Arbitration/Employment/Unconscionability/FAA: Employee’s Waiver Of Dispute Resolution Berman Hearing In Favor Of Arbitration, While Not Per Se Improper, Could Still Be Unconscionable

SCOTUS Ruling In Concepcion Causes California Supreme Court To Change Its Position On Waiver of Berman Hearing  

     So what is a Berman hearing?  It is a dispute resolution forum established by the Legislature to assist employees in recovering wages owed.  Labor Code section 98.  The procedure is named after legislator Howard Berman, who instituted it.

     In Sonic-Calabasas A, Inc. v. Moreno, 51 Cal.4th 659 (2011) (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 . . . “ Sonic-Calabasas A, Inc.,, v. Moreno, Case No. S174475 (Cal. Sup. Ct. Oct. 17, 2013) (Sonic II).

     In light of AT&T Mobility LLC v. Concepcion, 563 U.S. __ , 131 S.Ct. 1740 (2011), the California Supreme Court now holds in Sonic II that the Federal Arbitration Act preempts a state law rule “categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment.”  However, the agreement requiring that a Berman hearing to be bypassed in favor of arbitration “may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer,” writes Justice Lui for the Majority.

     In other words, unconscionability depends on the totality of the circumstances.  And so, ‘[b]ecause evidence relevant to the unconscionability claim was not developed below,” the Court remands to the trial court in Sonic II to determine whether the arbitration agreement is unconscionable “under the principles set forth in this [very long!] opinion.”

     Justice Corrigan, while concurring, disagrees with the Majority’s “failure to articulate a clear standard for assessing the unconscionability of arbitration terms in employment agreements.”  And Justices Chin and Baxter, concurring and dissenting, agree with the preemption conclusion, but disagree with the decision to remand to the trial court to address unconscionability.  They believe the issue was forfeited, and that the plaintiff would never have been able to meet the burden of establishing unconscionability.