Federal Law Preempts State-Law Rule which prohibits waiver of a Berman Hearing Prior to Arbitration

Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 311 P.3d 184 (Sonic II)

The California Supreme Court in Sonic I held 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 wage hearing before the Labor Commissioner, known as a Berman hearing . The Court further held that rule prohibiting waiver of a Berman hearing does not discriminate against arbitration agreements and is therefore not preempted by the Federal Arbitration Act (FAA).

Following the ruling, United States Supreme Court issued its decision in AT&T Mobility v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion). The United States Supreme Court thereafter ordered the California Supreme Court to reconsider its ruling in Sonic I in light of Concepcion.

Concepcion clarified that because compelling the parties to undergo a Berman hearing would impose significant delays in the commencement of arbitration, the approach taken in Sonic I was inconsistent with the FAA.  Accordingly, California Supreme Court reversed the decision of Sonic I and held that the FAA preempts California state-law rule categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment. The Supreme Court further clarified that state courts may continue to enforce unconscionability rules that do not interfere with fundamental attributes of arbitration.

Pointers: An arbitration agreement can still be deemed unenforceable if determined to be procedurally and substantively unconscionable based on unfair terms or being one-sided, inter alia.