The Continuing Fight Over Employer-Employee Arbitration Agreements


Despite a great deal of law that supports binding arbitration as an efficient and fair means of resolving disputes in lieu of the court system, the California courts have been reluctant to enforce arbitration agreements in the employer-employee context, often finding the agreements procedurally and substantively unconscionable. Earlier this year, in Moreno v. Sonic Calabasas, the California Supreme Court continued this trend by finding an arbitration agreement that required an employee to waive his right to a hearing before the Labor Commissioner on a wage claim both “contrary to public policy and unconscionable.” On Monday, the United States Supreme Court vacated the California Supreme Court’s opinion and sent the case back to the California Supreme Court for reconsideration in light of a recent decision by the United States Supreme Court.

The United States Supreme Court has in recent history been more willing than most California courts to enforce arbitration agreements. Earlier this year, the United States Supreme Court ruled in AT&T Mobility v. Concepcion that a California state law which invalidates class action arbitration waivers is preempted by the Federal Arbitration Act. A great deal of legal commentary has been written about whether the Supreme Court’s opinion in Concepcion can be effectively used to set aside developed California case law that is used to invalidate arbitration agreements in the employment context. The action of the United States Supreme Court on Monday vacating the California Supreme Court’s opinion in Moreno v. Sonic-Calabasas is the first step in that direction. It remains to be seen what the California Supreme Court will do with the case now that it has been sent back to the court but it is worth noting that the original decision invalidating the arbitration agreement was a split decision with only four justices in the majority.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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