Frank Moreno agreed, as a condition of his employment with Sonic-Calabasas A, Inc., to arbitrate all of this employment disputes with his employer. After terminating his employment with Sonic, Moreno filed an administrative wage claim with the Labor Commissioner for unpaid vacation pay. Filing such a claim is the first step toward obtaining a “Berman” hearing (an administrative dispute resolution forum designed to assist employees in recovering wages).
The California Supreme Court held in Sonic–Calabasas A, Inc. v. Moreno, 2013 WL 5645378 (Oct. 17, 2013) (Sonic II) that under the rule established in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) and American Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) that the FAA preempts California law to the extent it prohibits waiver of a Berman hearing. The Court reasoned that compelling the parties to participate in a Berman hearing imposes significant delays to arbitration and it is, therefore, inconsistent with the FAA. This decision reverses the Court’s prior ruling in Sonic–Calabasas A, Inc. v. Moreno, 51 Cal. 4th 659 (2011), which held that such waivers were contrary to public policy and unconscionable because a Berman hearing is a dispute resolution forum established by the Legislature to assist employees in recovering purportedly unpaid wages.
The Court clarified that state courts may continue to enforce unconscionability rules that do not interfere with “fundamental attributes of arbitration.” The Court concluded that, while the Berman statutes confer important benefits on claimants (lowering the cost of pursuing wage claims and enforcing judgments), arbitration may provide the same benefits. For this reason, the Court held that an employee’s surrendering the right to a Berman hearing does not, on its own, render an agreement unconscionable.
While Sonic II opens the door for employers to require employees to waive their rights to a Berman hearing as a condition of employment (as long as the overall bargain is not unreasonably one-sided), this decision may also provide insight to the Court’s expected decision in Iskanian v. CLS Transp. (which we previously discussed here). In Iskanian, the Court is considering whether the United States Supreme Court’s decision in AT&T Mobility requires enforcement of a class action waiver when applied to a claim asserted under the Private Attorney General Act (“PAGA”).