In Sonic-Calabasas A, Inc. v. Moreno the California Supreme Court was asked to determine if an arbitration provision requiring an employee to waive the option of a Berman hearing is contrary to public policy and is unconscionable. On February 24, 2011 the Supreme Court ruled that any provision requiring an employee to waive the option of a Berman hearing is not enforceable. Such a waiver is both a violation of public policy and unconscionable.
The Court indicated that the Berman administrative hearing process affords California employees many advantages, which are not available in arbitration, such as: speedy and inexpensive resolution to wage disputes; assistance by the Labor Commissioner in obtaining the award; safe guards against frivolous defenses by employers, the enforceability of any award, assistance by the Labor Commissioner in enforcing an award; and one-way fee shifting for attorneys fees to be posed on employers who unsuccessfully appeals.
The Court further based its decision on the fact that the lawful payment of wages to California employees is not simply an individual right but an important public policy goal.
In determining that Berman waivers are unconscionable the Court concluded:
In sum, rather than being justified by "legitimate commercial needs" (see Armendariz, supra, 24 Cal.4th at p. 117), the main purpose of the Berman waiver appears to be for employers to gain an advantage in the dispute resolution process by eliminating the statutory advantages accorded to employees designed to make that process fairer and more efficient. We conclude the waiver is markedly one-sided and therefore substantively unconscionable.However, the Court held that an appeal from a Berman hearing award, can be held before an arbitrator, rather than the Superior Court.
The Court also rejected the employer's argument that the Federal Arbitration Act preempts California law and requires enforcement of the arbitration agreement.
