Feb. 24, 2011
Mandatory Arbitration Provisions Do Not Preempt Employee’s Right To File Wage Claims With Labor Commissioner
In Sonic-Calabasas A, Inc. v. Moreno, the California Supreme Court held that a mandatory arbitration provision in an employment agreement cannot require an employee to waive his or her right to have wage claims adjudicated before the California Labor Commissioner. According to the Court, such a waiver is void and unenforceable as contrary to public policy.
As a condition of employment with her employer, the plaintiff-employee in Sonic-Calabasas A, Inc. had signed an arbitration agreement requiring him to arbitrate any and all disputes arising out his employment, including claims for unpaid wages. After leaving his position, the employee filed a claim with the Labor Commissioner for unpaid vacation pay. The employee sought to resolve the claim in front of the Labor Commissioner during a so-called “Berman” hearing. A Berman hearing is an informal administrative-type proceeding created under the California Labor Code to allow employees to bring claims for unpaid wages. The employer responded by filing a motion to compel arbitration in lieu of the Berman hearing.
In rejecting the employer’s motion, the Sonic-Calabasas Court reasoned that the Legislature had given employees a statutory right to seek the procedural advantages of a Berman hearing, which include reduced costs and risks of pursuing a wage claim. Accordingly, the Court found that requiring the employee to waive the right to these protections undermines the public purpose behind the Berman statutes. Additionally, the Court found such a “contract of adhesion” in the employment context to be oppressive and one-sided in favor of the employer, and therefore unconscionable.