Sonic-Calabasas A, Inc. v. Moreno (Sonic II)
After Concepcion, the FAA preempts a categorical rule barring waiver of the Labor Commissioner’s Berman hearing as a condition of arbitration — but generally applicable unconscionability still polices arbitration agreements that are unreasonably one-sided.
Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 (“Sonic II”)
Arbitration
Unconscionability
Berman Hearing
FAA Preemption
Wages
In brief. On remand from the U.S. Supreme Court in light of Concepcion, the California Supreme Court overruled part of its own earlier decision. It held that “the FAA preempts our state law rule categorically prohibiting waiver of a Berman hearing in a[n] [arbitration] agreement.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1124 (“Sonic II”).) But “state courts may continue to enforce unconscionability rules that do not” target arbitration: an agreement to bypass a Berman hearing “may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.” (Id. at pp. 1124–1125.)
Facts
Frank Moreno, an employee of the car dealership Sonic-Calabasas A, Inc., filed a wage claim with the California Labor Commissioner seeking unpaid vacation pay — invoking the administrative “Berman” process (Lab. Code, § 98 et seq.), which provides employees a “speedy, informal, and affordable” forum to recover unpaid wages, with procedural advantages favoring the employee. (57 Cal.4th at pp. 1118–1122.) Sonic moved to compel arbitration under Moreno’s employment arbitration agreement, which required him to forgo the Berman hearing and arbitrate the wage dispute. (Id. at pp. 1122–1123.)
Procedural history
In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (“Sonic I”), the Court had held categorically “that it is contrary to public policy and unconscionable for an employer to require an employee . . . to waive the right to a Berman hearing.” (57 Cal.4th at p. 1123.) The U.S. Supreme Court granted certiorari, vacated, and remanded for reconsideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333. (Ibid.) On remand (“Sonic II”), the California Supreme Court overruled Sonic I’s categorical rule but preserved case-by-case unconscionability review, and remanded for that analysis. (Id. at pp. 1124–1126, 1170–1171.)
Issue
After Concepcion, may California categorically refuse to enforce an arbitration agreement that waives an employee’s right to a Berman hearing — and, if not, what role remains for generally applicable unconscionability in evaluating such agreements? (57 Cal.4th at pp. 1123–1125.)
Holding
The categorical rule is preempted; case-specific unconscionability survives. “[T]he FAA preempts our state law rule categorically prohibiting waiver of a Berman hearing,” because conditioning arbitration on preserving the Berman process “would impose significant delays in the commencement of arbitration” and is “inconsistent with the FAA.” (57 Cal.4th at p. 1124.) “At the same time, . . . state courts may continue to enforce unconscionability rules that do not” single out arbitration; an agreement bypassing the Berman hearing “may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.” (Id. at pp. 1124–1125.) Reversed in part and remanded. (Id. at pp. 1170–1171.)
Reasoning
1. What Sonic I held. The Court recounted that Sonic I had adopted a categorical, arbitration-specific rule: because the Berman statutes “confer important benefits on wage claimants” — including a low-cost hearing, assistance from the Labor Commissioner, and one-way fee and bond protections on appeal — it was per se unconscionable and against public policy to require employees to waive that process as a condition of employment. (57 Cal.4th at pp. 1123, 1126–1133.)
2. Why Concepcion requires overruling that rule. The Court acknowledged that Concepcion forbids state rules that “interfere[] with fundamental attributes of arbitration” or that condition enforceability on procedures inconsistent with arbitration’s informal, streamlined design. (57 Cal.4th at pp. 1140–1146.) A rule that effectively requires a Berman hearing — an administrative proceeding with its own delays and procedures — before arbitration “is inconsistent with the FAA,” because it withholds enforcement of the parties’ agreement to arbitrate unless an extra, non-arbitral process first occurs. (Id. at pp. 1145–1146.) The Court therefore overruled Sonic I’s categorical holding. (Id. at p. 1124.)
3. The surviving role of unconscionability. Crucially, Concepcion did not displace generally applicable unconscionability. (57 Cal.4th at pp. 1142–1160.) Courts may still ask whether an arbitration agreement is unconscionably one-sided — but the inquiry is reframed. The question is not whether arbitration replicates the Berman protections, but “whether the arbitration process itself provides an accessible, informal, and affordable” means of resolving the wage dispute that is not “unreasonably one-sided.” (Id. at pp. 1146–1149, 1159–1160.) Loss of the Berman advantages is relevant context, but only as part of the ordinary procedural-and-substantive unconscionability analysis, not as a categorical trigger. (Ibid.)
4. The reframed standard. Synthesizing Armendariz and Concepcion, the Court held that an arbitral scheme may be substantively unconscionable if it imposes costs, delays, or procedural hurdles that effectively deny an employee an affordable and accessible forum — measured against the goal of resolving wage claims, not against the Berman statutes as such. (57 Cal.4th at pp. 1146–1149, 1159–1170.) Because the lower courts had not applied this case-specific standard, the Court remanded for that determination. (Id. at pp. 1170–1171.)
5. The separate opinions. Justice Corrigan concurred. (57 Cal.4th at pp. 1172 et seq. (conc. opn. of Corrigan, J.).) Justice Chin, joined by Justice Baxter, concurred in part and dissented in part, contending the majority retained too much room for arbitration-specific unconscionability and that Concepcion required a narrower role for state-law scrutiny. (Id. at pp. 1173 et seq. (conc. & dis. opn. of Chin, J.).)
Significance
Sonic II is a leading post-Concepcion decision mapping what survives FAA preemption. It establishes the template California courts now follow: categorical, arbitration-specific rules are preempted, but generally applicable unconscionability remains available, reframed to ask whether the arbitral process is unreasonably one-sided rather than whether it preserves a particular non-arbitral remedy. It complements Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (the minimum-requirements and unconscionability framework) and anticipates OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, which applied the same case-specific, sliding-scale unconscionability analysis to invalidate a one-sided employment arbitration agreement in another Berman setting. Sonic II thus marks the boundary between federal preemption and the still-vital state law of unconscionability. See the Review’s coverage of the arbitration line.
Key quotes
“[T]he FAA preempts our state law rule categorically prohibiting waiver of a Berman hearing in a[n] [arbitration] agreement.” (Sonic II, supra, 57 Cal.4th at p. 1124.)
“[S]tate courts may continue to enforce unconscionability rules that do not” target arbitration; an agreement bypassing the Berman hearing “may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.” (Id. at pp. 1124–1125.)
Read the full opinion (California Supreme Court — full text) →
Practice pointer
Reframe the challenge as unconscionability, not loss of Berman. After Sonic II, do not argue that waiving the Berman hearing is per se unconscionable — that rule is preempted. Instead, attack the arbitration agreement under generally applicable unconscionability: show it is procedurally oppressive (adhesion, surprise) and substantively one-sided (cost-shifting, truncated discovery, lack of a neutral arbitrator or written award, fee provisions that deter low-wage claimants), so that it fails to provide an accessible, affordable, and even-handed forum. Use the loss of Berman’s protections as evidence of one-sidedness, not as an independent trigger. OTO v. Kho shows the analysis succeeding on the right facts. Employers should design wage-dispute arbitration to be genuinely accessible and affordable to withstand this scrutiny.
Open questions
How much arbitration-specific friction a court may weigh as “unconscionable” without running afoul of Concepcion remains contested — the precise issue dividing the Sonic II majority and the Chin/Baxter opinion. Courts continue to litigate what makes a wage-claim arbitral process “unreasonably one-sided,” how the loss of Berman advantages factors in, and how Sonic II’s standard operates alongside OTO v. Kho after subsequent FAA decisions.
See also: Bradsbery v. Vicar Operating