Case Title: Sonic-Calabasas A, Inc. v. Moreno

Citation: 

Docket Number: S174475

State: california

Court: California Supreme Court

Date: 2011-02-24T00:00:00Z

Document:
1 
Filed 2/24/11 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
SONIC-CALABASAS A, INC., 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S174475 
 
v. 
) 
 
 
) 
Ct.App. 2/4 B204902 
FRANK MORENO, 
) 
 
) 
Los Angeles County 
 
Defendant and Respondent. 
) 
Super. Ct. No. BS107161 
 ___________________________________ ) 
 
Under Labor Code section 98 et seq., an employee with a claim for unpaid wages 
has a right to seek an informal hearing in front of the Labor Commissioner, a so-called 
“Berman” hearing.  If the employee obtains an award at the Berman hearing, the 
employer may request de novo review of the award in the superior court, which the 
statute calls an “appeal.”  As explained at greater length below, the statutory regime of 
which the Berman hearing is part contains a number of provisions designed to assist 
employees during this process and to deter frivolous employer defenses.  These 
provisions include the Labor Commissioner‟s representation in the superior court of 
employees unable to afford counsel, the requirement that the employer post an 
undertaking in the amount of the award, and a one-way attorney fee provision that 
requires an employer that is unsuccessful in the appeal to pay the employee‟s attorney 
fees. 
In this case, we must decide whether a provision in an arbitration agreement that 
the employee enters as a condition of employment requiring waiver of the option of a 
2 
Berman hearing is contrary to public policy and unconscionable.  We conclude that it is, 
and therefore reverse the Court of Appeal‟s contrary judgment.  We nonetheless conclude 
that arbitration agreements may be enforced after a Berman hearing has taken place, i.e., 
the appeal from such a hearing may be made, pursuant to a valid arbitration agreement, in 
front of an arbitrator rather than in court. 
Furthermore, we must decide whether a state law rule that a Berman waiver in an 
arbitration agreement is unconscionable and contrary to public policy is preempted by the 
Federal Arbitration Act (FAA; 9 U.S.C. § 1, et seq.).  In arguing this issue, the parties 
particularly focus on a recent United States Supreme Court case, Preston v. Ferrer (2008) 
552 U.S. 346 (Preston), holding that a provision in this state‟s Talent Agencies Act 
vesting original jurisdiction of all disputes under that statute with the Labor 
Commissioner was preempted by the FAA.  We conclude, as did the Court of Appeal 
below, that Preston is distinguishable and that our holding is not preempted by the FAA. 
I. 
FACTS AND PROCEDURAL HISTORY 
 
The facts are not in dispute.  Frank Moreno is a former employee of 
Sonic-Calabasas A, Inc. (Sonic), which owns and operates an automobile dealership.  As 
a condition of his employment with Sonic, Moreno signed a document entitled 
“Applicant‟s Statement & Agreement.”  The agreement set forth a number of conditions 
of employment, including consent to drug testing and permission to contact former 
employers, as well as a provision making the employment at will.  Critically for our case, 
the agreement contained a paragraph governing dispute resolution.  The agreement 
required both parties to submit their employment disputes to “binding arbitration under 
the Federal Arbitration Act, in conformity with the procedures of the California 
Arbitration Act (Cal. Code Civ. Proc. sec. 1280 et seq. . . .).”  The agreement applied to 
“all disputes that may arise out of the employment context . . . that either [party] may 
have against the other which would otherwise require or allow resort to any court or other 
governmental dispute resolution forum[,] . . . whether based on tort, contract, statutory, or 
3 
equitable law, or otherwise.”  The agreement specified that it did not apply to claims 
brought under the National Labor Relations Act or the California Workers‟ 
Compensation Act, or to claims before the Employment Development Department.  
Furthermore, the agreement provided that the employee was not prevented from “filing 
and pursuing administrative proceedings only before the California Department of Fair 
Employment and Housing or the U.S. Equal Opportunity Commission.” 
 
At some point, Moreno left his position with Sonic.  In December 2006, Moreno 
filed an administrative wage claim with the Labor Commissioner for unpaid vacation pay 
pursuant to Labor Code section 98 et seq.1  Moreno alleged that he was entitled to unpaid 
“[v]acation wages for 63 days earned 7/15/02 to 7/15/06 at the rate of $441.29 per day.”  
The filing of this claim is the first step toward obtaining a Berman hearing. 
 
In February 2007, Sonic petitioned the superior court to compel arbitration of the 
wage claim and dismiss the pending administrative action.  (Code Civ. Proc., § 1281.2.)  
Sonic argued Moreno waived his right to a Berman hearing in the arbitration agreement. 
 
The Labor Commissioner intervened below on Moreno‟s behalf (§ 98.5), and 
Moreno adopted the Labor Commissioner‟s arguments.  The Labor Commissioner argued 
that the arbitration agreement, properly construed, did not preclude Moreno from filing 
an administrative wage claim under section 98 et seq.  The Labor Commissioner argued 
that resort to a Berman hearing was compatible with the arbitration agreement, because 
the hearing could be followed by arbitration in lieu of a de novo appeal to the superior 
court that is provided in section 98.2, subdivision (a).  The Labor Commissioner 
contended that a contrary interpretation of the arbitration agreement to waive a Berman 
hearing would violate public policy, relying on our decision regarding mandatory 
                                              
1  
All statutory references are to this code unless otherwise indicated. 
4 
employment arbitration agreements in Armendariz v. Foundation Health Psychcare 
Services, Inc. (2000) 24 Cal.4th 83 (Armendariz).   
 
The superior court denied the petition to compel arbitration as premature.  Citing 
Armendariz, the superior court stated that, as a matter of “basic public policy . . . until 
there has been the preliminary non-binding hearing and decision by the Labor 
Commissioner, the arbitration provisions of the employment contract are unenforceable, 
and any petition to compel arbitration is premature and must be denied.” 
 
Sonic appealed from the order of denial.  (Code Civ. Proc., § 1294, subd. (a).)  
The Labor Commissioner did not participate in the appeal, nor in proceedings before this 
court.  During the briefing period, the United States Supreme Court decided Preston, 
which held that the Labor Commissioner‟s original and exclusive jurisdiction under the 
Talent Agencies Act (Lab. Code, § 1700 et seq.) was preempted when the parties entered 
into an arbitration agreement governed by the FAA.  (Preston, supra, 552 U.S. 346.) 
 
The Court of Appeal concluded at the threshold that Preston was not dispositive of 
the appeal, reasoning that Preston applied to cases in which a party was challenging the 
validity of a contract as a whole and seeking to have that challenge adjudicated by an 
administrative agency; it did not apply to cases in which the party was challenging the 
arbitration clause itself as unconscionable.  The Court of Appeal further concluded that 
the arbitration agreement, correctly interpreted, constituted a waiver of a Berman hearing.  
By its terms, the agreement precluded Moreno from pursuing any judicial “or other 
government dispute resolution forum,” subject to certain enumerated exceptions.  “Given 
that neither the Division of Labor Standards Enforcement nor the Labor Commissioner 
was listed among the stated exceptions, we conclude, as a matter of law, that Moreno was 
barred from pursuing an administrative wage claim under section 98 et seq.” 
 
The Court of Appeal then concluded, for reasons explained below, that a Berman 
waiver was not contrary to public policy.  Moreno petitioned for review, contending the 
Court of Appeal decided this question incorrectly.  Sonic, in its answer to the petition, 
5 
contended the Court of Appeal was correct, and renewed its argument that a holding 
invalidating a Berman waiver would be preempted by the FAA, as construed in Preston.  
We granted review to decide these questions. 
II. 
DISCUSSION 
A. The Berman Hearing and Posthearing Procedures 
As we have explained:  “If an employer fails to pay wages in the amount, time or 
manner required by contract or by statute, the employee has two principal options.  The 
employee may seek judicial relief by filing an ordinary civil action against the employer 
for breach of contract and/or for the wages prescribed by statute.  (§§ 218, 1194.)  Or the 
employee may seek administrative relief by filing a wage claim with the commissioner 
pursuant to a special statutory scheme codified in sections 98 to 98.8.  The latter option 
was added by legislation enacted in 1976 (Stats. 1976, ch. 1190, §§ 4-11, pp. 5368-5371) 
and is commonly known as the „Berman‟ hearing procedure after the name of its 
sponsor.”  (Cuadra v. Millan (1998) 17 Cal.4th 855, 858 (Cuadra), disapproved on other 
grounds in Samuels v. Mix (1999) 22 Cal.4th 1, 16, fn. 4.) 
Once an employee files a complaint with the Labor Commissioner for nonpayment 
of wages, section 98, subdivision (a) “ „provides for three alternatives: the commissioner 
may either accept the matter and conduct an administrative hearing [citation], prosecute a 
civil action for the collection of wages and other money payable to employees arising out 
of an employment relationship [citation], or take no further action on the complaint. 
[Citation.]‟ ”  (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1115.)  
“If the commissioner decides to accept the matter and conduct an administrative hearing, 
he or she must hold the hearing within 90 days.”  (Ibid.)  Moreover, prior to holding a 
Berman hearing or pursuing a civil action, the Labor Commissioner‟s staff may attempt 
to settle claims either informally or through a conference between the parties.  (Dept. of 
6 
Industrial Relations, Div. of Labor Stds. Enforcement (DLSE), Policies and Procedures 
for Wage Claim Processing (2001 rev.) pp. 2-3). 
A Berman hearing is conducted by a deputy Labor Commissioner, who has the 
authority to issue subpoenas.  (Cal. Code Regs., tit. 8, §§ 13502, 13506.)  “The Berman 
hearing procedure is designed to provide a speedy, informal, and affordable method of 
resolving wage claims.  In brief, in a Berman proceeding the commissioner may hold a 
hearing on the wage claim; the pleadings are limited to a complaint and an answer; the 
answer may set forth the evidence that the defendant intends to rely on, and there is no 
discovery process; if the defendant fails to appear or answer no default is taken and the 
commissioner proceeds to decide the claim, but may grant a new hearing on request.  (§ 
98.) The commissioner must decide the claim within 15 days after the hearing.  (§ 98.1.)”  
(Cuadra, supra, 17 Cal.4th at pp. 858-859.)  The hearings are not governed by the 
technical rules of evidence, and any relevant evidence is admitted “if it is the sort of 
evidence on which responsible persons are accustomed to rely in the conduct of serious 
affairs.”  (Cal. Code Regs., tit. 8, § 13502.)  The hearing officer is authorized to assist the 
parties in cross-examining witnesses and to explain issues and terms not understood by 
the parties.  (DLSE, Policies and Procedures for Wage Claim Processing, supra, at p. 4.)  
The parties have a right to have a translator present.  (Ibid.; see § 105 [“Labor 
Commissioner shall provide that an interpreter be present at all hearings and interviews 
where appropriate.”].) 
Once judgment is entered in the Berman hearing, enforcement of the judgment is 
to be a court priority.  (§ 98.2, subd. (e).)  The Labor Commissioner is charged with the 
responsibility of enforcing the judgment and “shall make every reasonable effort to 
ensure that judgments are satisfied, including taking all appropriate legal action and 
requiring the employer to deposit a bond as provided in Section 240.”  (Id., subd. (i).) 
Within 10 days after notice of the decision any party may appeal to the appropriate 
court, where the claim will be heard de novo; if no appeal is taken, the commissioner‟s 
7 
decision will be deemed a judgment, final immediately, and enforceable as a judgment in 
a civil action.  (§ 98.2.)  If an employer appeals the Labor Commissioner‟s award, “[a]s a 
condition to filing an appeal pursuant to this section, an employer shall first post an 
undertaking with the reviewing court in the amount of the order, decision, or award.  The 
undertaking shall consist of an appeal bond issued by a licensed surety or a cash deposit 
with the court in the amount of the order, decision, or award.”  (§ 98.2, subd. (b).)  The 
purpose of this requirement is to discourage employers from filing frivolous appeals and 
from hiding assets in order to avoid enforcement of the judgment.  (Sen. Com. on Labor 
and Industrial Relations, Analysis of Assem. Bill No. 2772 (2009-2010 Reg. Sess.) as 
amended Apr. 8, 2010, p. 4.) 
Under section 98.2, subdivision (c), “If the party seeking review by filing an 
appeal to the superior court is unsuccessful in the appeal, the court shall determine the 
costs and reasonable attorney‟s fees incurred by the other parties to the appeal, and assess 
that amount as a cost upon the party filing the appeal.  An employee is successful if the 
court awards an amount greater than zero.”  This provision thereby establishes a one-way 
fee-shifting scheme, whereby unsuccessful appellants pay attorney fees while successful 
appellants may not obtain such fees.  (See Dawson v. Westerly Investigations, Inc. (1988) 
204 Cal.App.3d Supp. 20, 24-25 [construing the predecessor statute, § 98.2, subd. (b)].)2  
                                              
2  
That section 98.2, subdivision (c) is especially protective of employees is evident 
from the last sentence of that subdivision and the legislative history behind it.  Before the 
statute was amended in 2003, it did not explicitly provide that an employee would be 
considered successful on appeal if the court awards an amount greater than zero (cf. Stats. 
2002, ch. 784, § 522), but Court of Appeal decisions construed the statute in that manner.  
(Cardenas v. Mission Industries (1991) 226 Cal.App.3d 952, 960; Triad Data Services, 
Inc. v. Jackson (1984) 153 Cal.App.3d Supp. 1.)  We disapproved of those cases in Smith 
v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 370-371, concluding that an employee 
would be considered unsuccessful on appeal, and subject to section 98.2, subdivision 
(c)‟s fee shifting provision, if its award on appeal was less than the Labor 
Commissioner‟s award.  The Legislature then amended the statute in 2003 specifically to 
overule Smith v. Rae-Venter and to restore the law to be in accord with the holdings in 
(footnote continued on next page) 
8 
This is in contrast to section 218.5, which provides that in civil actions for nonpayment of 
wages initiated in the superior court, the “prevailing party” may obtain attorney fees. 
Furthermore, the Labor Commissioner “may” upon request represent a claimant 
“financially unable to afford counsel” in the de novo proceeding and “shall” represent the 
claimant if he or she is attempting to uphold the Labor Commissioner‟s award and is not 
objecting to the Commissioner‟s final order.  (§ 98.4.)  Such claimants represented by the 
Labor Commissioner may still collect attorney fees pursuant to section 98.2, although 
such claimants have not, strictly speaking, incurred attorneys fees, because construction 
of the statute in this manner is consistent with the statute‟s goals of discouraging 
unmeritorious appeals of wage claims.  (Lolley v. Campbell (2002) 28 Cal.4th 367, 376.) 
In sum, when employees have a wage dispute with an employer, they have a right 
to seek resolution of that dispute through the Labor Commissioner, either through the 
commissioner‟s settlement efforts, through an informal Berman hearing, or through the 
commissioner‟s direct prosecution of the action.  When employees prevail at a Berman 
hearing, they will enjoy the following benefits: (1) the award will be enforceable if not 
appealed; (2) the Labor Commissioner is statutorily mandated to expend best efforts in 
enforcing the award, which is also established as a court priority; (3) if the employer 
appeals, it is required to post a bond equal to the amount of the award so as to protect 
against frivolous appeals and evading the judgment; (4) a one-way attorney fee provision 
will ensure that fees will be imposed on employers who unsuccessfully appeal but not on 
employees who unsuccessfully defend their Berman hearing award, or on employees who 
                                                                                                                                                                           
(footnote continued from previous page) 
Cardenas and Triad.  (See Legis. Counsel‟s Dig., Assem. Bill No. 223 (2003-2004 
Reg.Sess.).)  The legislative history shows that the Legislature was concerned that the 
Smith v. Rae-Venter rule would discourage meritorious appeals by employees and even 
discourage the use of Berman hearings altogether.  (Sen. Com. on Labor and Industrial 
Relations, Analysis of Assem. Bill No. 223 (2003-2004 Reg. Sess.) as introduced, p. 3.) 
9 
appeal and are awarded an amount greater than zero in the superior court; (5) the Labor 
Commissioner is statutorily mandated to represent in an employer‟s appeal claimants 
unable to afford an attorney if the claimant does not contest the Labor Commissioner‟s 
award. 
B. Berman Hearings and Arbitration Are Compatible 
We note that the Labor Commissioner, who intervened in this case at the trial 
court level, did not contend that arbitration and Berman hearings are incompatible, or that 
the present arbitration agreement could not be enforced, but only that “the arbitration 
agreement should be construed as providing that respondent is entitled to initially pursue 
his remedy before the Commissioner and is only required to proceed to arbitration if and 
when a de novo appeal is filed.”  The trial court‟s order did not irrevocably deny the 
petition to compel arbitration but merely ruled that it could not be granted until a Berman 
hearing had taken place.  This is also Moreno‟s position before us.  Because, as will 
appear, the answer to the question whether a Berman hearing and arbitration are 
compatible will shape our answer to the questions of whether a Berman waiver is 
contrary to public policy and unconscionable, we address the former question first. 
We construe the relevant statutes to permit binding arbitration after a Berman 
hearing.  We recently considered an analogous statutory scheme in Schatz v. Allen 
Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557 (Schatz).  In that case, a 
client in a fee dispute with his attorney first resorted to the Mandatory Fee Arbitration 
Act (MFAA), which provides a nonbinding method of arbitrating attorney-client fee 
disputes governed by rules established by the State Bar.  (Bus. & Prof. Code, § 6200.)  
When the arbitrators decided in the attorney‟s favor, the client, Schatz, filed a complaint 
in superior court for a trial de novo, notwithstanding the fact that attorney and client had 
entered into an agreement for binding arbitration.  Schatz, in resisting a petition to 
compel arbitration, argued that by its literal terms the MFAA, in Business and 
10 
Professions Code section 6204, gives either party to an MFAA arbitration the right to a 
“trial” after the arbitration if a request for a trial is filed within 30 days. 
In answering the question of whether Schatz was bound by the arbitration 
agreement, we framed the analysis in terms of whether the statutory language in the 
MFAA was designed to impliedly repeal the California Arbitration Act (CAA), which 
contemplated that binding arbitration agreements be enforced.  We noted that all 
presumptions are against implied repeal, and that, absent an express declaration of 
legislative intent, courts will find an implied repeal only when there is no rational basis 
for harmonizing the two potentially conflicting statutes, and the statutes are 
irreconcilable, clearly repugnant, and so inconsistent that the two cannot have concurrent 
operation.  (Schatz, supra, 45 Cal.4th at p. 573.)   
We concluded in Schatz that there was no such implied repeal.  “ „Nothing in the 
MFAA makes [a binding] arbitration agreement . . . unenforceable.  The MFAA and the 
CAA create two very different types of arbitration . . . .  Both may be given effect.  
Clients may, if they wish, request and obtain nonbinding arbitration under the MFAA.  
That arbitration may, and often will, resolve the dispute.  But if the client does not 
request nonbinding arbitration, or if it is held but does not resolve the dispute, then the 
MFAA has played its role, and the matter would continue without it.  Either party may 
then pursue judicial action unless the parties had agreed to binding arbitration.  In that 
event, the CAA would apply, and the dispute would go to binding arbitration.  This 
conclusion is consistent with the statutory language of both the MFAA and the CAA and 
the strong public policy in favor of binding arbitration as a means of resolving 
disputes.‟ ”  (Schatz, supra, 45 Cal.4th at p. 574.) 
As in Schatz, we do not construe the Berman hearing procedures as impliedly 
repealing the CAA‟s requirement that arbitration agreements be enforced.  Thus, as in 
Schatz, notwithstanding the fact that Berman‟s nonbinding dispute resolution procedure 
contemplates a de novo appeal to the superior court (§ 98.2, subd. (a)), we interpret that 
11 
language to provide that “ „[e]ither party may . . . pursue judicial action unless the parties 
had agreed to binding arbitration.  In that event, the CAA would apply, and the dispute 
would go to binding arbitration.‟ ”  (Schatz, supra, 45 Cal.4th at p. 574.)   
Like the Labor Commissioner below, we see no reason why the statutory 
protections afforded employees following a Berman hearing cannot be made available in 
an arbitration proceeding.  A party to a Berman hearing seeking a de novo appeal via 
arbitration pursuant to a prior agreement rather than through a judicial proceeding would 
initially file an appeal in superior court pursuant to section 98.2, subdivision (a), together 
with a petition to compel arbitration.  The superior court would determine whether the 
appeal is timely and whether it comports with all the statutory requirements, such as the 
undertaking requirement in subdivision (b).  If so, and if the petition to compel arbitration 
is unopposed, or found to be meritorious, the trial court will grant the petition.  The Labor 
Commissioner, pursuant to section 98.4, may then represent an eligible wage claimant in 
the arbitration proceeding.  The one-way fee-shifting provisions of section 98.2, 
subdivision (c) will be enforced initially by the arbitrator, with such judicial review as 
may be appropriate.   
The above framework does not purport to anticipate every problem that may arise 
from dovetailing the Berman hearing statutes and the CAA.  But the Labor 
Commissioner‟s position below that the Berman hearing was merely preliminary to, 
rather than preemptive of, binding arbitration confirms our conclusion that the two 
statutory schemes are compatible and that having the Berman hearing precede arbitration 
is workable. 
That a Berman hearing and an arbitration pursuant to the CAA are compatible 
does not, of course, answer the question whether an employer can require an employee to 
waive a Berman hearing and go directly to arbitration as a condition of employment.  We 
turn now to the question. 
12 
C. Does the Waiver of a Berman Hearing Violate Public Policy and Is It 
Unconscionable? 
In determining whether a Berman waiver violates public policy, we first review 
the law related to mandatory employment arbitration agreements, i.e., arbitration 
agreements that are conditions of new or continuing employment.  In Armendariz, supra, 
24 Cal.4th 83, we concluded that such agreements were enforceable, provided they did 
not contain features that were contrary to public policy or unconscionable.  (Id. at p. 99.)  
We concluded that “arbitration agreements cannot be made to serve as a vehicle for the 
waiver of [unwaivable] statutory rights,” such as rights under the Fair Employment and 
Housing Act (FEHA).  To ensure that such waiver did not occur, we held that arbitrations 
addressing such statutory rights would be subject to certain minimal requirements.  As we 
later summarized these:  “(1) the arbitration agreement may not limit the damages 
normally available under the statute (Armendariz, supra, 24 Cal.4th at p. 103); (2) there 
must be discovery „sufficient to adequately arbitrate their statutory claim‟ (id. at p. 106); 
(3) there must be a written arbitration decision and judicial review „ “sufficient to ensure 
the arbitrators comply with the requirements of the statute” ‟ (ibid.); and (4) the employer 
must „pay all types of costs that are unique to arbitration‟ (id. at p. 113).”  (Little v. Auto 
Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076 (Little).)  We did not hold that the above 
requirements were the only conditions that public policy could place on arbitration 
agreements, and have since recognized other limitations.  (See Gentry v. Superior Court 
(2007) 42 Cal.4th 443, 463 (Gentry) [prohibition of class arbitration contrary to public 
policy in some cases].) 
Here we must decide whether an employee in the context of an arbitration 
agreement can waive the right to a Berman hearing and posthearing protections.  In 
concluding that such rights may be waived, the Court of Appeal first acknowledged, 
correctly, that the right to vacation pay was a vested right and therefore unwaivable under 
13 
section 227.3.3  (See Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 780, 784.)  
Having established the vested right to vacation pay, the court framed its inquiry as 
follows:  “We must decide whether the absence of these statutory protections will 
significantly impair Moreno‟s ability to vindicate his wage rights in arbitration.  
According to Gentry . . . , „Armendariz makes clear that for public policy reasons we will 
not enforce provisions contained within arbitration agreements that pose significant 
obstacles to the vindication of employees‟ statutory rights.‟  (Gentry, supra, 42 Cal.4th at 
p. 463, fn. 7.)” 
The court then reasoned that the Berman hearing and post-Berman protections 
would not significantly impair Moreno‟s ability to vindicate his right to vacation pay 
through arbitration.  “Significantly, all of these statutory protections are only available if 
and when an employer appeals from an adverse administrative ruling.  Obviously, it is 
impossible to determine whether Moreno will prevail at the administrative hearing.  
Accordingly, it is impossible to determine whether Moreno will lose any statutory 
protections if the Berman waiver is enforced.  Unless enforcing the Berman waiver will 
pose significant obstacles to the vindication of Moreno‟s statutory wage rights, 
Armendariz does not require us to invalidate the waiver.  At most, enforcing the Berman 
waiver will eliminate the possibility of receiving statutory protections that are contingent 
on an administrative ruling in Moreno‟s favor.  We are not persuaded that the loss of 
what are merely contingent benefits can be equated with the significant obstacle to the 
vindication of statutory rights that Armendariz sought to address.” 
                                              
3  
Section 227.3 states in part:  “Unless otherwise provided by a collective-
bargaining agreement, whenever a contract of employment or employer policy provides 
for paid vacations, and an employee is terminated without having taken off his vested 
vacation time, all vested vacation shall be paid to him as wages at his final rate in 
accordance with such contract of employment or employer policy respecting eligibility or 
time served; provided, however, that an employment contract or employer policy shall 
not provide for forfeiture of vested vacation time upon termination.”   
14 
The Court of Appeal elaborated:  “[T]he record contains no evidence that Moreno 
or any other wage claimant lacks the knowledge, skills, abilities, or resources to vindicate 
his or her statutory wage rights in an arbitral forum.  Even assuming the arbitral process 
is more difficult to navigate than the Berman process, there is nothing in this record to 
indicate that enforcing a Berman waiver will significantly impair the claimant‟s ability to 
vindicate his or her statutory rights.  In short, Moreno has failed to demonstrate either the 
inadequacy of the arbitral forum provided by his arbitration agreement or the existence of 
a factual basis to invalidate all Berman waivers as against public policy.”  
In the present case, however, the question is not whether, in a court‟s judgment, 
the absence of statutory protections afforded by the Berman hearing and the potential 
post-Berman protections would significantly impair Moreno‟s ability to vindicate his 
unwaivable right to vacation pay in arbitration.  Rather, the question is whether the 
employee‟s statutory right to seek a Berman hearing, with all the possible protections that 
follow from it, is itself an unwaivable right that an employee cannot be compelled to 
relinquish as a condition of employment.  We conclude that it is. 
The question whether the waiver of a particular statutory protection is contrary to 
public policy essentially entails discerning legislative intent.  Sometimes statutory rights 
are made expressly unwaivable.  (See § 1194 [right to recover minimum wage 
notwithstanding any agreement]; Civ. Code, § 1751 [waiver of rights under the Consumer 
Legal Remedies Act unenforceable and void].)  In other cases, whether a statute can be 
waived may be implied from the context and purpose of the statute.  Thus, in Armendariz, 
we deduced the unwaivability of FEHA rights to redress nondiscrimination from the fact 
that it incorporated this state‟s strong public policy against various types of employment 
discrimination.  (Armendariz, supra, 24 Cal.4th at pp. 100-101.)   
There is no question that the lawful payment of wages owed is not merely an 
individual right but an important public policy goal.  As one appellate court correctly 
summarized the matter:  “Civil Code section 3513 provides, in pertinent part, that:  
15 
„[a]nyone may waive the advantage of a law intended solely for his benefit.  But a law 
established for a public reason cannot be contravened by a private agreement.‟  [¶]  The 
determination of whether a particular statute is for public or private benefit is for the 
court in each case (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 645, p. 
586).  The provisions of the Labor Code, particularly those directed toward the payment 
of wages to employees entitled to be paid, were established to protect the workers and 
hence have a public purpose.  As was pointed out in In re Trombley (1948) 31 Cal.2d 
801, 809:  „[i]t has long been recognized that wages are not ordinary debts, that they may 
be preferred over other claims, and that, because of the economic position of the average 
worker and, in particular, his dependence on wages for the necessities of life for himself 
and his family, it is essential to the public welfare that he receive his pay when it is due.‟  
(Also see Kerr’s Catering Service v. Department of Industrial Relations (1962) 57 Cal.2d 
319, 326-327.)”  (Henry v. Amrol, Inc. (1990) 222 Cal.App.3d Supp. 1, 6.) 
Although the statutory protections that the Berman hearing and the posthearing 
procedures afford employees were added piecemeal over a number of years, their 
common purpose is evident:  Given the dependence of the average worker on prompt 
payment of wages, the Legislature has devised the Berman hearing and posthearing 
process as a means of affording an employee with a meritorious wage claim certain 
advantages, chiefly designed to reduce the costs and risks of pursuing a wage claim, 
recognizing that such costs and risks could prevent a theoretical right from becoming a 
reality.  These procedures, including the employer undertaking and the one-way fee 
provision, also deter employers from unjustifiably prolonging a wage dispute by filing an 
unmeritorious appeal.  This statutory regime therefore furthers the important and 
long-recognized public purpose of ensuring that workers are paid wages owed.  The 
public benefit of the Berman procedures, therefore, is not merely incidental to the 
legislation‟s primary purpose but in fact central to that purpose.  Nor can there be any 
doubt that permitting employers to require employees, as a condition of employment, to 
16 
waive their right to a Berman hearing would seriously undermine the efficacy of the 
Berman hearing statutes and hence thwart the public purpose behind the statutes.   
Sonic argues in effect that even if a nonarbitration clause that required a Berman 
hearing waiver is contrary to public policy, an arbitration clause containing the same 
waiver would not be, because arbitration offers the same or similar advantages as does 
the Berman hearing process.  We disagree.  As the previous part of this opinion makes 
clear, the choice is not between a Berman hearing and arbitration, because a person 
subject to binding arbitration and eligible for a Berman hearing will still be subject to 
binding arbitration if the employer appeals the Berman hearing award.  The choice is 
rather between arbitration that is or is not preceded by a Berman hearing.  As discussed 
above, there are considerable advantages for employees to undergo the Berman hearing 
process before arbitration.  First, the Labor Commissioner‟s staff is directed to settle 
claims either informally or through a conference between the parties.  (DLSE, Policies 
and Procedures for Wage Claim Processing, supra, at pp. 2-3.)  If no settlement is 
obtained, a Berman hearing is to be conducted in “an informal setting preserving the 
rights of the parties” (§ 98, subd. (a)), conducted, as explained above, without discovery 
or formal rules of evidence, and with the hearing officer‟s assistance in cross-examining 
witnesses and understanding terms and issues.  It is thus structured so that an employee 
can avail himself or herself of the process without the need of counsel.  An employee 
who is successful at a Berman hearing will have the resources of the Labor 
Commissioner behind him or her to ensure that the judgment is enforced.  (§ 98.2, subd. 
(i).)  If the employer appeals, then the employer must post an undertaking in the amount 
of the award to ensure enforcement of the judgment if the employee ultimately prevails.  
(§ 98.2, subd. (b).)  An employee unable to afford counsel will be represented by the 
Labor Commissioner if the employer requests arbitration and the employee does not 
contest the commissioner‟s award.  (§ 98.4.)  Moreover, an employee in this 
17 
circumstance will not be liable for the employer‟s attorney fees if the employer prevails 
on appeal.  (§ 98.2, subd. (c).) 
In contrast, arbitration, notwithstanding its advantages as a reasonably expeditious 
means of resolving disputes, still generally bears the hallmark of a formal legal 
proceeding in which representation by counsel is necessary or at least highly 
advantageous.  The arbitration in question here, for example, is to be conducted by a 
“retired California Superior Court Judge” and “to the extent applicable in civil actions in 
California courts, the following shall apply and be observed:  all rules of pleading 
(including the right of demurrer), all rules of evidence, all rights to resolution of the 
dispute by means of motions for summary judgment, judgment on the pleadings, and 
judgment under Code of Civil Procedure section 631.8.”  The arbitrator‟s award at either 
party‟s request will be reviewed by a second arbitrator who will “as far as practicable, 
proceed according to the law and procedures applicable to appellate review by the 
California Court of Appeal of a civil judgment following court trial.”  A wage claimant 
undergoing arbitration will need the same kind of legal representation as if he or she were 
going to superior court. 
Thus, an employee going directly to arbitration will lose a number of benefits and 
advantages.  He or she will not benefit from the Labor Commissioner‟s settlement efforts 
and expertise.  He or she must pay for his or her own attorney whether or not able to 
afford it — an attorney who may not have the expertise of the Labor Commissioner.  
Moreover, what matters to the employee is not a favorable arbitration award per se but 
the enforcement of that award, and an employee going directly to arbitration will have no 
special advantage obtaining such enforcement.  Nor is there any guaranty that the 
employee will not be responsible for any successful employer‟s attorney fees, for under 
section 218.5, an employee who proceeds directly against an employer with a wage claim 
18 
not preceded by a Berman hearing will be liable for such fees if the employer prevails on 
appeal.4  In short, the Berman hearing process, even when followed by binding 
arbitration, provides on the whole substantially lower costs and risks to the employee, 
greater deterrence of frivolous employer claims, and greater assurance that awards will be 
collected, than does the binding arbitration process alone.5 
Sonic argues that we can construe the arbitration agreement, as we did in 
Armendariz, to provide protections equivalent to those available during and after a 
Berman hearing.  The argument is without merit.  In Armendariz, we recognized that in 
                                              
4  
At oral argument, Sonic‟s counsel argued that its arbitration in fact resembled a 
Berman hearing in its informality, and the arbitrator would or might incorporate Berman-
like protections such as one-way fee shifting.  Nothing in the arbitration agreement, nor 
anything else in the record before us, confirms these representations.  It may be possible 
for an arbitration system to be designed so that it provides an employee all the advantages 
of the Berman hearing and posthearing protections.  But there is no indication that the 
present arbitration system is so designed.   
 
 
5  
Nor are we persuaded to the contrary by assertions about arbitration‟s greater 
expedition.  Based on the various statutory deadlines, as well as memoranda by the Labor 
Commissioner and declarations by labor law attorneys, we concluded in 1998 that the 
time between filing a complaint with the Labor Commissioner and a Berman hearing date 
is usually four to six months.  (Cuadra, supra, 17 Cal.4th at pp. 860-862 & fn. 7.)  Sonic, 
in its petition to compel arbitration below, documented three cases in which the 
commencement of a Berman hearing took longer than this average, in one case slightly 
under four years, in two other cases slightly under one year.  No doubt the time between 
the filing of an administrative complaint and commencement of a Berman hearing is 
subject to variation.  Whether the delays represent a backlog in the Labor 
Commissioner‟s workload, or were generated by the parties themselves, or how these 
times compare to the completion of an arbitration, is not clear.  It may be the case that 
once a dispute has arisen, some employees‟ assessment of the time it will take to conduct 
a Berman hearing, when compared to the time it will take to resolve a claim by going 
directly to arbitration, will weigh in favor of the latter course.  That an employee may 
make this assessment does not alter the fact that he or she gains no advantage, and places 
himself or herself at a possible significant disadvantage, by agreeing to waive the option 
of a Berman hearing in advance as a condition of employment. 
19 
some cases, terms in an arbitration agreement that are unconscionable or contrary to 
public policy may be severed and the rest of the agreement enforced.  (Armendariz, 
supra, 24 Cal.4th at pp. 123-124; see Little, supra, 29 Cal.4th at pp. 1075-1076.)  We also 
construed an arbitration agreement that was silent about some matters, such as costs, so 
as to make it conform to public policy.  (Armendariz, supra, at p. 113.)  Here, Sonic does 
not ask us to sever an unlawful provision or to construe a provision in a manner that 
renders it lawful, but rather to, in effect, reform a statute.  As reviewed above, the 
statutory protections pursuant to sections 98.2 and 98.4 are contingent on the Labor 
Commissioner‟s findings in a Berman hearing that an employee‟s claim is meritorious.  
For this court to order the Labor Commissioner or arbitrator to provide those protections 
when there has been no prior favorable determination in a Berman hearing is contrary to 
statute and beyond our authority.6 
Contrary to Sonic‟s suggestion, and that of the dissent, the fact that the Berman 
hearing is merely an option for employees, who may also go directly to court (§ 218), 
does not alter the nonwaivability of the Berman hearing protections, for it is precisely 
that option which an employer may not foreclose in a predispute agreement.  The purpose 
of the Berman hearing statutes is to empower wage claimants by giving them access to a 
Berman hearing with all of its advantages.  Allowing an employee the freedom to choose 
                                              
6 
This is not to say that Armendariz is irrelevant in the context of 
post-Berman-hearing arbitration.  As Sonic appears to have conceded at oral argument, 
Armendariz‟s procedural protections, and in particular its fee-shifting requirement, are 
applicable.  A wage claimant who has undergone a Berman hearing cannot be compelled 
to bear arbitration forum costs he or she would not be required to pay if the employer 
appealed to superior court.  (See Armendariz, supra, 24 Cal.4th at p. 113.)  A contrary 
rule that would subject a wage claimant to either the risk or the reality of being saddled 
with substantial arbitration costs that could either diminish or nullify a potential award or 
discourage employees from seeking such an award in the first place would be in 
fundamental conflict with the purpose of a Berman hearing to provide employees a low-
cost and effective means of vindicating such claims. 
20 
whether to resort to a Berman hearing when a wage claim arises, after evaluating in light 
of the particular circumstances whether such a hearing is advantageous, is wholly 
consistent with the public policy behind the Berman hearing statutes.  A requirement that 
the employee surrender the option of a Berman hearing as a condition of employment is 
not.  As we recognized in Armendariz, our concern is with the impermissible waiver of 
certain rights and protections as a condition of employment before a dispute has arisen.  
(See Armendariz, supra, 24 Cal.4th at p. 103, fn. 8.)7  We therefore find the argument 
that, because the Legislature intended an employee to have the option of a Berman 
hearing when a wage claim arises, the Legislature also must have intended to permit 
employers to require employees to waive that option as a condition of employment, to be 
unpersuasive. 
Sonic finds support for the Court of Appeal‟s holding in Gentry, in which we 
concluded that some class arbitration waivers are unlawful but declined to categorically 
declare invalid all such waivers.  Gentry is readily distinguishable.  Class arbitration is a 
judicially devised procedure.  We acknowledged that class actions or arbitrations were 
not categorically necessary to vindicate statutory rights, and that under some 
circumstances, those rights could be adequately enforced by individual action.  (Gentry, 
supra, 42 Cal.4th at pp. 462, 464.)  We further recognized the well-established principle 
that “ „[t]rial courts are ideally situated to evaluate the efficiencies and practicalities of 
permitting group action . . . .‟ ”  (Id. at pp. 463-464, quoting Linder v. Thrifty Oil Co. 
(2000) 23 Cal.4th 429, 435.)  In the present case, in contrast, the Berman hearing and 
posthearing procedures have been mandated by the Legislature to be available to all 
                                              
7  
We thus do not decide whether it is contrary to public policy to knowingly and 
voluntarily waive the right to seek a Berman hearing as part of a freely negotiated, 
nonstandard contract, such as may exist between an employer and a highly compensated 
executive employee. 
21 
employees with wage complaints that fall within the scope of the statute.  As discussed 
above, that mandate represents a legislative judgment about the special protections and 
procedural rights that should be afforded to persons with wage claims in order to ensure 
that such claims be fairly resolved.  The judgment that such a waiver is contrary to public 
policy is not contingent upon the determination of a trial court, during a petition to 
compel arbitration, about whether and to what extent a particular wage claimant will 
benefit from the Berman hearing process.  Indeed, as the Court of Appeal acknowledged, 
the trial court at that stage is in no position to determine such matters.   
Moreover, notwithstanding the Court of Appeal‟s and Sonic‟s suggestions, 
Berman hearings and posthearing protections are by their own terms made available to all 
statutorily eligible wage earners, not merely low-wage workers.  This legislative 
determination cannot be modified by a judicial determination that employees earning 
something more than a low wage do not really require these protections and therefore can 
be required to waive them as a condition of employment.  Sonic suggests that the fact that 
Moreno had been earning over $100,000 at the time he left his employment means that he 
would not be in the class of persons unable to afford counsel and eligible for 
representation by the Labor Commissioner in the event of an appeal.  But extending this 
suggestion into an argument that a Berman waiver as applied to Moreno is not contrary to 
public policy suffers from at least three flaws.  First, as Moreno‟s counsel points out, 
there is nothing in the record regarding Moreno‟s present financial condition.  Second, 
the determination of whether a claimant is unable to afford counsel is vested solely in the 
Labor Commissioner under section 98.4, and a superior court deciding a petition to 
compel arbitration is in no position to guess what the commissioner‟s determination will 
be.  Third and most fundamentally, even if it could be determined that Moreno‟s financial 
condition was such that he would not be represented by the Labor Commissioner, the 
Berman statutes provide, as explained, many advantages to all wage claimants, not only 
indigent ones.  These include the informal hearing itself, the commissioner‟s settlement 
22 
efforts, the bonding requirement ensuring that wage awards to employees actually be 
enforced, and the one-way fee-shifting provision discouraging frivolous employer 
appeals and encouraging the pursuit of meritorious claims without fear of financial 
penalty.8  We therefore conclude the Berman waiver at issue here is contrary to public 
policy.9 
                                              
8  
Sonic also cites in support Giuliano v. Inland Empire Personnel, Inc. (2007) 149 
Cal.App.4th 1276.  In that case, a high-ranking executive sued his former employer for 
breach of contract and for nonpayment of statutory wages under section 200 et seq.  The 
Court of Appeal, in upholding the employer‟s petition to compel arbitration, rejected the 
argument that the Armendariz requirements applied in that case, which it characterized as 
a “garden-variety” breach of contract action.  (Giuliano, supra, at p. 1289.)  The plaintiff 
in Giuliano did not seek a Berman hearing but filed an action directly in court.  That case 
is therefore inapposite. 
9  
The dissent goes to great lengths in its attempts to show that a Berman waiver is 
not contrary to public policy.  Yet it does not contest in any concrete way that Berman 
hearings and posthearing protections provide important advantages to employees not 
present if the employee went directly to arbitration, or that permitting a Berman hearing 
waiver as a condition of employment would substantially undermine the legislative 
policy behind the Berman hearing statutes.  It is true, as discussed above, that a given 
employee may choose to forgo a Berman hearing and go directly to arbitration, perhaps 
concluding, for example, that his or her strong case may be resolved more quickly.  But 
whatever advantages arbitration without a Berman hearing may have for an employee 
will be realized if the employee is given a choice, once a wage dispute arises, of going 
directly to arbitration or going first to the Labor Commissioner.  It is precisely this choice 
that the Berman statutes authorize and the predispute waiver at issue in this case, which 
the dissent would uphold, seeks to revoke.  Moreover, the dissent‟s conjecture that 
employers who cannot insert Berman waivers into arbitration agreements will likely 
abandon arbitration of wage claims (dis. opn., post, at p. 28, fn. 8) is groundless 
speculation.  The dissent also seeks to minimize the public importance of the Berman 
hearing legislation, notwithstanding venerable case law discussed above affirming that 
the collection of wages owed not only vindicates individual rights but fulfills an 
important public purpose.  (See Armendariz, supra, 24 Cal.4th at pp. 100-101 
[anti-employment-discrimination statutes unwaivable notwithstanding significant 
individual benefit to employees].)  Nor does the dissent‟s lengthy discussion of the case 
law of the United States Supreme Court and this court (see dis. opn., post, at pp. 11-16) 
— case law that merely stands for the uncontroversial proposition that statutory claims 
are generally arbitrable — shed light on the present case.  Nor is the dissent correct when 
(footnote continued on next page) 
23 
Our conclusion is the same if we analyze the issue in terms of unconscionability.10  
One common formulation of unconscionability is that it refers to “ „an absence of 
meaningful choice on the part of one of the parties together with contract terms which are 
unreasonably favorable to the other party.‟ ”  (Ingle v. Circuit City Stores, Inc. (9th Cir. 
                                                                                                                                                                           
(footnote continued from previous page) 
it asserts that our public policy arguments are at odds with those of Moreno.  Moreno 
argues vigorously that the Berman waiver, by forcing employees to forego the various 
statutory advantages discussed above and in great detail in his briefs, “limits the remedies 
that would otherwise be available to enforce employees‟ statutory rights [e.g., one-way 
fee-shifting and undertaking requirements], and . . . imposes costs exceeding those that 
the employee would normally incur [e.g., costs of counsel].”  We agree. 
10  
We requested supplemental briefing on the unconscionability issue, which was not 
argued in the courts below.  Sonic contends that we should not address unconscionability, 
principally arguing that it was not afforded the opportunity to produce evidence regarding 
unconscionability.  (See Civ. Code, § 1670.5, subd. (b).)  It is true, as has been stated, 
that “[u]nconscionability is a question of law for the court.  [Citations.]  Nonetheless, 
factual issues may bear on that question.”  (Wayne v. Staples, Inc. (2006) 135 
Cal.App.4th 466, 480.)  When, however, there is no dispute as to the evidence, the court 
may resolve the unconscionability issue in the context of a petition to compel arbitration 
without resort to such a hearing and testimony.  (See, e.g., Armendariz, supra, 24 Cal.4th 
at pp. 115-121.)  Here, the only issue that Sonic specifically cites as requiring further 
factual or evidentiary exploration is that of surprise.  As will appear below, however, we 
do not rely on the element of surprise in our procedural unconscionability analysis, but on 
the uncontested fact that the agreement was one of adhesion and imposed as a condition 
of employment.   
 
Moreover, Moreno did raise the unconscionability issue below as an affirmative 
defense to the petition to compel arbitration.  Although as a matter of general policy we 
do not decide issues not raised in the Court of Appeal (Cal. Rules of Court, rule 
8.500(c)(1)), we may depart from that policy when an important countervailing purpose 
would be served.  (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 
6-7 & fn. 2 [this court has the discretion to consider important issues of law not argued by 
the parties below].)  Here, as explained below, the issues of public policy and 
unconscionability are closely linked, and a decision on both issues will serve to clarify 
the scope of our holding, as well as more fully explain our conclusion that a rule 
generally prohibiting a Berman waiver as a condition of employment is not preempted by 
the FAA. 
24 
2003) 328 F.3d 1165, 1170, and authorities cited therein.)  As that formulation implicitly 
recognizes, the doctrine of unconscionability has both a procedural and a substantive 
element, the former focusing on oppression or surprise due to unequal bargaining power, 
the latter on overly harsh or one-sided results.  “The procedural element of an 
unconscionable contract generally takes the form of a contract of adhesion,” ‟ ” which, 
imposed and drafted by the party of superior bargaining strength, relegates to the 
subscribing party only the opportunity to adhere to the contract or reject it.  (Little, supra, 
29 Cal.4th at p. 1071.) 
“Substantively unconscionable terms can take various forms, but may generally be 
described as unfairly one-sided.  One such form, as in Armendariz, is the arbitration 
agreement‟s lack of a „ “modicum of bilaterality,” ‟ wherein the employee‟s claims 
against the employer, but not the employer‟s claims against the employee, are subject to 
arbitration.  (Armendariz, supra, 24 Cal.4th at p. 119.)  Another kind of substantively 
unconscionable provision occurs when the party imposing arbitration mandates a post-
arbitration proceeding, either judicial or arbitral, wholly or largely to its benefit at the 
expense of the party on which the arbitration is imposed.”  (Little, supra, 29 Cal.4th at 
pp. 1071-1072.)  In determining unconscionability, our inquiry is into whether a contract 
provision was “unconscionable at the time it was made.”  (Civ. Code, § 1670.5, subd. 
(a).)   
Here, the arbitration agreement was a contract of adhesion indisputably imposed 
as a condition of employment.  Moreover, we have recognized that contract terms 
imposed as a condition of employment are particularly prone to procedural 
unconscionability.  “[I]n the case of preemployment arbitration contracts, the economic 
pressure exerted by employers on all but the most sought-after employees may be 
particularly acute, for the arbitration agreement stands between the employee and 
necessary employment, and few employees are in a position to refuse a job because of an 
arbitration requirement.”  (Armendariz, supra, 24 Cal.4th at p. 115.)  Moreover, many 
25 
employees may not give careful scrutiny to routine personnel documents that employers 
ask them to sign.  (See Gentry, supra, 42 Cal.4th at p. 471.) 
Furthermore, for reasons suggested above, significant substantive 
unconscionability is also present.  As explained, Berman hearing and posthearing 
procedures were designed to provide wage claimants with meritorious claims unique 
protections that lower the costs and risks of pursuing such claims, leveling a playing field 
that generally favors employers with greater resources and bargaining power.  Requiring 
employees to forgo these protections as a condition of employment can only benefit the 
employer at the expense of the employee.  Nor can we say, as also explained, that the 
benefits the employee gains from arbitration compensates for what he or she loses by 
forgoing the option of a Berman hearing. 
In sum, rather than being justified by “legitimate commercial needs” (see 
Armendariz, supra, 24 Cal.4th at p. 117), the main purpose of the Berman waiver appears 
to be for employers to gain an advantage in the dispute resolution process by eliminating 
the statutory advantages accorded to employees designed to make that process fairer and 
more efficient.  We conclude the waiver is markedly one-sided and therefore 
substantively unconscionable.  This substantive unconscionability, together with the 
significant element of procedural unconscionability, leads to the conclusion that the 
Berman waiver in the arbitration agreeement at issue here is unconscionable. 
We note that the public policy and unconscionability defenses, albeit similar in 
some ways, are different in important respects.  A public policy defense is concerned 
with the relationship of the contract to society as a whole, and targets contractual 
provisions that undermine a clear public policy, such as an unwaivable statutory right 
designed to accomplish a public purpose.  (See Armendariz, supra, 24 Cal.4th at 
pp. 100-101.)  Unconscionability is concerned with the relationship between the 
contracting parties and one-sided terms (id. at p. 114), such that consent in any real sense 
appears to be lacking.  Contracts can be contrary to public policy but not unconscionable 
26 
(see Board of Education v. Round Valley Teachers Assn (1996) 13 Cal.4th 269, 287-288 
[provision in a negotiated collective bargaining contract conflicts with a statute and is 
therefore unenforceable]) and vice versa (see A & M Produce Co. v. FMC Corp. (1982) 
135 Cal.App.3d 473, 493 [warranty disclaimer and exclusion of consequential damages 
in particular commercial contract unconscionable].)  But there is sometimes an overlap 
between these two defenses to contract enforcement.   
Such is the case here.  On the one hand, to permit employers to require employees 
to waive the right to a Berman hearing as a condition of employment would gravely 
undermine the public policy behind the Berman hearing statutes, as discussed above.  On 
the other hand, because the Berman hearing statutes accomplish their public policy goal 
of ensuring prompt payment of wages by according employees special advantages in their 
effort to obtain such payment, a provision in a contract of adhesion that requires the 
employee to surrender such advantages as a condition of employment is oppressive and 
one-sided, and therefore unconscionable.11 
D. Our Holding Is Not Preempted by the FAA 
Sonic contends that a holding that a predispute waiver of a Berman hearing in an 
arbitration agreement is contrary to public policy and unconscionable would be 
preempted by the FAA.  To address this claim, we begin by reviewing some basic 
                                              
11  
The dissent argues that the agreement “viewed from a broader perspective is not 
unconscionable” because the agreement binds both parties to arbitrate all disputes, 
subject to certain exceptions.  (Dis. opn., post, at pp. 28-29.)  The argument is off the 
mark.  It is true that an arbitration agreement may be unconscionable when it requires 
“arbitration only for the claims of the weaker party but a choice of forums for the claims 
of the stronger party.”  (Armendariz, supra, 24 Cal.4th at p. 119.)  But that is not the only 
form unconscionability may take.  In the present case, as discussed, the Berman statutes 
were part of a public policy designed to advantage employees seeking wages owed.  This 
arbitration agreement requires the employee to forgo these advantages, without seeking 
any comparable sacrifice from the employer.  To contend that this agreement is simply a 
bilateral agreement to arbitrate ignores that important reality. 
27 
principles pertaining to the enforcement of arbitration agreements and FAA preemption.  
“ ‟California law, like federal law, favors enforcement of valid arbitration agreements. 
[Citation.] . . .  Thus, under both federal and California law, arbitration agreements are 
valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity 
for the revocation of any contract.‟  (Armendariz, supra, 24 Cal.4th at pp. 97-98; see also 
9 U.S.C. § 2; Code Civ. Proc., § 1281.)  In other words, although under federal and 
California law, arbitration agreements are enforced „in accordance with their terms‟ (Volt 
Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 (Volt)), such enforcement is 
limited by certain general contract principles „ ”at law or in equity for the revocation of 
any contract.” ‟ ”  (Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 163 
(Discover Bank).)  Thus, “under section 2 of the FAA, a state court may refuse to enforce 
an arbitration agreement based on „generally applicable contract defenses, such as fraud, 
duress, or unconscionability.‟ ”  (Little, supra, 29 Cal.4th at p. 1079, quoting Doctor’s 
Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687.)12 
The doctrine of unconscionability cannot be used, however, in a way that 
discriminates against arbitration agreements.  In Perry v. Thomas (1987) 482 U.S. 483 
(Perry), for example, the court held that section 229, which provides in pertinent part that 
                                              
12  
We note that in general, the question whether an arbitration agreement is 
unconscionable or contrary to public policy is for the court, not the arbitrator, to decide.  
(Discover Bank v. Superior Court, supra, 36 Cal.4th at p. 171.)  Recently, the Supreme 
Court held, in a case brought in federal court, that the question of unconscionability of an 
arbitration agreement may be for the arbitrator to decide when the agreement has clearly 
and unmistakably delegated that issue to the arbitrator.  (Rent-A-Center v. Jackson (2010) 
__ U.S. __ [130 S.Ct. 2772, 2778-2779].)  Sonic has not contended that the arbitration 
agreement delegates responsibility to the arbitrator to decide questions of the agreement‟s 
unconscionability or violation of public policy.  We thus have no need to decide whether 
Rent-A- Center‟s five-to-four decision applies to actions brought in state court (see 
Preston, supra, 552 U.S. 346, 363 (dis. opn. of Thomas, J.) [reaffirming the view of 
Justice Thomas that the FAA does not apply to state court proceedings]), nor whether we 
would adopt a similar rule as a matter of state law. 
28 
“[a]ctions to enforce the provisions of this article for the collection of due and unpaid 
wages claimed by an individual may be maintained without regard to the existence of any 
private agreement to arbitrate,” was preempted by the FAA in all cases in which the FAA 
applies.  The court concluded that the requirement under section 229 “that litigants be 
provided a judicial forum for resolving wage disputes” stood in direct conflict with the 
FAA.  (Perry, supra, at p. 491.)  The Perry court further made clear that the doctrine of 
unconscionability could not be used to save section 229 from FAA preemption.  “[S]tate 
law, whether of legislative or judicial origin, is applicable if that law arose to govern 
issues concerning the validity, revocability, and enforceability of contracts generally.  A 
state-law principle that takes its meaning precisely from the fact that a contract to 
arbitrate is at issue does not comport with this requirement of § 2. [Citations.] A court 
may not, then, in assessing the rights of litigants to enforce an arbitration agreement, 
construe that agreement in a manner different from that in which it otherwise construes 
nonarbitration agreements under state law.  Nor may a court rely on the uniqueness of an 
agreement to arbitrate as a basis for a state-law holding that enforcement would be 
unconscionable, for this would enable the court to effect what we hold today the state 
legislature cannot.”  (Perry, supra, 482 U.S. at pp. 492-493, fn. 9.) 
Here, our conclusion that Berman waivers are contrary to public policy and 
unconscionable does not discriminate against arbitration agreements.  We neither 
construe the arbitration agreement “in a manner different from that in which [we would] 
construe[] nonarbitration agreements” nor do we “rely on the uniqueness of an agreement 
to arbitrate as a basis for a state-law holding that enforcement would be unconscionable.”  
(Perry, supra, 482 U.S. at p. 492, fn. 9.)  Rather, our conclusion that a Berman waiver is 
contrary to public policy and unconscionable is equally applicable whether the waiver 
appears within an arbitration agreement or independent of arbitration.  Our holding does 
not disfavor arbitration agreements, but neither does it permit them “ „to harbor terms, 
29 
conditions and practices‟ that undermine public policy.”  (Discover Bank, supra, 36 
Cal.4th at p. 166.) 
In arguing that the FAA preempts a state law rule precluding Berman waivers, 
Sonic relies in particular on Preston, supra, 552 U.S. 346, and a careful examination of 
that decision is therefore necessary.  In Preston, the United States Supreme Court 
considered a California case arising from a dispute between a television personality, 
Judge Alex Ferrer, and Attorney Arnold Preston regarding fees allegedly owed the latter.  
The agreement between them called for dispute resolution via arbitration.  Ferrer claimed, 
however, that the attorney had been acting as a talent agent without a license in violation 
of the Talent Agencies Act (TAA; § 1700 et seq.), and that therefore under the terms of 
that statute the contract was invalid and unenforceable.  (Preston, supra, 552 U.S. at p. 
350.)  Ferrer sought to adjudicate the matter in the first instance before the Labor 
Commissioner, with whom the TAA vests primary jurisdiction to adjudicate disputes 
arising under that statute, permitting an appeal within 10 days to the superior court for a 
de novo hearing.  (§ 1700.44.)  Preston sought instead to compel arbitration, but the trial 
court denied the petition on the ground that the Labor Commissioner had primary 
jurisdiction, and the Court of Appeal affirmed.  After we denied review, the United States 
Supreme Court granted Preston‟s petition for a writ of certiorari.  (Preston, supra, 552 
U.S. at pp. 350-351.) 
The Supreme Court reversed, holding that the TAA‟s grant of primary jurisdiction 
to the Labor Commissioner, inasmuch as it thwarted the arbitration agreement, violated 
the FAA.  Section 2 of the FAA, which requires enforcement of arbitration agreements 
“save upon such grounds as exist at law or in equity for the revocation of any contract” (9 
U.S.C. § 2) “ „declare[s] a national policy favoring arbitration‟ of claims that parties 
contract to settle in that manner.  Southland Corp. [v. Keating (1984)] 465 U.S. [1], 10.  
That national policy, we held in Southland, „appli[es] in state as well as federal courts‟ 
and „foreclose[s] state legislative attempts to undercut the enforceability of arbitration 
30 
agreements.‟  Id., at 16.  The FAA‟s displacement of conflicting state law is „now well-
established [citations] . . . .‟ ”  (Preston, supra, 552 U.S. at p. 353.) 
“A recurring question under § 2 is who should decide whether „grounds . . . exist 
at law or in equity‟ to invalidate an arbitration agreement.  In Prima Paint Corp. v. Flood 
& Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967), we held that attacks on the validity 
of an entire contract, as distinct from attacks aimed at the arbitration clause, are within 
the arbitrator‟s ken.  [¶]  The litigation in Prima Paint originated in federal court, but the 
same rule, we held in Buckeye [Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440 
(Buckeye)], applies in state court.  546 U.S., at 447-448.  The plaintiffs in Buckeye 
alleged that the contracts they signed, which contained arbitration clauses, were illegal 
under state law and void ab initio.  Id., at 443, 126 S.Ct. 1204. . . . [W]e held that the 
plaintiffs‟ challenge was within the province of the arbitrator to decide.  See 546 U.S., at 
446, 126 S.Ct. 1204.”  (Preston, supra, 552 U.S. at p. 353.) 
The Preston court then concluded that “Buckeye largely, if not entirely, resolves 
the dispute before us.  The contract between Preston and Ferrer clearly „evidenc[ed] a 
transaction involving commerce,‟ 9 U.S.C. § 2, and Ferrer has never disputed that the 
written arbitration provision in the contract falls within the purview of § 2.  Moreover, 
Ferrer sought invalidation of the contract as a whole.  In the proceedings below, he made 
no discrete challenge to the validity of the arbitration clause.  [Citation.]  Ferrer thus 
urged the Labor Commissioner and California courts to override the contract‟s arbitration 
clause on a ground that Buckeye requires the arbitrator to decide in the first instance.”  
(Preston, supra, 552 U.S. at p. 354, fn. omitted, italics added.) 
The Supreme Court then rejected Ferrer‟s argument that the case was 
distinguishable from Buckeye because “the TAA merely requires exhaustion of 
administrative remedies before the parties proceed to arbitration.”  (Preston, supra, 552 
U.S. at p. 354.)  “The TAA permits arbitration in lieu of proceeding before the Labor 
Commissioner if an arbitration provision „in a contract between a talent agency and [an 
31 
artist]‟ both „provides for reasonable notice to the Labor Commissioner of the time and 
place of all arbitration hearings‟ and gives the Commissioner „the right to attend all 
arbitration hearings.‟  § 1700.45.  This prescription demonstrates that there is no inherent 
conflict between the TAA and arbitration as a dispute resolution mechanism.  But § 
1700.45 was of no utility to Preston.  He has consistently maintained that he is not a 
talent agent as that term is defined in § 1700.4(a), but is, instead, a personal manager not 
subject to the TAA‟s regulatory regime.  [Citation.]  To invoke § 1700.45, Preston would 
have been required to concede a point fatal to his claim for compensation — i.e., that he 
is a talent agent, albeit an unlicensed one — and to have drafted his contract in 
compliance with a statute that he maintains is inapplicable. 
“Procedural prescriptions of the TAA thus conflict with the FAA‟s dispute 
resolution regime in two basic respects: First, the TAA, in § 1700.44(a), grants the Labor 
Commissioner exclusive jurisdiction to decide an issue that the parties agreed to arbitrate, 
see Buckeye, 546 U.S., at 446; second, the TAA, in § 1700.45, imposes prerequisites to 
enforcement of an arbitration agreement that are not applicable to contracts generally, see 
Doctor’s Associates, Inc. v. Casarotto,  517 U.S. at 687.”  (Preston, supra, 552 U.S. at 
pp. 355-356.) 
The Supreme Court further rejected Ferrer‟s contention “that the TAA is 
nevertheless compatible with the FAA because § 1700.44(a) merely postpones arbitration 
until after the Labor Commissioner has exercised her primary jurisdiction” and that after 
that proceeding “either party could move to compel arbitration under Cal.Civ.Proc.Code 
Ann. § 1281.2 (West 2007), and thereby obtain an arbitrator‟s determination prior to 
judicial review.”  (Preston, supra, 552 U.S. at p. 356.)  The court noted that this position 
was inconsistent with the position Ferrer took below, and with a literal reading of the 
statute, that de novo review may be sought in superior court, not with an arbitrator.  
(Preston, supra, 552 U.S. at pp. 356-357.)  But the court announced a broader holding:  
“A prime objective of an agreement to arbitrate is to achieve „streamlined proceedings 
32 
and expeditious results.‟  [Citations.]  That objective would be frustrated even if Preston 
could compel arbitration in lieu of de novo Superior Court review.  Requiring initial 
reference of the parties‟ dispute to the Labor Commissioner would, at the least, hinder 
speedy resolution of the controversy.”  (Preston, supra, 552 U.S. at pp. 357-358.)   
The Preston court distinguished the case before it from EEOC v. Waffle House, 
Inc. (2002) 534 U.S. 279.  In the latter case, the court had held that an arbitration 
agreement between an employer and an employee did not preclude the Equal 
Employment Opportunity Commission (EEOC) from exercising the independent 
prosecutorial authority granted it by Congress to pursue in court individual relief, or as 
the court phrased it, “victim-specific judicial relief,” such as backpay, reinstatement, and 
damages, on behalf of employees subject to arbitration agreements.  (Id. at p. 282; see id., 
at p. 287.)  The EEOC was not a party to the arbitration agreements, and it exercises its 
prosecutorial duties without the consent or supervision of the employees on whose behalf 
it brings its action.  (Id. at p. 291.)  As the Preston court stated, Waffle House was 
distinguishable because “in proceedings under § 1700.44(a), the Labor Commissioner 
functions not as an advocate advancing a cause before a tribunal authorized to find the 
facts and apply the law; instead, the Commissioner serves as an impartial arbiter.  That 
role is just what the FAA-governed agreement between Ferrer and Preston reserves for 
the arbitrator.  In contrast, in Waffle House . . . , the Court addressed the role of an 
agency, not as adjudicator but as prosecutor, pursuing an enforcement action in its own 
name or reviewing a discrimination charge to determine whether to initiate judicial 
proceedings.”  (Preston, supra, 552 U.S. at p. 359.) 
The Court of Appeal below, treating the federal preemption issue as a threshold 
matter, rejected Sonic‟s argument that Preston governs this case:  “As the Supreme Court 
in Preston explained:  (1) the artist was seeking to invalidate the entire contract based on 
the personal manager‟s alleged violations of the TAA, which is an issue that Buckeye 
requires the arbitrator to decide in the first instance; (2) the validity and substantive rights 
33 
of the arbitration clause were not in dispute; and (3) the only issue was whether the fee 
dispute should be resolved in an arbitral or administrative forum.  The parties did not 
litigate in Preston whether there were any generally applicable contract defenses, such as 
fraud, duress, or unconscionability, which would invalidate or restrict the arbitration 
agreement.”  The court then concluded that because the issue in the case before it was the 
unconscionability of the arbitration clause, Preston was not dispositive. 
We agree with the Court of Appeal that Preston is distinguishable.  In this case, 
unlike in Buckeye and in Preston, the challenge is to a portion of the arbitration 
agreement — the Berman waiver — as contrary to public policy and unconscionable, 
rather than to the contract as a whole.  Buckeye therefore does not apply.  These cases are 
distinguished not merely because of the nature of the litigants‟ challenges, but also 
because of the fundamental differences between the two statutory regimes at issue.  The 
statute in Preston, the TAA, merely lodges primary jurisdiction in the Labor 
Commissioner, and does not come with the same type of statutory protections as are 
found in the Berman hearing and posthearing procedures discussed above.13  In fact, 
notwithstanding Ferrer‟s argument that those in his position would be deprived of the 
Labor Commissioner‟s expertise (Preston, supra, 552 U.S. at p. 358), the Preston court 
recognized that section 1700.45 explicitly authorizes predispute agreements that allow 
parties to bypass the Labor Commissioner to resolve TAA issues through arbitration, 
albeit with certain conditions that could not lawfully be applied in that case (Preston, at 
p. 356).  A predispute agreement that provides for such arbitration of TAA disputes, 
therefore, cannot be unconscionable or contrary to public policy.  This is in marked 
                                              
13  
Section 1700.44, subdivision (a) does require that a party wishing to stay the 
Labor Commissioner‟s monetary award on appeal post a bond not exceeding twice the 
amount of the judgment.  This provision applies to whichever party to a TAA proceeding 
seeks a stay, in contrast to section 98.2, subdivision (b), which imposes an undertaking 
requirement exclusively on the employer. 
34 
contrast to the Berman hearing statutes, which have no comparable provision authorizing 
arbitration agreements that bypass the Labor Commissioner, and which we have 
construed as not permitting such agreements as a condition of employment. 
Sonic makes much of a paragraph in Preston that it argues supports its position.  
As noted above, the court stated:  “A prime objective of an agreement to arbitrate is to 
achieve „streamlined proceedings and expeditious results.‟  [Citations.]  That objective 
would be frustrated even if Preston could compel arbitration in lieu of de novo Superior 
Court review.  Requiring initial reference of the parties‟ dispute to the Labor 
Commissioner would, at the least, hinder speedy resolution of the controversy.”  
(Preston, supra, 552 U.S. at pp. 357-358.) 
This statement cannot be read, as Sonic urges, to mean that any state law 
procedure that delays the commencement of arbitration is preempted by the FAA.  
Rather, the Preston court‟s statement, read in context, is quite narrow.  It merely affirms 
that a violation of the Buckeye rule will not be excused if the administrative agency 
displacing the arbitrator‟s jurisdiction does so only preliminarily and is subject to de novo 
review in arbitration, because such displacement is not costless, but in fact would lead to 
delay.  (Preston, supra, 552 U.S. at pp. 357-358.)   But here Buckeye does not apply, 
because of Moreno‟s meritorious challenge to a provision in the arbitration agreement 
itself.  The above quoted statement explaining why the Buckeye rule applies 
notwithstanding the fact that arbitration may be delayed rather than denied cannot 
justifiably be expanded into a statement asserting that any time an arbitration is delayed 
by application of a state statute, even when Buckeye does not apply, the statute must be 
invalidated. 
In arriving at this conclusion, we make clear that a state legislature or court cannot 
insulate itself from an FAA preemption challenge merely by declaring that the waiver of 
an administrative forum in an arbitration agreement is against public policy.  (See Perry, 
supra, 482 U.S. at p. 492, fn. 9.)  A public policy based solely on the supposed 
35 
superiority of an administrative forum over arbitration could no more survive FAA 
preemption than could a policy based on the supposed superiority of a judicial forum.  
(See Perry, at p. 492, fn. 9.)  But neither do we understand the FAA to preempt a state‟s 
authority to impose various preliminary proceedings that delay both the adjudication and 
the arbitration of a cause of action in order to pursue important state interests.  In the 
FEHA, for example, before a civil action can be filed, a party must file a complaint with 
the Department of Fair Employment and Housing and exhaust the administrative remedy.  
(Gov. Code, §§ 12960, 12965; see Blum v. Superior Court (2006) 141 Cal.App.4th 418, 
422.)  The Supreme Court has never suggested that the FAA requires that these 
preliminary proceedings be bypassed in order to go directly to arbitration.  Indeed, under 
our state‟s law, a statutory cause of action for employment discrimination under the 
FEHA cannot succeed in court, nor presumably in an arbitration applying California law, 
unless administrative remedies have been exhausted.  (See Medix Ambulance Service, 
Inc. v. Superior Court (2002) 97 Cal.App.4th 109, 115-118.)  Exhaustion of these 
administrative remedies may delay the commencement both of arbitration and litigation. 
So, too, a state Legislature may, as it has done with the Berman hearings, advance 
a certain public policy by offering certain classes of litigants the option of an informal, 
nonbinding administrative hearing serving as a gateway to obtaining special protections 
that enable the vindication of their claims.  State law may also prescribe that this option is 
not waivable as a condition of employment.  We do not understand Preston to stand for 
the proposition that this state public policy, which neither favors nor disfavors arbitration, 
must be invalidated because it may result in some delay in the commencement of 
arbitration.  We do not believe that the fact the state has chosen to condition access to 
special procedural protections on success at a nonbinding administrative hearing, rather 
than, for example, on a preliminary administrative investigation, is significant from the 
standpoint of FAA preemption.  Nor do we believe the FAA requires a wage claimant to 
36 
come to an arbitration stripped of the protections and advantages state law authorizes her 
or him to have in court.14 
We reach the same conclusion regarding Moreno‟s unconscionability defense.  
Under both the CAA and the FAA, the validity and enforceability of an arbitration 
agreement are based on the consent of the parties to that agreement.  (See Stolt-Nielsen 
S.A. v. AnimalFeeds International Corp. (2010) __ U.S. __ [130 S.Ct. 1758, 1774-1775]; 
Cable Connections, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1358.)  As discussed 
above, a provision of an arbitration agreement that is unconscionable lacks the 
meaningful consent of one of the parties due to that party‟s actual lack of choice and the 
                                              
14  
The dissent, in arguing for preemption of the public policy defense, cites a number 
of United States Supreme Court cases affirming the proposition that a state may not, in 
the name of public policy and the supposed superiority of litigation over arbitration, 
require the substitution of a judicial forum for an arbitral one.  (See dis. opn., post, at pp. 
17-26; see also Carter v. SSC Odin Operating Co., LLC  (Ill. 2010) 927 N.E.2d 1207.)  
No party to this litigation contests the truth of that proposition.  But those cases do not 
address the question before us:  Whether a state may forbid a predispute waiver of access 
to preliminary administrative proceedings designed to further public policy by giving 
special advantages to a disadvantaged group, when that antiwaiver policy applies equally 
to litigation and arbitration.  Only Preston addresses the substitution of an administrative 
forum for a judicial one, and only one paragraph in Preston considers the validity of an 
administrative forum preliminary to an arbitral one; but as discussed above, the plaintiff 
in Preston did not, nor could he have, raise legitimate public policy or unconscionability 
defenses at issue here.  “[I]t is axiomatic that cases are not authority for propositions not 
considered.”  (People v. Alvarez (2002) 27 Cal.4th 1161, 1176.)  That axiom applies with 
equal force to the one post-Preston case cited by the dissent that considers Berman 
hearing waivers, Ruff v. Splice (Ill. App. Ct. 2010) 923 N.E.2d 1250.  In that case, the 
plaintiff, the former CEO of the defendant company, never raised public policy or 
unconscionability defenses to arbitration, nor is it clear that he could have, but rather 
argued primarily that the defendant had waived its right to arbitration.  (Id. at p. 1253.)  
Finally, the dissent is simply incorrect in asserting that two cases holding that certain 
types of public injunctions are inarbitrable, Broughton v. Cigna Healthplans (1999) 21 
Cal.4th 1066, Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303 (cases in 
which the author of the dissent also dissented) are overruled by Buckeye.  (See dis. opn., 
post, at p. 24, fn. 5.)  The latter case did not even remotely consider the arbitrability of 
such injunctions. 
37 
one-sided nature of the terms imposed, notwithstanding the outward trappings of consent.  
Again, an unconscionability defense based simply on an employee having to relinquish a 
judicial or administrative forum in favor of arbitration is precluded by the FAA.  (See 
Perry, supra, 482 U.S. at pp. 492-493, fn. 9.)  But here, when an employee is compelled 
as a condition of employment to forgo other important statutory advantages the 
Legislature has afforded to vindicate wage claims without gaining any significant 
offsetting advantages, we have no difficulty concluding that the lack of meaningful 
consent in that situation places the employee‟s unconscionability claim beyond the scope 
of FAA preemption. 
In short, our holding invalidating Berman waivers neither falls within the purview 
of Preston and Buckeye, nor relies on rules of contract law that particularly disfavor 
arbitration, but rather is based on the generally applicable contract defenses of 
unconscionability and violation of public policy.  We therefore conclude our holding is 
not preempted by the FAA. 
 
III. 
DISPOSITION 
As noted, the superior court order stated that “until there has been the preliminary 
non-binding hearing and decision by the Labor Commissioner, the arbitration provisions 
of the employment contract are unenforceable, and any petition to compel arbitration is 
premature and must be denied.”  The judgment of the Court of Appeal is reversed and the 
cause is remanded with directions to reinstate the superior court‟s order. 
 
 
 
 
 
 
 
 
MORENO, J. 
WE CONCUR: KENNARD, ACTING C. J. 
 
WERDEGAR, J. 
 
GEORGE, J.* 
____________________________ 
* 
Retired Chief Justice of California, assigned by the Chief Justice pursuant to 
article VI, section 6 of the California Constitution.
1 
 
 
 
DISSENTING OPINION BY CHIN, J. 
Both California and federal law strongly favor judicial enforcement of arbitration 
agreements according to their terms.  The majority‟s conclusion that the arbitration 
agreement in this case is contrary to public policy — and therefore unenforceable — is 
inconsistent with the state and federal policies favoring enforcement of arbitration 
agreements and is inconsistent with decisions of both this court and the United States 
Supreme Court.  Moreover, because, as the United States Supreme Court recently held, 
federal law — the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq.) —
 “supersede[s]” state laws that “lodg[e] primary jurisdiction” over a dispute the parties 
have agreed to arbitrate in an “administrative” forum (Preston v. Ferrer (2008) 552 U.S. 
346, 349-350 (Preston)), California‟s statutory scheme, as the majority construes it, is 
preempted.  I therefore disagree with the majority‟s conclusion. 
I also do not join the majority‟s holding that the arbitration provision in this case is 
unconscionable — and therefore unenforceable — insofar as it precludes the wage 
claimant from requesting an administrative hearing — known as a “Berman hearing” —
 before submitting his claim for vacation pay to arbitration.  Procedurally, we should not 
reach this issue, because the claimant did not pursue it in the trial court, in the Court of 
Appeal, or in this court until we requested briefing on it.  Substantively, the majority errs 
by discounting the benefits to the employee of waiving the right to pursue a Berman 
hearing.  It also errs in focusing narrowly only on what it calls the “Berman waiver.”  
(Maj. opn., ante, at p. 2.)  In assessing substantive unconscionability, we should instead 
2 
focus broadly on the purpose and benefits of the arbitration provision as a whole.  
Viewed from this broader perspective, the arbitration provision is not unconscionable.   
For these reasons, I dissent. 
I.  Factual Background. 
Frank Moreno was an employee of Sonic-Calabasas A, Inc. (Sonic).  In December 
2006, after voluntarily ending his employment, Moreno filed a wage claim with the 
Labor Commissioner pursuant to Labor Code section 98 et seq.1  seeking allegedly 
unpaid “vacation wages” for 63 days at the rate of $441.29 per day, for a total of 
$18,203.54.  He also requested “additional wages accrued pursuant to Labor Code 
Section 203 as a penalty.”  
In February 2007, Sonic filed in the superior court a petition to compel arbitration 
of Moreno‟s claim and to dismiss his pending administrative action.  It relied on the 
broad and comprehensive arbitration provision in an agreement Moreno had signed, 
which provides in relevant part:  “I . . . acknowledge that [Sonic] utilizes a system of 
alternative dispute resolution that involves binding arbitration to resolve all disputes that 
may arise out of the employment context.  Because of the mutual benefits (such as 
reduced expense and increased efficiency) which private binding arbitration can provide 
both [Sonic] and myself, both [Sonic] and I agree that any claim, dispute, and/or 
controversy (including, but not limited to, any claims of discrimination and harassment 
. . .) that either I or [Sonic] . . . may have against the other which would otherwise require 
or allow resort to any court or other governmental dispute resolution forum arising from, 
related to, or having any relationship or connection whatsoever with my seeking 
employment with, employment by, or other association with [Sonic], whether based on 
tort, contract, statutory, or equitable law, or otherwise, (with the sole exception of claims 
                                              
1  
All further unlabeled statutory references are to the Labor Code. 
3 
arising under the National Labor Relations Act . . . , claims for medical and disability 
benefits under the California Workers Compensation Act, and Employment Development 
Department claims) shall be submitted to and determined exclusively by binding 
arbitration under the Federal Arbitration Act, in conformity with the procedures of the 
California Arbitration Act (Cal. Code Civ. Proc. sec. 1280 et seq., including section 
1283.05 and all of the Act‟s other mandatory and permissive rights to discovery).  
However, nothing herein shall prevent me from filing and pursuing administrative 
proceedings only before the California Department of Fair Employment and Housing, or 
the U.S. Equal Opportunity Commission.”  
Moreno and the Labor Commissioner, who intervened on Moreno‟s behalf, 
opposed Sonic‟s motion to compel.  They argued that, insofar as the arbitration 
agreement may be interpreted to preclude Moreno from pursuing a Berman hearing, it 
substantially burdens his ability to vindicate his right to vacation pay and, therefore, is 
unenforceable as against public policy. 
The superior court denied the petition to compel arbitration, finding that the 
arbitration provision violates public policy insofar as it waives Moreno‟s right to pursue a 
Berman hearing.  The Court of Appeal reversed, finding that this waiver does not 
substantially burden Moreno‟s ability to vindicate his right to vacation pay and, therefore, 
is not unenforceable as against public policy. 
 
II.  Enforcement of the Arbitration Provision Does Not Violate California’s 
Public Policy. 
Through enactment of a comprehensive statutory scheme regulating private 
arbitration, the Legislature “has expressed a „strong public policy in favor of arbitration 
as a speedy and relatively inexpensive means of dispute resolution.‟  [Citations.]”  
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (Moncharsh).)  “The policy of 
[California‟s] law in recognizing arbitration agreements and in providing by statute for 
4 
their enforcement is to encourage persons who wish to avoid delays incident to a civil 
action to obtain an adjustment of their differences by a tribunal of their own choosing.”  
(Utah Const. Co. v. Western Pac. Ry. Co. (1916) 174 Cal. 156, 159.) Thus, California law 
establishes “a presumption in favor of arbitrability.”  (Engalla v. Permanente Medical 
Group, Inc. (1997) 15 Cal.4th 951, 971 (Engalla).)   
The clearest expression of California‟s policy favoring arbitration appears in Code 
of Civil Procedure section 1281, which declares that “[a] written agreement to submit to 
arbitration an existing controversy or a controversy thereafter arising is valid, enforceable 
and irrevocable, save upon such grounds as exist for the revocation of any contract.”  
This section establishes the “fundamental policy” of California‟s arbitration scheme: 
“that arbitration agreements will be enforced in accordance with their terms.”  
(Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 836, fn. 10.)  To implement this 
policy, Code of Civil Procedure section 1281.2 directs that, on petition, a court “shall 
order” arbitration “if it determines that an agreement to arbitrate the controversy exists, 
unless it determines that” one of only three specified exceptions applies: (1) the petitioner 
has waived the right to compel arbitration; (2) grounds exist for revoking the agreement; 
or (3) a party to the agreement is also a party to a pending legal proceeding with a third 
party that arises out of the same transaction, and a possibility exists of conflicting rulings 
on common legal or factual issues. 
In Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 171, the majority 
indicated that one ground for revoking an arbitration agreement is that the agreement is 
“contrary to public policy.”  However, because public policy requires and encourages the 
making of contracts upon all valid and lawful considerations, and because the courts‟ 
power to declare a contract void as against public policy is “ „very delicate and 
undefined,‟ ” courts should exercise this power “ „only in cases free from doubt,‟ ” where 
“it is entirely plain” that the contract violates sound public policy.  (Stephens v. Southern 
Pacific Co. (1895) 109 Cal. 86, 89 (Stephens).)  This general principle of contract law 
5 
applies with added force where an arbitration agreement is at issue, given California‟s 
public policy favoring arbitration.  Because arbitration is, under California law, “a highly 
favored means of settling [employment] disputes,” courts must “ „indulge every 
intendment to give effect to such proceedings‟ ” and “should endeavor to reach a result 
[that] comports with the „strong public policy‟ favoring arbitration.”  (Doers v. Golden 
Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189 (Doers).)  The party challenging the 
contractual arbitration provision bears the burden of showing that its enforcement would 
violate “ „settled public policy.‟ ”  (Stephens, supra, at p. 90.)  
In several relatively recent decisions, we have discussed the scope of the public 
policy exception to the statutory rule that arbitration agreements are enforceable 
according to their terms.  In Armendariz v. Foundation Health Psychcare Services, Inc. 
(2000) 24 Cal.4th 83, 91 (Armendariz), we considered the validity of an agreement, 
imposed by the employer as a condition of employment, that required an employee to 
arbitrate a discrimination claim brought under the California Fair Employment and 
Housing Act (FEHA) (Gov. Code, § 12900 et seq.).  We first found that, because “the 
statutory rights established by the FEHA are „for a public reason‟ ” (Armendariz, supra, 
at p. 100), “FEHA rights are unwaivable” (id., at p. 112), and a mandatory arbitration 
agreement “cannot be made to serve as a vehicle for [their] waiver” (id., at p. 101).  We 
then held that such an agreement is valid and enforceable “if the arbitration permits an 
employee to vindicate his or her statutory rights.  . . . [I]n order for such vindication to 
occur, the arbitration must meet certain minimum requirements, including neutrality of 
the arbitrator, the provision of adequate discovery, a written decision that will permit a 
limited form of judicial review, and limitations on the costs of arbitration.”  (Id. at pp. 90-
91.)   
We next took up the issue in Gentry v. Superior Court (2007) 42 Cal.4th 443, 450 
(Gentry), which involved the validity of a predispute arbitration agreement that precluded 
class arbitration of employees‟ statutory claims for overtime pay.  In a closely divided 
6 
decision, a bare majority of this court held that, because the statutory right to overtime 
pay fosters the public health and welfare and is therefore unwaivable, a class arbitration 
waiver is unenforceable if it significantly and substantially burdens the ability of 
employees to vindicate their rights to overtime pay by placing serious and formidable 
obstacles in the way of prosecuting claims for such pay (id., at pp. 450, 463-466).   
Applying the framework of Armendariz and Gentry, the Court of Appeal in this 
case first considered whether the right to vacation pay is an unwaivable statutory right.  
Concluding that it is, the court then considered whether arbitration would significantly 
impair Moreno‟s ability to vindicate this right.  Finding nothing in the record to indicate 
that it would, the Court of Appeal held that the arbitration provision is enforceable. 
The Court of Appeal correctly applied Armendariz and Gentry.  As the majority 
observes, “ „[t]he Berman hearing procedure is designed to provide a speedy, informal, 
and affordable method of resolving wage claims.‟ ”  (Maj. opn., ante, at p. 6.)  
Arbitration is similarly designed; our public policy favors arbitration precisely because it 
is a speedy, informal, and relatively inexpensive means of dispute resolution.  (Broughton 
v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1080 (Broughton); Moncharsh, supra, 3 
Cal.4th at p. 9.)  It is true, as the majority explains, that a Berman hearing may offer some 
employees certain procedural advantages that may, in a given case, make it somewhat 
easier to recover unpaid vacation wages.  (Maj. opn., ante, at pp. 16-18.)  But that 
circumstance does not establish that arbitration according to the terms of arbitration 
agreements would not “permit[]”employees “to vindicate” their statutory right to vacation 
pay — which is the relevant inquiry under Armendariz, supra, 24 Cal.4th at page 90 —
 or would significantly and substantially burden their ability to vindicate that right by 
placing serious and formidable obstacles in the way of prosecuting their claims for 
overtime pay — which appears to be the inquiry under the Gentry majority‟s 
reformulation of Armendariz.  (Gentry, supra, 42 Cal.4th at pp. 450, 463-466.)  Because 
California‟s public policy favoring arbitration requires us to “ „indulge every intendment 
7 
to give effect to‟ ” an arbitration provision (Doers, supra, 23 Cal.3d at p. 189), and 
because we should not declare a contract to be void as against public policy unless that 
conclusion is “ „free from doubt‟ ” and “entirely plain” (Stephens, supra, 109 Cal. at p. 
89), that some claimants might be somewhat better off with a Berman hearing does not 
justify a holding that a predispute waiver of the right to request a Berman hearing is void 
as against public policy.2 
There are several indications that the Legislature agrees with this conclusion.  To 
begin with, nothing in the language of the statutes setting forth the Berman procedures 
(the Berman statutes) even hints that those procedures are nonwaivable or that an 
employee may not agree to arbitrate a claim.  Moreover, under the statutes, there is, in 
fact, no right to a Berman hearing; there is only a right to file a complaint requesting a 
Berman hearing.  As the majority observes, in response to the filing of such a complaint, 
the Labor Commissioner has three options:  (1) hold a Berman hearing; (2) prosecute a 
civil action; or (3) take no action on the complaint.  (Maj. opn., ante, at p. 5.)  The 
benefits of a Berman hearing are potentially available only if the Labor Commissioner 
chooses the first option.  Finally, as the majority also observes, an employee may choose 
to skip the administrative procedure entirely and go directly to court.  (Maj. opn., ante, at 
p. 5.)  The Legislature‟s failure to make a Berman hearing mandatory and the absence of 
any language prohibiting waiver suggest that, in the Legislature‟s view, an employee may 
                                              
2  
Moreover, upon examination, the potential procedural advantages of a Berman 
hearing are not as great as the majority indicates.  Ironically, what the majority views as a 
vice of the arbitration agreement here at issue — the provision for discovery (maj. opn., 
ante, at p. 16) — we held in Armendariz to be a virtue — indeed a requirement — of a 
valid and enforceable arbitration agreement.  (Armendariz, supra, 24 Cal.4th at pp. 90-
91.)  Also, the holding of a Berman hearing may actually hinder an employee‟s ability to 
vindicate his or her right to vacation pay; the Berman statutes discourage employees who 
lose at Berman hearings from seeking judicial review by providing that they must, if 
unsuccessful on appeal, pay their employers‟ costs and attorney‟s fees.  (§ 98.2, subd. 
(c).)   
8 
adequately vindicate the statutory right to vacation pay in an alternative forum, such as 
arbitration.  I see no reason to reject the Legislature‟s view.   
Notably, the majority does not contend otherwise.  It does not assert that requiring 
Moreno to arbitrate according to his agreement would either eliminate or substantially 
burden his ability to vindicate his right to vacation pay.  In fact, according to the 
majority, notwithstanding Armendariz and Gentry, that is not even the relevant inquiry.  
Instead, the majority asserts, “the question [here] is whether [an] employee‟s statutory 
right to seek a Berman hearing, with all the possible protections that follow from it, is 
itself an unwaivable right that an employee cannot be compelled to relinquish as a 
condition of employment.”  (Maj. opn., ante, at p. 14.)  The majority then concludes that 
this right is unwaivable (ibid.), reasoning, “permitting employers to require employees, as 
a condition of employment, to waive their right to a Berman hearing would seriously 
undermine the efficacy of the Berman hearing statutes and hence thwart the public 
purpose behind the statutes” (id., at pp. 15-16).  
Initially, I note that the majority‟s formulation of the issue here is completely at 
odds with Moreno‟s.  As he did in the trial court and the Court of Appeal, Moreno has 
consistently argued in this court that the arbitration agreement is against public policy —
 and thus unenforceable — because arbitration lacks some of the procedural advantages 
that may come with a Berman hearing and therefore “would drastically undercut his 
ability to vindicate” his nonwaivable, statutory right to vacation pay.  Indeed, according 
to Moreno, analyzing whether the alleged benefits of a Berman hearing “are substantive, 
unwaivable rights in their own” — which is precisely what the majority does —
 “confuses what it is that is unwaivable — the underlying statutory right to payment of 
accrued vacation wages upon separation of employment — with the remedial tools that 
flow from the Labor Commissioner‟s wage adjudication process.”  Thus, the majority‟s 
analysis will, no doubt, come as a surprise to the parties.  
9 
Substantively, as to whether an employee‟s statutory right to request a Berman 
hearing is itself waivable, irrespective of an employee‟s ability to vindicate his or her 
right to vacation pay in arbitration, the “established rule” in California is that “rights 
conferred by statute may be waived unless specific statutory provisions prohibit waiver.”  
(Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1049, fn. 4 (Bickel).)  “As we have 
recognized for over a century, the law „will not compel a man to insist upon any benefit 
or advantage secured to him individually.‟  [Citation.]  Accordingly, a party may waive 
compliance with statutory conditions intended for his or her benefit, so long as the 
Legislature has not made those conditions mandatory.  [Citation.]”  (Sharon S. v. 
Superior Court (2003) 31 Cal.4th 417, 426-427 (Sharon S.).)  Thus, under the majority‟s 
approach, the starting point for the inquiry should be “whether there is any [statutory] 
language . . . prohibiting a waiver” of an employee‟s right to request a Berman hearing.  
(Bickel, supra, at p. 1049.) 
Here, the relevant statutes contain no language even hinting that the right to 
request a Berman hearing is unwaivable or that the holding of a Berman hearing is 
mandatory.  Indeed, by allowing employees to skip the administrative process entirely 
and go directly to court, the statutory language suggests just the opposite, i.e., that 
employees may waive their right to request a Berman hearing.  Moreover, nothing in the 
statutory language indicates that an employee‟s ability to waive this right exists only after 
a dispute has arisen.  In short, the statutory language offers no support for the majority‟s 
conclusion.  Nor does anything in the relevant legislative history support the majority‟s 
view. 
Again, the majority does not assert otherwise.  Instead, in concluding that the right 
to request a Berman hearing is unwaivable, the majority invokes the principle that a law 
established for a public reason may not be contravened by a private act or agreement.  
(Maj. opn., ante, at pp. 14-16.)    
10 
For several reasons, the majority‟s analysis is unpersuasive.  First, given that the 
Legislature has already established a public policy of allowing waiver — by not making a 
Berman hearing mandatory and by allowing employees to go directly to court without 
requesting a Berman hearing — it seems inappropriate for this court to adopt a contrary 
view of public policy.  Second, as the court‟s opinion in Bickel explained, “[s]ome public 
benefit is . . . inherent in most legislation.”  (Bickel, supra, 16 Cal.4th at p. 1049.)  Thus, 
“[t]he pertinent inquiry” under the principle the majority invokes “is not whether the law 
has any public benefit, but whether that benefit is merely incidental to the legislation‟s 
primary purpose.”  (Ibid., italics added.)  Unquestionably, the primary purpose of the 
Berman statutes is to assist the individual employee in recovering unpaid wages.  
Although the public may benefit from such recovery, that benefit is merely incidental to 
the statutes‟ primary purpose.  Moreover, because, as I have explained, arbitration would 
enable Moreno to vindicate his right to vacation pay, waiver of his right to request a 
Berman hearing would not “ „seriously compromise any public purpose‟ ” the statutes 
were “ „intended to serve‟ [citation].”  (Sharon S., supra, 31 Cal.4th at p. 426.)  
Therefore, the principle on which the majority relies does not apply here to preclude 
employees, by agreeing to arbitration, from waiving their right to request a Berman 
hearing. 
This conclusion is consistent with analogous authority from both this court and the 
United States Supreme Court.  In Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 
473 U.S. 614, 640 (Mitsubishi Motors), the high court held that a federal antitrust claim is 
arbitrable under an arbitration clause in an agreement embodying an international 
commercial transaction.  A contrary result, the court explained, could not be justified by 
“the fundamental importance to American democratic capitalism of the regime of the 
antitrust laws.  [Citations.]”  (Id. at p. 634.)  Although acknowledging that an antitrust 
claim is not merely a private matter, that the antitrust laws are designed to promote the 
national interest in a competitive economy, that an antitrust plaintiff acts as a private 
11 
attorney general who protects the public‟s interest, and that the treble damages provision 
of the antitrust law is a chief tool in the antitrust enforcement scheme, the court 
explained:  “The [public] importance of the private damages remedy, however, does not 
compel the conclusion that it may not be sought outside an American court.  
Notwithstanding its important incidental policing function, the treble-damages cause of 
action . . . seeks primarily to enable an injured competitor to gain compensation for that 
injury.  (Id. at p. 635)  “And, of course, the antitrust cause of action remains at all times 
under the control of the individual litigant: no citizen is under an obligation to bring an 
antitrust suit [citation] and the private antitrust plaintiff needs no executive or judicial 
approval before settling one.  It follows that, at least where the international cast of a 
transaction would otherwise add an element of uncertainty to dispute resolution, the 
prospective litigant may provide in advance for a mutually agreeable procedure whereby 
he would seek his antitrust recovery as well as settle other controversies.  [¶] . . . [S]o 
long as the prospective litigant effectively may vindicate its statutory cause of action in 
the arbitral forum, the [antitrust] statute will continue to serve both its remedial and 
deterrent function.”  (Id. at pp. 636-637.) 
In Shearson/American Express, Inc. v. McMahon (1987) 482 U.S. 220 
(McMahon), the court held valid and enforceable a predispute agreement to arbitrate a 
claim brought under the Racketeer Influenced and Corrupt Organizations Act (RICO) (18 
U.S.C. § 1961 et seq.).  In reaching its conclusion, the court rejected the argument that 
“the public interest in the enforcement of RICO precludes” submission of a RICO claim 
to arbitration.  (McMahon, at p. 240.)  The court found that, like the antitrust treble 
damages provision at issue in Mitsubishi Motors, RICO‟s treble damages remedy has 
primarily a “remedial purpose,” and that its “policing function . . . , although important, 
[is] a secondary concern.  [Citation.]”  (McMahon, at pp. 240-241.)  Because RICO 
plaintiffs “may effectively vindicate their RICO claim[s] in an arbitral forum, . . . there is 
12 
no inherent conflict between arbitration and the purposes underlying [RICO].”  
(McMahon, at p. 242.)  
In Rodriguez de Quijas v. Shearson/Am. Exp. (1989) 490 U.S. 477 (Rodriguez de 
Quijas), the court held that predispute agreements to arbitrate claims under the federal 
Securities Act of 1933 (1933 Act) (15 U.S.C. § 77A et seq.) are valid and enforceable.  
About 35 years earlier, in Wilko v. Swan (1953) 346 U.S. 427 (Wilko), the court held 
otherwise, relying largely on the fact that the 1933 Act conferred on buyers of securities 
special procedural advantages, including broadened venue and nationwide service of 
process in federal court, no amount-in-controversy requirement for diversity cases, and 
concurrent jurisdiction in state and federal courts without the possibility of removal.  
(Wilko, at pp. 431-435.)  Congress provided these advantages, the court explained in 
Wilko, in recognition of “the disadvantages under which buyers labor” vis-à-vis sellers, 
i.e., less opportunity to investigate and appraise factors affecting a security‟s value.  (Id. 
at p. 435.)  Predispute arbitration agreements are problematic, the Wilko court reasoned, 
because the buyer is “surrender[ing] . . . the [procedural] advantages the [1933] Act gives 
him . . . at [precisely] a time when he is less able to judge the weight of the handicap the 
[1933] Act places upon his adversary.”  (Ibid.)  In this regard, the Wilko court declared, 
“a waiver in advance of a controversy stands upon a different footing” than a post-dispute 
waiver.  (Id. at p. 438.)  When the high court later overruled Wilko, it held that a buyer‟s 
procedural advantages in litigation are not “so critical that they cannot be waived [in a 
predispute arbitration agreement] under the rationale that the [1933] Act was intended to 
place buyers of securities on an equal footing with sellers.”  (Rodriguez de Quijas, supra, 
at p. 481.)  Among other things, the court reasoned, “the grant of concurrent jurisdiction 
constitutes explicit authorization for [buyers] to waive” the other procedural advantages 
“by filing suit in state court without possibility of removal to federal court.”  (Id. at p. 
482.) 
13 
In Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 23 (Gilmer), the 
high court held that a mandatory, predispute employment agreement to arbitrate an age 
discrimination claim brought under federal law is valid and enforceable.  In reaching this 
conclusion, the court rejected the argument that the arbitration agreement was 
unenforceable because the Age Discrimination in Employment Act of 1967 (ADEA) (29 
U.S.C. § 621 et seq.) “is designed not only to address individual grievances, but also to 
further important social policies.  [Citation.]”  (Gilmer, at p. 27.)  The court explained:   
“We do not perceive any inherent inconsistency between those policies, however, and 
enforcing agreements to arbitrate age discrimination claims.  . . . Both [arbitration and 
judicial dispute resolution] . . . can further broader social purposes.  . . .  „[S]o long as the 
prospective litigant effectively may vindicate [his or her] statutory cause of action in the 
arbitral forum, the statute will continue to serve both its remedial and deterrent function.‟  
[Citation.]”  (Id. at p. 28.)  The court also rejected the argument that arbitration was 
inadequate because it offered more limited discovery than litigation in court, explaining:  
“[T]here has been no showing in this case that the [arbitration] discovery provisions . . . 
will prove insufficient to allow ADEA claimants . . . a fair opportunity to present their 
claims.  Although those procedures might not be as extensive as in the federal courts, by 
agreeing to arbitrate, a party „trades the procedures and opportunity for review of the 
courtroom for the simplicity, informality, and expedition of arbitration.‟  [Citation.]”  (Id. 
at p. 31.)  Finally, the court rejected the claim that the mandatory, predispute employment 
arbitration clause should be unenforceable because “there often will be unequal 
bargaining power between employers and employees.”  (Id. at p. 33.)  “Mere inequality in 
bargaining power,” the court explained, “is not a sufficient reason to hold that 
[mandatory, predispute] arbitration agreements are never enforceable in the employment 
context.”  A “claim of unequal bargaining power,” the court held, “is best left for 
resolution in specific cases” on specific facts.  (Ibid.)    
14 
In several decisions, we have followed these high court precedents to uphold the 
validity of predispute arbitration agreements.  In Broughton, supra, 21 Cal.4th at page 
1084, at issue was a predispute agreement to arbitrate a damage claim under the 
Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.).  In holding that the 
agreement was valid and enforceable, we explained:  “Such an action is primarily for the 
benefit of a party to the arbitration, even if the action incidentally vindicates important 
public interests.  [Citation.]  In the context of statutory damages claims, the United States 
Supreme Court has consistently rejected plaintiffs‟ arguments that abbreviated discovery, 
arbitration‟s inability to establish binding precedent, and a plaintiff's right to a jury trial 
render the arbitral forum inadequate, or that submission of resolution of the claims to 
arbitration is in any sense a waiver of the substantive rights afforded by statute.  
[Citations.]  „By agreeing to arbitrate a statutory claim, a party does not forgo the 
substantive rights afforded by the statute; it only submits to their resolution in an arbitral, 
rather than a judicial, forum.‟  [Citation.]”  (Broughton, supra, at p. 1084.)   
In Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 317-318 (Cruz), 
we held that a predispute agreement to arbitrate a claim for restitution and disgorgement 
under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) is valid and 
enforceable.  In reaching this conclusion, we rejected the argument that such a claim is 
inarbitrable because “restitution under the UCL accomplishes a public purpose by 
deterring unlawful conduct,” explaining:  “[T]he same could be said of damages under 
the CLRA or under various federal statutes.  This deterrent effect is, however, incidental 
to the private benefits obtained from those bringing the restitutionary or damages action.   
[Citation.]  The Supreme Court has made clear that such actions, notwithstanding the 
public benefit, are fully arbitrable under the FAA.”3  (Cruz, at p. 318.)  
                                              
3  
In Broughton, a bare majority of the court also held that a predispute agreement to 
arbitrate a CLRA for injunctive relief is not enforceable, based on its view that such relief 
(footnote continued on next page) 
15 
These authorities support the conclusion that the arbitration agreement here at 
issue is valid and enforceable according to its terms.  Like the claims at issue in those 
cases, a claim for recovery of vacation pay is a remedial claim that primarily benefits the 
individual employee.  Thus, any public benefit from such a claim is merely incidental to 
the legislation‟s primary purpose.  Like the procedures at issue in Rodriguez de Quijas, 
the potential procedural advantages of a Berman hearing are not “so critical that they 
cannot be waived” in a predispute arbitration agreement under the rationale that the 
Berman statutes were intended to place employees on an equal footing with employers 
(cf. Rodriguez de Quijas, supra, 490 U.S. at p. 481), or, as the majority puts it, to 
“level[]” the “playing field” (maj. opn., ante, at p. 25).  The Legislature itself has 
established this fact by providing that an employee may skip the administrative process 
and go directly to court, and that the Labor Commission may take no action on a claim or 
file a civil claim without holding a Berman hearing.  These provisions, like the provision 
granting concurrent jurisdiction in Rodriguez de Quijas, “constitute[] explicit 
authorization for [employees] to waive” the potential procedural advantages of a Berman 
hearing.4  (Id. at p. 482.)  Moreover, as I have previously explained, even without a 
Berman hearing‟s potential procedural advantages, employees may effectively vindicate 
                                                                                                                                                                           
(footnote continued from previous page) 
“is for the benefit of the general public rather than the party bringing the action.”  
(Broughton, supra, 21 Cal.4th at p. 1082.)  Any benefit to the individual plaintiff, the 
majority argued, would likely “be incidental to the general public benefit . . . .”  (Id. at p. 
1080, fn. 5.)  In Cruz, a bare majority of the court reaffirmed this holding and extended it 
to consumer claims for injunctive relief under the UCL and for false advertising.  (Cruz, 
supra, 30 Cal.4th at pp. 312-316.)  Such relief, the majority asserted, is “designed to 
prevent further harm to the public at large rather than to redress or prevent injury to a 
plaintiff.”  (Id. at p. 316.) 
4  
Moreover, in light of these provisions, enforcing an employee‟s waiver of the right 
to pursue a Berman hearing does not, as the majority asserts, “undermine the legislative 
policy behind the Berman hearing statutes.”  (Maj. opn., ante, at p. 22, fn. 9.)   
16 
their statutory right to unpaid vacation pay in arbitration.  Finally, as Gilmer establishes, 
the majority‟s concern that employees have fewer resources and less “bargaining power” 
than employers (maj. opn., ante, at p. 25) “is not a sufficient reason to hold that 
[mandatory, predispute] arbitration agreements are never enforceable in the employment 
context.”  (Gilmer, supra, 500 U.S. at p. 33)  A “claim of unequal bargaining power is 
best left for resolution in specific cases” on specific facts.5  (Ibid.)  Under these 
decisions — which the majority completely ignores, while offering none in support of its 
conclusion — the arbitration agreement in this case is enforceable according to its terms. 
 
III.  The Berman Statutes, as the Majority Construes Them, Are Preempted 
by the FAA. 
As the high court has explained, the FAA not only declares a liberal federal policy 
favoring arbitration agreements, it creates a body of federal substantive law that requires 
courts to enforce privately negotiated arbitration agreements within the FAA‟s coverage 
according to their terms.  (Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 
468, 478; Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24.)  
This federal policy and substantive law apply “notwithstanding any state substantive or 
procedural policies to the contrary.”  (Moses H. Cone Hospital, 460 U.S. at p. 24.)  In 
other words, Congress, in enacting the FAA, “intended to foreclose state legislative 
attempts to undercut the enforceability of arbitration agreements” (Southland Corp. v. 
Keating (1984) 465 U.S. 1, 16 (Southland)), and “withdrew the power of the states to 
require a judicial forum for the resolution of claims which the contracting parties agreed 
to resolve by arbitration” (id., at p. 10).  In short, the FAA “embodies a clear federal 
                                              
5  
Contrary to Gilmer, the majority holds that mandatory, predispute agreements to 
arbitrate a claim for vacation pay are generally unenforceable, but leaves open the 
possibility that such an agreement is enforceable “as part of a freely negotiated, 
nonstandard contract, such as may exist between an employer and a highly compensated 
executive employee.”  (Maj. opn., ante, at p. 20, fn. 7.) 
17 
policy of requiring arbitration unless the agreement to arbitrate is not part of a contract 
evidencing interstate commerce or is revocable „upon such grounds as exist at law or in 
equity for the revocation of any contract.‟  [Citation.] . . . [N]othing in the [FAA] 
indicat[es] that the broad principle of enforceability is subject to any additional 
limitations under state law.‟  [Citation.]”  (Perry v. Thomas (1987) 482 U.S. 483, 489-
490.) 
In Preston, the high court recently made clear that the FAA preempts not only 
state laws that require a judicial forum for resolution of disputes the parties have agreed 
to arbitrate, but also “state statutes that refer [such] disputes initially to an administrative 
agency.”  (Preston, supra, 552 U.S. at p. 349.)  At issue there was the constitutionality of 
a California statute very much like the Berman statutes in that it required the Labor 
Commissioner to “hear and determine” disputes arising under California‟s Talent 
Agencies Act (TAA) (§ 1700 et. seq.), “subject to an appeal within 10 days after 
determination, to the superior court where the same shall be heard de novo.”  (§ 1700.44, 
subd. (a).)  In Preston, an attorney who performed services in the entertainment industry 
sought recovery of fees for services rendered to a former Florida judge who appeared on 
television.  (Id. at p. 350.)  The attorney demanded arbitration based on the parties‟ 
agreement to arbitrate any dispute relating to their contract.  The former judge responded 
by filing a petition with the Labor Commissioner charging that their contract was illegal 
because, in violation of the TAA, the attorney had acted as a talent agent without the 
required license.  (Preston, supra, at p. 350.)  A California trial court denied the motion 
to compel arbitration, and the California Court of Appeal affirmed that decision, 
reasoning that section 1700.44, subdivision (a), “vest[ed] „exclusive original jurisdiction‟ 
over the dispute in the Labor Commissioner.  [Citation.]”  (Preston, supra, at p. 351.)  
The high court reversed, holding that the statute “conflict[ed] with the FAA‟s dispute 
resolution regime” by “grant[ing] the Labor Commissioner exclusive jurisdiction to 
decide an issue that the parties agreed to arbitrate [citation] . . . .”   (Preston, supra, at p. 
18 
356.)  In reaching its conclusion, the court rejected the claim that, because de novo 
review of the Labor Commissioner‟s decision could proceed as an arbitration, the TAA 
was “nevertheless compatible with the FAA.”  (Preston, supra, at p. 356.)  This 
approach, the court explained, would frustrate “a prime objective” of an arbitration 
agreement:  “to achieve „streamlined proceedings and expeditious results.‟  [Citation.]”  
(Id. at p. 357.)  “Requiring initial reference of the parties‟ dispute to the Labor 
Commissioner would, at the least, hinder speedy resolution of the controversy.”  (Id. at p. 
358.)  Thus, the court held, “[w]hen parties agree to arbitrate all questions arising under a 
contract, the FAA supersedes state laws lodging primary jurisdiction in another forum, 
whether judicial or administrative.”  (Id. at p. 359.)    
The majority holds that the Berman statutes do precisely what Preston says, under 
the FAA, a state statute may not do:  lodge primary jurisdiction over a dispute in an 
administrative agency notwithstanding the parties‟ agreement to arbitrate that dispute.  
Under Preston, the Berman statutes, so construed, directly conflict with the FAA and 
violate the supremacy clause of the United States Constitution (U.S. Const., art. VI, cl. 
2).  Preston also establishes that the availability of arbitration after a Berman hearing, as 
part of the statutory de novo review process, does not permit a different conclusion.  
What the high court said about the TAA in Preston fully applies to the Berman statutes, 
as the majority construes them:  “Requiring initial reference of the parties‟ dispute to the 
Labor Commissioner would, at the least, hinder speedy resolution of the controversy.”  
(Preston, supra, 552 U.S. at p. 358.)  In this regard, the majority acknowledges that we 
noted in 1998 that the time between filing a complaint with the Labor Commissioner and 
a Berman hearing date was usually four to six months, and that Sonic has documented 
cases in which the commencement of a Berman hearing took a year or more.  (Maj. opn., 
ante, at p. 18, fn. 5.)  Moreover, as we have previously observed, because either party to a 
Berman hearing “has a right to a trial de novo in superior court, where the ruling of the 
Labor Commissioner‟s hearing officer is entitled to no deference,” “Berman hearings 
19 
may result in no cost savings” to the parties.  (Gentry, supra, 42 Cal.4th at p. 464.)  Thus, 
the prospect of arbitration after a Berman hearing does not alter the conclusion that the 
Berman statutes, as the majority construes them, are incompatible with the FAA.  In 
short, as an Illinois appellate court held just last year, “Preston makes it clear that the 
[FAA] preempts” the Berman statutes insofar as they “vest[] [primary] jurisdiction in the 
[Labor] Commissioner rather than an arbitration proceeding . . . as provided in [a] 
contract.”  (Ruff v. Splice (Ill. Ct. App. 2010) 923 N.E.2d 1250, 1253.)   
The majority‟s grounds for distinguishing Preston are unpersuasive.  The majority 
first observes that unlike Preston, which involved a challenge to the parties‟ “contract as 
a whole,” this case involves a challenge only “to a portion of the arbitration agreement.”  
(Maj. opn., ante, at p. 32.)  This observation, although accurate, is irrelevant.  In Preston, 
the circumstance that the challenge was to the contract as a whole, rather than only to its 
arbitration clause, was material only to the court‟s threshold determination that the 
dispute between the parties presented an issue that, but for the TAA, would be for the 
arbitrator to decide in the first instance.  (Preston, supra, 552 U.S. at p. 353.)  It played 
no part in the court‟s subsequent holding — which is the part of Preston that governs 
here — that the FAA preempts the TAA insofar as the TAA confers on the Labor 
Commissioner primary jurisdiction to decide an issue the parties have agreed to arbitrate.  
Here, it is undisputed that Moreno‟s claim for vacation pay presents issues that, but for 
the majority‟s construction of the Berman statutes, would be for the arbitrator to decide in 
the first instance.  Thus, that Preston involved a challenge to the contract as a whole does 
not diminish the controlling force of its unqualified and unequivocal holding that the 
FAA preempts state laws that lodge in an administrative agency primary jurisdiction over 
an issue the parties have agreed to arbitrate.  (Preston, supra, at pp. 349-350.)   
The majority next asserts that Preston is distinguishable because of “the 
fundamental differences” between the TAA and the “statutory regime[]” now before us.  
(Maj. opn., ante, at p. 32.)  According to the majority, because the TAA “does not come 
20 
with the same type of statutory protections as are found in the Berman hearing and 
posthearing procedures,” Preston does not govern.  (Maj. opn., ante, at p. 32.)  
The potential procedural advantages the Legislature has attached to a Berman 
hearing do not render Preston inapplicable.  Under Preston, were our Legislature, based 
on its view of public policy, to enact a statute requiring administrative determination of a 
claim before resort to any other forum, the FAA would preempt that statute‟s 
enforcement where the parties have agreed, in a predispute agreement evidencing 
interstate commerce, to arbitrate that claim.  Indeed, this conclusion follows not just from 
Preston, but from other decisions in which the high court has expressly “rejected the 
proposition that the enforceability of [an] arbitration agreement turn[s] on [a] state 
legislature‟s judgment concerning the forum for enforcement of [a] state-law cause of 
action.  [Citation.]”  (Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440, 446 
(Buckeye).)  The Legislature may not circumvent this proscription simply by attaching 
advantageous procedures to the administrative process and declaring — either expressly 
or, as the majority finds here, impliedly — those procedures to be unwaivable as a matter 
of public policy.  As the high court has made clear, the FAA‟s preemptive policy 
requiring enforcement of arbitration agreements according to their terms applies 
“notwithstanding any state substantive or procedural policies to the contrary.”  (Moses H. 
Cone Hospital, supra, 460 U.S. at p. 24, italics added.) 
Nor, contrary to the majority‟s analysis, may a state legislature — or in this case, a 
state court — avoid this FAA proscription by invoking the rule that the FAA permits 
revocation of arbitration agreements “upon such grounds as exist at law or in equity for 
the revocation of any contract.”  (9 U.S.C. § 2.)  The high court has twice expressly 
rejected this very approach.  In Southland, the court held that the FAA preempted 
California‟s Franchise Investment Law (Corp. Code § 31000 et seq.) insofar as we had 
construed it to prohibit enforcement of agreements to arbitrate claims under that law.  
(Southland, supra, 465 U.S. at p. 10.)  Justice Stevens dissented from this holding, 
21 
relying on the same FAA enforceability exception the majority now invokes:  revocation 
“based on „such grounds as exist at law or in equity for the revocation of any contract.‟ ” 
(Id., at p. 18 (conc. & dis. opn. of Stevens, J.).)  He reasoned that, because a contract void 
as contrary to public policy is revocable at law or in equity, the FAA does not preempt a 
state law that “provid[es] special protection” to franchisees by declaring agreements to 
arbitrate claims under the Franchise Investment Law void as a matter of public policy.  
(Id. at p. 21).  The Southland majority rejected this view, explaining:  “We agree, of 
course, that a party may assert general contract defenses such as fraud to avoid 
enforcement of an arbitration agreement.  We conclude, however, that the defense to 
arbitration found in the California Franchise Investment Law is not a ground that exists at 
law or in equity „for the revocation of any contract‟ but merely a ground that exists for 
the revocation of arbitration provisions in contracts subject to the California Franchise 
Investment Law.  Moreover, under [Justice Stevens‟s] view, „a state policy of providing 
special protection for franchisees . . .  can be recognized without impairing the basic 
purposes of the federal statute.‟  [Citation.]  If we accepted this analysis, states could 
wholly eviscerate congressional intent to place arbitration agreements „upon the same 
footing as other contracts,‟ [citation] simply by passing statutes such as the Franchise 
Investment Law.  We have rejected this analysis because it is in conflict with the [FAA] 
and would permit states to override the declared policy requiring enforcement of 
arbitration agreements.”  (Id., at pp. 16-17, fn. 11.) 
The majority‟s analysis is inconsistent with Southland.  Contrary to the majority‟s 
conclusion, under Southland, “the defense to arbitration” the majority has read into the 
Berman statutes — based on a state public policy that precludes waiver of a Berman 
hearing‟s potential procedural advantages — “is not a ground that exists at law or in 
equity „for the revocation of any contract‟ but merely a ground that exists for the 
revocation of arbitration provisions in contracts subject to” the Berman statutes.  
(Southland, supra, 465 U.S. at p. 16, fn. 11; see Carter v. SSC Odin Operating Co., LLC  
22 
(Ill. 2010) 927 N.E.2d 1207, 1218 (Carter) (antiwaiver provisions of state Nursing Home 
Care Act, although based on public policy, “are not a defense generally applicable to „any 
contract‟ ” because they “invalidate arbitration agreements [only] in a specific type of 
contract — those involving nursing care”].)  Also contrary to Southland, the majority‟s 
view that California may implement a “ „a state policy of providing special protection 
for‟ ” a class of individuals — in this case, employees — will permit California “wholly 
[to] eviscerate congressional intent to place arbitration agreements „upon the same 
footing as other contracts,‟ [citation] simply by passing statutes such as” the Berman 
statutes.  (Southland, at p. 16, fn. 11.)  In this regard, the majority‟s approach, Southland 
declares, “conflict[s] with” the FAA and, therefore, is impermissible.  (Ibid.) 
The majority‟s analysis is also inconsistent with the high court‟s more recent 
decision in Buckeye, supra, 546 U.S. 440.  In Prima Paint v. Flood & Conklin (1967) 388 
U.S. 395, 402-404, the court held that, as a matter of substantive federal arbitration law, a 
contract‟s arbitration provision is severable from the rest of the contract, and challenges 
to the validity of the contract as a whole, as opposed to the arbitration provision itself, 
must be arbitrated in the first instance.  Notwithstanding this decision, in Cardegna v. 
Buckeye Check Cashing, Inc. (Fla. 2005) 894 So.2d 860, 864-865, the Florida Supreme 
Court held that, where the party resisting arbitration alleges that the entire contract is 
illegal and thus unenforceable as a matter of state public policy, a Florida court, and not 
an arbitrator, must first determine the contract‟s legality.  In Buckeye, supra, 546 U.S. at 
page 446, the high court reversed the Florida court‟s decision, explaining that, under the 
FAA, Florida‟s public policy of refusing to enforce an arbitration provision in an illegal 
contract is “irrelevant.”  The court explained:  “[I]n Southland, . . . [w]e . . . rejected the 
proposition that the enforceability of [an] arbitration agreement turned on the state 
legislature‟s judgment concerning the forum for enforcement of the state-law cause of 
action.  [Citation.]  So also here, we cannot accept the Florida Supreme Court‟s 
conclusion that enforceability of the arbitration agreement should turn on „Florida public 
23 
policy and contract law‟ [citation].”   (Buckeye, supra, 546 U.S. at p. 446.)  Under 
Buckeye, the majority‟s conclusion that Moreno‟s predispute waiver of his right to 
request a Berman hearing violates state public policy is simply “irrelevant,” and its view 
that the arbitration provision‟s enforceability “should turn on „California public policy 
and contract law‟ ” is erroneous as a matter of federal law.  (Buckeye, supra, 546 U.S. at 
p. 446.)  As Buckeye firmly establishes, contrary to the majority‟s view, the FAA does 
not permit either the Legislature or a majority of this court to refuse to enforce an 
arbitration agreement based on its “judgment concerning the forum for enforcement of 
the state-law cause of action” for vacation pay.6  (Buckeye, supra, at p. 446.) 
Despite these decisions, the majority declares that it does not “understand the FAA 
to preempt a state‟s authority to impose various preliminary proceedings that delay both 
the adjudication and the arbitration of a cause of action in order to pursue important state 
interests.”  (Maj. opn., ante, at p. 35.)  According to the majority, the high court has never 
suggested that the FAA preempts state laws requiring that preliminary administrative 
steps like the filing of an administrative complaint be pursued before the filing of a civil 
action.  (Maj. opn., ante, at pp. 34-35.)  “So, too,” the majority continues, consistent with 
the FAA, “a state Legislature may, as it has done with the Berman hearings, advance a 
certain public policy by offering certain classes of litigants the [unwaivable] option of an 
informal, nonbinding administrative hearing serving as a gateway to obtaining special 
protections that enable the vindication of their claims.”  (Maj. opn., ante,  at p. 35.)  
                                              
6  
In this regard, Buckeye also establishes that this court‟s earlier decisions in 
Broughton and Cruz are incorrect insofar as they hold that, notwithstanding the FAA, 
California may prohibit arbitration of claims for injunctive relief under the CLRA, the 
UCL, and for false advertising, because of injunctive relief‟s public purpose and the 
institutional shortcomings of arbitration as a forum for dealing with public injunctions.  
(See Cruz, supra, 30 Cal.4th at pp. 323-341 (dis. opn. of Chin, J.); Broughton, supra, 21 
Cal.4th at pp. 1089-1094 (dis. opn. of Chin, J.).) 
24 
Again, Preston conclusively refutes the majority‟s understanding of the FAA.  
There, in holding that the FAA preempts the TAA, the high court distinguished between 
an agency acting in the role of “adjudicator” and an agency acting in the role of 
“prosecutor, pursuing an enforcement action in its own name or reviewing a . . . charge to 
determine whether to initiate judicial proceedings.”  (Preston, supra, 552 U.S. at p. 359.)  
In proceedings under the TAA, the court explained, “the Labor Commissioner functions 
not as an advocate advancing a cause before a tribunal authorized to find the facts and 
apply the law; instead, the Commissioner serves as impartial arbiter.”  Because “[t]hat 
role is just what the FAA-governed agreement between [the parties] reserves for the 
arbitrator,”  the court explained, the TAA is incompatible with the FAA.  (Preston, at p. 
359.)  Similarly, in a Berman hearing, the Labor Commissioner functions not as an 
advocate advancing a cause before a tribunal authorized to find the facts and apply the 
law; instead, the Commissioner serves as impartial arbiter.  And because that role is just 
what the FAA-governed agreement between Moreno and Sonic reserves for the arbitrator, 
the Berman statutes, as interpreted by the majority, are incompatible with the FAA.  
Thus, the FAA preempts the Berman statutes insofar as the majority construes them, as a 
matter of public policy, to allow Moreno to pursue a Berman hearing notwithstanding his 
agreement to forego that option and arbitrate his claim for vacation pay.7 
 
                                              
7  
The majority asserts that the FAA does not preempt the Berman statutes insofar as 
they prohibit “Berman waivers” because that prohibition “does not discriminate against 
arbitration agreements” and applies “equally” to waivers that “appear[] . . . independent 
of arbitration.”  (Maj. opn., ante, at p. 27.) 
However, as the Illinois Supreme Court recently explained, the California statute the high 
court found preempted in Preston “did not single out or target arbitration agreements 
explicitly,” but “simply placed [primary] jurisdiction of labor disputes with an 
administrative agency [citations].”  (Carter, supra, 927 N.E.2d at p. 1218.)  Preston thus 
“make[s] clear that state statutes are preempted by the FAA if the statutes as applied 
preclude the enforcement of federally protected arbitration rights, regardless of whether 
the state statutes specifically target arbitration agreements.”  (Carter, at p. 1218)  
25 
IV.  The Arbitration Provision Is Not Unconscionable. 
The majority alternatively holds that the arbitration provision is unconscionable 
insofar as it precludes Moreno from requesting a Berman hearing before submitting his 
claim to arbitration.  For both procedural and substantive reasons, I do not join this 
holding. 
Procedurally, we should not reach the issue.  In Pearson Dental Supplies, Inc. v. 
Superior Court (2010) 48 Cal.4th 665, 681, we recently held that the plaintiff, who was 
resisting a petition to compel arbitration, had “forfeited” his claim of unconscionability 
by failing to “raise the issue.”  Here, after inserting a boilerplate allegation of 
unconscionability as an affirmative defense in his response to Sonic‟s petition to compel 
arbitration, Moreno did nothing in the trial court to pursue that defense.  In his briefs, he 
argued only that the arbitration provision violates public policy insofar as it burdens his 
ability to vindicate his right to vacation pay.  Nor did he assert unconscionability in the 
Court of Appeal, in the petition for review he filed in this court, or in the opening and 
reply briefs he filed with us.  It was not until well after briefing closed in this court, when 
we resurrected the issue by asking the parties to discuss it in supplemental briefs, that 
Moreno ever mentioned unconscionability again.  On this record, and given that Moreno, 
as the party asserting unconscionability, bears the burden of proving unconscionability 
(Engalla, supra, 15 Cal.4th at p. 972; Szetela v. Discover Bank (2002) 97 Cal.App.4th 
1094, 1099), Moreno has forfeited or abandoned the issue.   
Alternatively, rather than decide the merits, we should remand the issue of 
unconscionability for consideration in the lower courts, as we did a similar claim in 
Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 509.  There, 
after reversing a finding that an arbitration provision was unenforceable based on 
unwaivability, we declined to address an unconscionability claim, noting that “no court 
ha[d] yet addressed” the issue and stating:  “Considerations of judicial economy make it 
appropriate to leave [this] question[] to the lower courts in the first instance.  [Citation.]”  
26 
(Ibid.)  Consistent with our decision, several published decisions have since explained 
that, because a determination of unconscionability requires development of a factual 
record, an appellate court should not address an unconscionability claim that has not been 
litigated in the trial court.  (Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313, 1338-
1339; Olinick v. BMG Entertainment (2006) 138 Cal.App.4th 1286, 1293, fn. 7.)  Given 
these authorities and the record here, we should not reach the issue. 
Substantively, the majority‟s analysis is unpersuasive.  The majority finds that a 
predispute “Berman waiver” is “markedly one-sided” because it “only benefit[s] the 
employer at the expense of the employee” and the majority finds itself unable to say that 
the benefits of arbitration “compensate[]” the employee for giving up the option of a 
Berman hearing.  (Maj. opn., ante, at p. 25.)  Thus, the majority declares, “the main 
purpose of the Berman waiver appears to be for employers to gain an advantage in the 
dispute resolution process by eliminating the statutory advantages accorded to employees 
designed to make that process fairer and more efficient.”  (Id., italics added.)  However, 
as previously noted, because of the de novo review process under the Berman statutes, a 
decision to waive the administrative option potentially saves the employee both time and 
money.  The majority‟s analysis disregards these substantial benefits.8 
                                              
8  
The majority incorrectly assumes that, under its holding, an employee will 
necessarily have the choice, after a dispute arises, of going directly to arbitration or 
pursuing a Berman hearing first.  (Maj. opn., ante, at p. 22, fn. 9.)  In light of the 
majority‟s holding, parties in the future will likely exclude from predispute arbitration 
agreements claims that would be subject to the Berman statutes.  Thus, after a dispute 
arises, an employee who has signed such an agreement will not be able to choose 
arbitration absent the employer‟s agreement.  Indeed, in light of the majority‟s holding, it 
is not even clear in this case that either Moreno or Sonic may, without the other‟s 
agreement, insist on arbitration either before or after a Berman hearing.  (Cf. Gentry, 
supra, 42 Cal.4th at p. 466 [if trial court invalidates class action waiver provision on 
public policy grounds, parties may waive arbitration provision and bring matter to 
court].) 
27 
Moreover, the focus of the majority‟s analysis is incorrectly narrow.  Contrary to 
what the majority‟s discussion suggests, the agreement at issue here does not contain a 
“Berman waiver” per se.  Rather, as noted above, it contains a broad, bilateral arbitration 
provision that applies, with certain exceptions, to “all disputes that may arise out of the 
employment context . . . that either [party] . . . may have against the other which would 
otherwise require or allow resort to any court or other governmental dispute resolution 
forum.”  (Ante, p. 2.)  It is this broad, bilateral provision for arbitration that encompasses, 
among other things, what the majority calls “the Berman waiver.”  An assessment of 
substantive unconscionability should consider the purpose and benefits to the employee 
of this broad arbitration provision.  Thus, the majority errs in focusing narrowly only on 
the purpose and benefits of the provision insofar as it constitutes a waiver of Berman 
procedures. 
Viewed from a broader perspective, the arbitration provision is not 
unconscionable.  As noted above, it requires both the employer and the employee to 
submit all of their claims against each other to binding arbitration, subject to a limited list 
of exceptions.  Moreover, the claims excluded from the arbitration provision are largely 
claims that would be brought by an employee.  In other words, as Sonic observes, “the 
arbitration agreement does not inequitably exempt the employer from arbitration of 
claims more likely to be brought by an employee.”  As also noted above, in the 
arbitration provision, the parties expressly acknowledged that their bilateral agreement to 
arbitrate all of their disputes, subject to enumerated exceptions, would provide “mutual 
benefits (such as reduced expense and increased efficiency).”  (Italics added.)  Neither 
Moreno nor the majority has established otherwise.  Indeed, by holding that Sonic may 
pursue arbitration under the parties‟ agreement after a Berman hearing (maj. opn., ante, at 
pp. 9-11), the majority implicitly finds that the arbitration provision is not, viewed in its 
entirety, impermissibly one-sided.  In short, I agree with Sonic that “[t]he so-called 
Berman [w]aiver only looks [one-sided] in a vacuum.”  Because neither Moreno, who 
28 
bears the burden of proof on the issue, nor the majority has shown that the arbitration 
provision, viewed from the proper perspective, is unconscionable, I do not join the 
majority‟s holding. 
 
V.  Conclusion. 
The laws of both California and the United States require courts to enforce 
arbitration agreements according to their terms, absent a ground for revocation of any 
contract.  Because no such ground exists in this case, the arbitration provision at issue is 
fully enforceable.  The majority‟s contrary conclusion is inconsistent with federal and 
state law, and renders California‟s statutory scheme preempted by the FAA.   
Of greater concern than the fate of the arbitration provision at issue in this case are 
the far-reaching implications of the majority‟s decision for arbitration in California.  
Under the majority‟s analysis, for an arbitration agreement to be valid and enforceable, it 
is no longer enough that arbitration allows full vindication of the substantive statutory 
right at issue.  To invalidate an arbitration agreement, a court need only find some 
advantageous procedure that the Legislature has attached to a particular forum, and 
declare — without any indication from the Legislature — that waiver of that procedure is 
against public policy.  Under the majority‟s analysis, for an arbitration agreement to be 
valid and enforceable, it also is no longer enough that an employer, like its employee, 
agrees to arbitrate all of its claims, and even provides for exceptions to arbitration that 
may be invoked only by the employee.  To invalidate an arbitration agreement as 
impermissibly one-sided and unconscionable, a court, isolating one claim from the many 
the parties have agreed to arbitrate, need only declare itself unable to say that the benefits 
the employee gains from arbitration of that isolated claim compensate for what the 
employee loses.  In these respects, the majority‟s decision substantially undermines the 
public policy as declared by the Legislature, which strongly favors enforcement of  
arbitration agreements according to their terms and requires us to indulge every 
29 
intendment to give effect to an arbitration provision.  The majority‟s decision also 
improperly disregards the well-established principles that courts should not declare a 
contractual provision to be void as against public policy unless that conclusion is free 
from doubt and entirely plain, and the party resisting arbitration bears the burden of 
showing that the provision is against public policy or unconscionable.  Finally, contrary 
to the high court‟s decisions, the majority‟s decision impermissibly allows states — or 
their courts — easily to circumvent the federal policy favoring enforcement of arbitration 
agreements according to their terms.  For all of these reasons, I dissent. 
 
 
 
 
 
 
 
CHIN, J. 
WE CONCUR: 
BAXTER, J. 
CORRIGAN, J. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Sonic-Calabasas A, Inc. v. Moreno 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 174 Cal.App.4th 546 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S174475 
Date Filed: February 24, 2011 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Aurelio Munoz 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Fine, Boggs & Perkins, David J. Reese and John P. Boggs for Plaintiff and Appellant. 
 
Locker Folberg, Rachel Folberg and Miles E. Locker for Defendant and Respondent. 
 
McGuinn, Hillsman & Palefsky, Cliff Palefsky, Keith Ehrman; Law Office of Daniel U. Smith and Valerie T. 
McGinty for California Employment Lawyers Association as Amicus Curiae on behalf of Defendant and 
Respondent. 
 
Hina B. Shah; Cynthia Rice; Jose Tello; Miye Goishi; and Silas Shawver for Asian Law Caucus, Asian Pacific 
American Legal Center, Bet Tzedek Legal Services, California Rural Legal Assistance, Inc., Centro Legal de La 
Raza, Garment Worker Center, Hastings Civil Justice Clinic, Katharine & George Alexander Community Law 
Center, La Raza Centro Legal, Lawyers‟ Committee for Civil Rights of the San Francisco Bay Area, Legal Aid 
Foundation of Los Angeles, Legal Aid Society-Employment Law Center, Maintenance Cooperation Trust Fund, 
National Employment Law Project, Neighborhood Legal Services of Los Angeles County, Wage Justice Center, 
Women‟s Employment Rights Clinic of Golden Gate University School of Law and Worksafe Law Center as Amici 
Curiae on behalf of Defendant and Respondent. 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
John P. Boggs 
Fine, Boggs & Perkins 
2450 So. Cabrillo Hwy., Suite 100 
Half Moon Bay, CA  94019 
(650) 712-8908 
 
Miles E. Locker 
Locker Folberg 
235 Montgomery Street, Suite 835 
San Francisco, CA  94104 
(415) 962-1626 
 
Cliff Palefsky 
McGuinn, Hillsman & Palefsky 
535 Pacific Avenue 
San Francisco, CA  94133 
(415) 421-9292