In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), the California Supreme Court held as a categorical rule that it is contrary to public policy and unconscionable for an employer to require an employee, as a condition of employment, to waive the right to a Berman hearing, a dispute resolution forum established by the Legislature to assist employees in recovering wages owed. It further held that the rule prohibiting waiver of a Berman hearing does not discriminate against arbitration agreements and is therefore not preempted by the Federal Arbitration Act, and that, if one of the parties is dissatisfied with the result of the Berman hearing, it can move to arbitrate the wage dispute consistent with the arbitration agreement, just as a dissatisfied party can obtain a trial in court without such an agreement.
The United States Supreme Court granted certiorari, vacated the judgment, and remanded the case for consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __, 131 S.Ct. 1740. In Concepcion, the court clarified the limitations that the FAA imposes on a state’s capacity to enforce its rules of unconscionability on parties to arbitration agreements. In light of Concepcion, the Californa Supreme Court concludes that because compelling the parties to undergo a Berman hearing would impose significant delays in the commencement of arbitration, the approach in Sonic I is inconsistent with the FAA. Accordingly, the FAA preempts any state law categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment.
Nonetheless, state courts may continue to enforce unconscionability rules that do not “interfere with fundamental attributes of arbitration.” (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1748].
Although a court may not refuse to enforce an arbitration agreement imposed on an employee as a condition of employment simply because it requires the employee to bypass a Berman hearing, such an agreement may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.
Furthermore, the Berman statutes confer important benefits on wage claimants by lowering the costs of pursuing their claims and by ensuring that they are able to enforce judgments in their favor. There is no reason why an arbitral forum cannot provide these benefits, and an employee’s surrender of such benefits does not necessarily make the agreement unconscionable. The fundamental fairness of the bargain, as with all contracts, will depend on what benefits the employee received under the agreement’s substantive terms and the totality of circumstances surrounding the formation of the agreement.
The employee in Sonic II contends that the particular arbitration scheme at issue is unconscionable, while the employer contends that its arbitration agreement offers adequate protections and advantages to facilitate the employee’s claim and is not unreasonably one-sided. Because evidence relevant to the unconscionability claim was not developed below, the Supreme Court remands the matter to the trial court to determine whether the present arbitration agreement is unconscionable under the principles set forth in Sonic II.
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