June 9, 2014

A California arbitration decision stands

By Deborah J. La Fetra Senior Attorney

The California Supreme Court gained a little ground today in its perpetual tug-of-war with the United States Supreme Court over the enforcement of contracts containing arbitration provisions. The California court doesn’t like arbitration and creatively finds all sorts of reasons to avoid enforcing contracts that call for arbitral resolution of disputes. Sonic-Calabasas A v. Moreno involves an employment contract, and this case has been bouncing up and down the courts for years. The California Supreme Court originally invalidated the contract as unconscionable and against public policy because it waived an administrative hearing on employment disputes that otherwise would be available under the state Labor Code (so-called Berman hearings). The U.S. Supreme Court vacated that decision a couple years ago, and ordered the state court to reconsider the matter in light of AT&T Mobility v. Concepcion, which held that the federal substantive law of arbitration and the Federal Arbitration Act preempted any state common law rule or statute that stood as an “obstacle” to arbitration.

On its second review, the California Supreme Court recognized that it had to abandon its categorical rule of invalidating arbitration contracts that waived the Berman hearing, but it announced a new rule that requires that arbitration contracts that waive Berman hearings must provide for “accessible, affordable resolution of wage disputes.” As a practical matter, this either forces California employers to participate in the Berman hearings, or set up its own dispute resolution process that mirrors those hearings. PLF filed an amicus brief supporting the petition for writ of certiorari.  Unfortunately, today the Supreme Court declined to review the California decision.

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