CA Supreme Court Holds That Employees Are Bound By Arbitration Agreements Waiving Right To A Labor Comm’r Hearing

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...