer-relevant rulings, and the Ninth Circuit handed down a decision that will expand EFAA coverage beyond anything most employers anticipated when they drafted their current arbitration agreements. Here is what matters and why.

1. Two-Option § 998 Offers Are Now Valid — With Conditions

Gorobets v. Jaguar Land Rover North America, LLC (Cal., Aug. 6, 2026) 20 Cal.5th 501

The California Supreme Court resolved the long-standing uncertainty over whether a Code of Civil Procedure § 998 offer can present two alternative sets of terms. The answer is yes — provided: (1) the offer clearly presents the alternatives available to the offeree, and (2) at least one of the two sets of terms is sufficiently certain to permit accurate valuation at the time the offer is made.

For cost-shifting purposes, if the offering party ultimately does better at trial than the highest-value valid alternative it proposed, costs shift.

Why it matters for employer defense: § 998 offers are a standard tool for cost management in wage and hour litigation. Employers frequently want to offer alternative resolution structures — a lump-sum payment versus structured installments, for example, or resolution with versus without injunctive relief — and have been uncertain whether dual-structure offers would be valid. Gorobets confirms they are, with caveats on certainty and clarity. Defense counsel should revisit standard § 998 offer templates in light of this decision.

2. The EFAA Reaches Plaintiffs Who Started in Arbitration

Ding v. Structure Therapeutics, Inc. (9th Cir., Aug. 19, 2026) 2026 WL 2420555

This is the most significant arbitration development of the month. Dr. Ding filed a demand for arbitration asserting discrimination and harassment claims. During discovery in arbitration, she uncovered evidence that her mistreatment was motivated by her sex. She withdrew from arbitration and elected to pursue her claims in court under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), 9 U.S.C. §§ 401–402.

The Ninth Circuit affirmed that she could do exactly that. An employee who initiated arbitration and participated in it for a period of time can still invoke the EFAA upon discovering a sexual harassment basis for her claims. The EFAA's purpose — giving harassment victims a genuine choice of forum — overrides the fact that the plaintiff voluntarily entered arbitration in the first instance.

Why it matters: Employers with pending arbitration proceedings involving discrimination claims now have a new exposure point: if a plaintiff discovers sexual harassment allegations mid-arbitration, she can exit arbitration entirely and bring her full case to court. This is not theoretical. Discovery in arbitration often surfaces facts that weren't in the original complaint. The EFAA exit right follows those facts, not the original pleading. Any arbitration agreement that predates March 3, 2022 — the EFAA's effective date — offers no protection here, and even post-EFAA agreements cannot waive this right.

3. Arbitration Waiver by Litigation Conduct — The Standard Is Clear

Mitchell v. Lilac Solutions, Inc. (Cal. App. 1st Dist., Div. 4, Aug. 20, 2026) 2026 WL 2443955

Defendants served 12 sets of written discovery, noticed multiple depositions, served 11 third-party subpoenas, responded to 33 sets of plaintiff's discovery requests, and filed seven court motions — then moved to compel arbitration after plaintiffs filed an anti-SLAPP motion against the amended cross-complaint. The Court of Appeal affirmed waiver, applying the clear-and-convincing evidence standard from Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562.

The court made explicit that the Quach standard applies even when a trial court doesn't articulate it — appellate courts will apply it on review regardless.

Why it matters: The temptation to conduct substantial litigation discovery before moving to compel arbitration — particularly when defendants want to size up the plaintiff's case first — is well-documented. Mitchell confirms that extensive pre-motion litigation conduct defeats arbitration rights even under the demanding Quach clear-and-convincing standard. If arbitration is the defense strategy, the motion needs to come early.

4. Arbitration Agreement Plus Companion Confidentiality Agreement Equals Unenforceability

Cluck v. GEO Secure Services, LLC (Cal. App. 4th Dist., Div. 1, Aug. 3, 2026) 122 Cal.App.5th 249

Plaintiff signed an arbitration agreement covering all employment disputes — and also signed a confidentiality agreement that allowed GEO to seek relief for breaches in a court of law, sitting without a jury, in Florida. The Court of Appeal read the two agreements together and found the combined package one-sided: Cluck had to arbitrate everything while GEO could pursue its most likely claims — trade secret and confidentiality breaches — in Florida court.

Arbitration denied.

Why it matters: This is the second major arbitration-plus-side-agreement enforceability problem this quarter (see Phan v. Knight Sacramento SU Inc. from July). The pattern is clear: courts are reading onboarding document packages holistically, not in isolation. An arbitration agreement that looks balanced standing alone may fail if a companion agreement carves out the employer's claims into a preferred forum. Any employer with both an arbitration agreement and a confidentiality agreement in its onboarding stack should have both reviewed together.

5. Wrongful Termination Claim Outside the Arbitration Agreement's Scope — FEHA Claims Don't Automatically Arbitrate

Morales v. Superior Court of San Diego County (Cal. App. 4th Dist., Div. 1, Aug. 3, 2026) 122 Cal.App.5th 239

The arbitration provision covered "[a]ny dispute regarding any aspect of this Agreement or any act which allegedly has or would violate any provision of this Agreement." Morales sued for wrongful termination in violation of FEHA. The Court of Appeal reversed the order compelling arbitration: because Morales's wrongful termination claim was not based on the employment agreement, the arbitration clause by its express terms did not apply.

Why it matters: Narrowly scoped arbitration clauses — ones tied to the agreement rather than broadly to "any dispute arising out of or related to your employment" — will not catch statutory FEHA claims. Template arbitration agreements vary significantly on this language. The difference between "disputes arising out of this agreement" and "disputes arising out of or related to your employment" is, in this decision, the difference between arbitration and a jury trial on FEHA wrongful termination exposure.

6. Successive Motions to Compel Arbitration Are Subject to § 1008's Limits

Hickenbottom v. Medical Solutions, LLC (Cal. App. 4th Dist., Div. 1, Aug. 26, 2026) 2026 WL 2511310

After a first motion to compel arbitration was denied, the employer filed a second motion based on a different arbitration agreement without filing a § 1008 affidavit or making any showing of diligence. The Court of Appeal held that the second motion was a renewed motion governed by § 1008, and that the trial court lacked jurisdiction to entertain it.

The court's framing was unambiguous: § 1008 is designed to prevent parties from bringing the same motion over and over, and successive motions to compel arbitration — even when based on different agreements — fall within it.

Why it matters: Employers with multiple arbitration agreements covering the same employee (onboarding agreement, subsequent employment agreement, arbitration-specific addendum) cannot treat each one as an independent first bite at the apple. If the first motion is denied, the second must comply with § 1008's procedural requirements or it will be dismissed for lack of jurisdiction. Coordinate the arbitration strategy before the first motion is filed.

7. Religious Accommodation — "No Available Role" Is Not Enough

Cherry v. Washington Department of Fish & Wildlife (9th Cir., Aug. 21, 2026) 2026 WL 2451427

Five state employees sought religious exemptions from a COVID vaccine mandate. The department found their beliefs sincere, granted exemptions, then told them their current roles required physical presence with others and they would be separated unless they got vaccinated. The Ninth Circuit reversed summary judgment for the employer: telling an employee to contact an HR specialist about "available reassignment options" and then separating them when they don't successfully navigate that process is not offering a reasonable accommodation as a matter of law.

Though decided under Title VII and involving a public employer, this decision maps directly onto FEHA's interactive process obligations, which require active employer engagement — not a passive referral to a form or a specialist.

Why it matters for California employers: The interactive process obligation runs both ways. An employer cannot satisfy FEHA by pointing a disabled or religiously-observant employee toward resources and then terminating them when the employee fails to independently locate an accommodation. The employer must actually participate in identifying one. This is a recurring failure mode in accommodation cases.

The August Summary for WCG Clients

Five of the seven cases above turn on arbitration agreement problems — scope, companion documents, litigation conduct, successive motions, or the EFAA exit right. The frequency is not coincidental: arbitration agreements that were drafted before Quach (2024), Fuentes (Feb. 2026), Betanco/Doss/Orr (June/July 2026), and now Ding and Cluck are operating in a legal environment that didn't exist when they were signed.

For any employer client who has not had their full onboarding arbitration package reviewed in the last 18 months, August's decisions are five separate reasons why that review is overdue.

Wage Counsel Group provides forensic wage and hour audit services and litigation support for California employers and defense-side employment counsel. For inquiries, contact david@wagecounselgroup.com or visit wagecounselgroup.com.