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Legal Effect of Berman Waivers on Arbitration Agreements

Legal Effect of Berman Waivers on Arbitration Agreements

The California Legislature implemented Berman hearings, as codified in California Labor Code §98, to provide an efficient an inexpensive process for employees to resolve wage disputes. These hearings essentially function as mini-trials, which must be decided on within 15 days, in the event that an employer and employee are unable to settle the claim during a conciliation conference, as part of the Division of Labor Standards and Enforcement's process for resolving wage disputes. In 2011, the California Supreme Court held in Sonic-Calabasas A, Inc. v. Moreno (Sonic I) that employees cannot be required to waive their right to a Berman hearing as a term of employment.

However, in light of the United States Supreme Court's holding in AT&T Mobility v. Concepcion, the California Supreme Court overturned this holding in Sonic II, recognizing that "compelling parties to undergo a Berman hearing would impose significant delays in the commencement of arbitration" and thus conflict with the Federal Arbitration Act. However, while the current law provides that a Berman waiver does not automatically make an arbitration agreement unconscionable, the California Supreme Court advised trial courts to consider whether the contract was unreasonably adhesive or one-sided. The United States Supreme Court has acknowledged the validity of this decision by denying certiorari on June 9.

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