14 California Labor & Employment Law Review Volume 25, No. 4
In the landmark 2000 case of
Armendariz v. Foundation Health
Psychcare Services, Inc.1 the California
Supreme Court made it clear that
employers could require employees
to submit statutory claims to
arbitration, provided certain minimal
standards of fairness were met. The
court specifically ruled that a claim of
violation of the Fair Employment and
Housing Act (FEHA) could be the
subject of a mandatory arbitration
provision, so long as there was no
waiver of statutory rights and the
terms of the arbitration agreement
were not otherwise unconscionable.
Although the court in Armendariz
recognized that an employer may
require its employees to arbitrate
statutory claims, it recently held in
Sonic-Calabasas, Inc., v. Moreno2
that despite a valid arbitration clause,
an employee cannot be compelled
to waive an informal hearing over
unpaid wages before the Labor
Commissioner, known as a “Berman
hearing.”3 In Sonic, the employee
filed an administrative claim with the
Labor Commissioner, seeking unpaid
vacation pay. Before the Berman
hearing was held, the employer
sought a judicial ruling compelling
arbitration of the wage dispute, and
dismissing the pending Berman
hearing. The employer asserted that,
by signing the arbitration agreement,
the employee waived his right to a
Berman hearing, since the arbitration
clause required all disputes to be
submitted to arbitration.4 The
court held that while the employee
ultimately would be compelled to
arbitrate the wage claim should either
party seek a de novo review of the
Labor Commissioner’s decision, he
could not be deprived of the right to
have an informal Berman hearing first.
Before discussing the court’s
reasoning, a short summary of
Berman hearings is in order. Under
the Labor Code, employees who
believe they are owed wages may
either file an action directly in court,
or may file an administrative claim
with the Labor Commissioner. The
claim is assigned to a Deputy Labor
Commissioner, who may dismiss
the claim or set it for hearing. There
is no opportunity for pre-hearing
discovery. The hearing is conducted
without formal rules of evidence, and
the Deputy Labor Commissioner
may assist a party in cross-examining
witnesses or explaining the issues.
After the award is rendered, either
side may appeal to the trial court for a
de novo review. Should the employer
appeal, it is required to post a bond
equal to the award. Employees who
prevail are entitled to attorneys’ fees.
The Labor Commissioner is required
to represent employees who cannot
afford counsel at the trial.5
In Sonic-Calabasas, the court
of appeal had determined that the
arbitration agreement was not
unconscionable because the employee
could litigate his right to vacation pay
in the arbitration. However, because
of all the protections that employees
obtain through Berman hearings, the
California Supreme Court rejected
the appellate court’s view, holding
that an employee’s right to a Berman
hearing is “an unwaivable right that
an employee cannot be compelled
to relinquish as a condition of
employment.”6 The court went on
to explain that claims for wages are
given special treatment under the law:
It has long been recognized
that wages are not ordinary
debts, that they may be
preferred over other claims,
and that, because of the
economic position of the
average worker and, in
particular, his dependence
on wages for the necessities
of life for himself and his
family, it is essential to the
public welfare that he receive
his pay when it is due.7
The court held that the
Legislature had created the Berman
hearing and appeal process as a
means of affording an employee with
a meritorious wage claim certain
advantages, chiefly designed to
reduce the costs and risks of pursuing
a wage claim, recognizing that such
costs and risks could prevent a
theoretical right from becoming a
reality.8 The court thus concluded
that “permitting employers to
require employees, as a condition of
employment, to waive their right to
a Berman hearing would seriously
undermine the efficacy of the Berman
hearing statutes and hence thwart the
public purpose behind the statutes.”9
Justice Chin, in a dissenting
opinion, pointed out that the majority
opinion referred to Berman hearings
Big News in Arbitration:
Sonic-Calabasas v. Moreno
and AT&T Mobility v.
Concepcion
By Joel M. Grossman
Joel Grossman is a mediator and arbitra-
tor with JAMS in Los Angeles. His practice
focuses on employment, entertainment
and other business disputes. He has
twice been selected as one of Califor-
nia’s Top 40 Neutrals by the Daily Jour-
nal. For more information please visit
www.grossmanmediation.com.
