Back to News & Insights
Employment Law Employment Litigation

Employment Law Alert – CA Supreme Court Strikes Down Arbitration Agreement

August 1, 2011 |
Print Friendly, PDF & Email

In late February 2011, the California Supreme Court held that where an employee was required to sign an arbitration agreement with his employer, and the arbitration agreement stated that the employee waived his right to a hearing before the California Labor Commissioner regarding wage claims, the entire arbitration agreement was unenforceable. See Sonic-Calabasis A, Inc. v. Moreno.

As a condition of his employment with Sonic-Calabasis A, Inc. (“Sonic-Calabasis”), Moreno signed an agreement requiring both employer and employee to submit any employment disputes to binding arbitration.  After his employment with Sonic-Calabasis ended, Moreno filed an administrative wage claim with the California Labor Commissioner for failure to pay his accrued but unused vacation.  Labor Code §98 gives an employee who has filed a wage claim the right to have a hearing on his claims before the Labor Commissioner, also known as a “Bermanhearing.”

Before the Berman hearing could be held before the Labor Commissioner, Sonic-Calabasis petitioned the state court to compel arbitration of the wage claim and dismiss Moreno’s administrative action.  The California Supreme Court held that the clause in the employment agreement waiving the right to a hearing before the Labor Commissioner was unconscionable and contrary to public policy.

The Court explained that a law which is established for a public reason cannot be contravened by a private agreement.  The California Labor Code, and specifically the mechanisms of section 98 have a public purpose in that they were designed to protect workers.  Further, the law has an additional public benefit of reducing the costs and risks of pursuing a wage claim for the average worker.  Therefore, permitting employers to require employees to waive those rights as a condition of employment would thwart the public purpose behind the statute and render the statute itself meaningless.

The Sonic-Calabasis decision will affect many companies in California.  Employers who have arbitration agreements with employees should review those contracts to determine whether they include a waiver of the right to proceed to a Bermanhearing for wage claims.

If you have any questions regarding these changes or how they affect your business, please contact Kara Arguello or any member of Berliner Cohen’s Employment Law Group.

Roberta S. Hayashi

Christine Long

Kara L. Arguello



©2011 Berliner Cohen.  This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship and no attorney-client relationship is created through your use of the Berliner Site or your receipt of the materials.

Berliner Cohen’s experienced employment law attorneys advise and represent employers and managers on a full range of legal issues affecting the workplace, including harassment and discrimination, unfair competition and trade secrets, wrongful discharge, wage and hour issues, and labor disputes.  Berliner Cohen is one of the largest and oldest law firms in San Jose serving the business and regulatory needs of private business and public agencies in Northern California.  For 40 years, the Firm has developed the special expertise required by a diverse client base consisting of nationally recognized business interests and a number of Silicon Valley’s largest national and multinational corporations, new ventures, leading real estate developers and brokerages, cutting-edge technology companies, healthcare and other service providers, banking and financial institutions, municipalities, public agencies and individuals.  Berliner Cohen also meets the growing demands of the San Joaquin Valley with its expanding office in Merced.