In Keating v. Superior Court (1982) 31 Cal.3d 584, the Supreme Court set forth the law governing waiver of arbitration rights. "The law in this area is rather well defined. Arbitration is strongly favored. Courts will closely scrutinize any claims of waiver , and '"indulge every intendment to give effect to such proceedings." ' Moreover, the burden of proof is 'heavy' and rests on the party seeking to establish waiver which 'is not to be lightly inferred.' . . .We have recently acknowledged that while there is no 'single test' in establishing waiver, the relevant factors include whether the party seeking arbitration (1) has 'previously taken steps inconsistent with an intent to invoke arbitration,' (2) 'has unreasonably delayed' in seeking arbitration, (3) or has acted in 'bad faith' or with 'wilful misconduct.' We have stressed the significance of the presence or absence of prejudice. Waiver does not occur by mere participation in litigation; there must be 'judicial litigation of the merits of arbitrable issues' , although 'waiver could occur prior to a judgment on the merits if prejudice could be demonstrated' . This result is fully consistent with federal cases which have held that 'as an abstract exercise in logic it may appear that it is inconsistent for a party to participate in a lawsuit for breach of a contract, and later to ask the court to stay that litigation pending arbitration. Yet the law is clear that such participation, standing alone, does not constitute a waiver , for there is an overriding federal policy favoring arbitration. . . . Mere delay in seeking a stay of the proceedings without some resultant prejudice to a party , cannot carry the day.' "