Sonic-Calabasas Inc. v. Moreno

Case Updates

The California Supreme Court ruled that Federal Arbitration Act preempts a state-law rule that categorically prohibited an arbitration provision that waives a “Berman hearing,” an administrative hearing before enforcing employer arbitration agreements.

The U.S. Chamber urged the Supreme Court of California to grant review of this case and to hold that the Federal Arbitration Act (FAA) preempts a California public policy rule that administrative hearings under Labor Code § 98 (also known as a “Berman hearing”) cannot be waived through arbitration agreements. In this case, the plaintiff contends that agreements to arbitrate claims for unpaid wages are categorically unenforceable until the Labor Commissioner has conducted a “Berman hearing.” In its amicus brief, the Chamber argued that the Supreme Court’s decision in AT&T Mobility v. Concepcion reaffirmed that the FAA unquestionably “preempt[s] a state-law rule requiring exhaustion of administrative remedies before arbitration.” If allowed to stand, California’s rule requiring Berman hearings would undermine existing arbitration agreements, frustrate the intent of employers and employees, and erode the benefits offered by arbitration as a prompt, efficient, and inexpensive alternative to litigation.