California Supreme Court Issues Decision on Arbitration and Labor Commissioner Hearings

By Steve Pearl, The California Employment Law Blog, November 20, 2013   
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In 2011, the California Supreme Court held: (1) an employee’s statutory right to a wage hearing before the Labor Commissioner, known as a Berman hearing, “with all the possible protections that follow from it, is itself an unwaivable right that an employee cannot be compelled to relinquish as a condition of employment;” (2) waiver of an employee’s right to seek such a hearing is a substantively unconscionable contract term; and (3) the Federal Arbitration Act (FAA) does not preempt the Court’s holdings on points one and two. Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I) (discussed here).

The Supreme Court of the United States granted review and vacated that decision, remanding the case for further consideration in light of AT&T Mobility LLC v Concepcion 563 U.S. ___ (2011) (discussed here).
The California Supreme Court issued its new decision last week. Reversing its earlier decision, the Court held as follows:
Although the Berman statutes (Cal. Labor Code sections 98 to 98.8) provide important benefits to employees by reducing the costs and risks of pursuing a wage claim (slip op. at 6-10), the FAA as construed by Concepcion preempts Sonic I‘s holding that a waiver of Berman procedures in an arbitration agreement is, in and of itself, unconscionable and contrary to public policy. Slip op. at 23.

Because a Berman hearing causes arbitration to be substantially delayed, the unwaivability of such a hearing, even if desirable as a matter of contractual fairness or public policy, interferes with a fundamental attribute of arbitration — namely, its objective “‘to achieve “streamlined proceedings and expeditious results.”‘” Sonic I‘s rule is thus preempted by the FAA.

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