Court Opinion

ID: 4198083
Source: CourtListenerOpinion
Date Created: 2017-08-22 20:07:13.226601+00
Date Added: 2024-06-11T14:40:34.863152
License: Public Domain

Filed 8/21/17
                             CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                              FIRST APPELLATE DISTRICT

                                     DIVISION ONE

OTO, L.L.C.,
        Plaintiff and Appellant,
                                                 A147564
v.
KEN KHO,                                         (Alameda County
                                                 Super. Ct. No. RG15781961)
        Defendant and Respondent;
JULIE A. SU, as Labor Commissioner,
etc.,
        Intervener and Appellant.

        Ken Kho filed a claim for unpaid wages with the California Labor Commissioner
(commissioner) against his former employer, OTO, L.L.C., doing business as One Toyota
of Oakland (hereafter One Toyota). After settlement discussions failed, One Toyota filed
a petition to compel arbitration. Under the arbitration agreement, which One Toyota
required Kho to execute without explanation during his employment, the wage claim
would be subject to binding arbitration conducted by a retired superior court judge.
Because the intended procedure incorporated many of the provisions of the Code of Civil
Procedure and the Evidence Code, the anticipated arbitration proceeding would resemble
ordinary civil litigation.
        The trial court denied the petition to compel. Under Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109 (Sonic II), an arbitration agreement that waives the
various advantageous provisions of the Labor Code governing the litigation of a wage
claim is substantively unconscionable if it fails to provide the employee with an
affordable and accessible alternative forum. The trial court concluded that the alternative
anticipated by One Toyota’s arbitration agreement failed this standard because it
effectively required Kho to retain counsel and did not expressly provide for him to
recover his attorney fees if he prevailed. We reverse, concluding the arbitration
proceeding satisfies the Sonic II requirements of affordability and accessibility.
                                   I. BACKGROUND
       Kho worked as an auto mechanic for One Toyota from January 2010 through
April 2014, when his employment was terminated. Several months later, in October
2014, Kho filed a wage claim with the commissioner.
       In November 2014, Kho and One Toyota participated in an unsuccessful
settlement conference, mediated by a deputy labor commissioner. The parties continued
settlement discussions for the following month, until, in mid-December, One Toyota
requested that the commissioner’s office forward a proposed settlement agreement to
Kho. After Kho “decided not to accept” the offer, he requested a so-called “Berman
hearing” on his claim.1
       On January 30, 2015, the commissioner notified One Toyota of Kho’s request, and
in March the hearing was scheduled for the following August. In July, Kho requested the
issuance of a subpoena for records from One Toyota in preparation for the hearing. The
subpoena was issued, requiring One Toyota to bring the requested documents to the
hearing.
       On the morning of the Berman hearing, a Monday, One Toyota’s attorney faxed a
letter to the commissioner’s office, requesting that the hearing be taken off calendar
because One Toyota had filed a petition to compel arbitration and stay the administrative
proceedings on the prior Friday.2 By return fax, the commissioner’s office informed

       1
        Apparently Kho’s refusal of the offer was not communicated to One Toyota by
the commissioner until March 2015, at which time One Toyota told the commissioner it
would continue to try to settle the matter. By that time, of course, One Toyota had
received notice of the scheduled Berman hearing.
       2
         The parties dispute whether this was the first time One Toyota raised the issue of
arbitration. In a declaration filed later, One Toyota’s attorney claimed to have informed
Kho at the time of the settlement conference that it intended to seek arbitration of his

                                             2
counsel that the hearing would proceed as scheduled. At the appointed time, counsel for
One Toyota appeared, served Kho with the petition to compel and stay proceedings, and
left. Undeterred, the hearing officer proceeded with the hearing in One Toyota’s absence
and later issued an extensive “Order, Decision, or Award” (ODA) finding Kho entitled to
$102,912 in unpaid wages and $55,634 in liquidated damages, interest, and penalties.
              One Toyota thereafter sought de novo review of the ODA in the trial court
pursuant to Labor Code section 98.2, posting the requisite bond to secure payment of the
award. (Id., subd. (b).) At the same time, One Toyota supplemented its petition to
compel arbitration with the filing of a motion to vacate the ODA. By stipulation, the
commissioner was allowed to intervene in the trial court proceedings.
              One Toyota’s petition to compel arbitration was premised on a “Comprehensive
Agreement—Employment At-Will and Arbitration” (Agreement), executed by Kho on
February 22, 2013, three years into his employment. The substance of the Agreement
appears to be quite similar to the arbitration agreement addressed in the Sonic decisions.
(See Sonic II, supra, 57 Cal.4th at pp. 1125–1126, 1146; Sonic-Calabasas A, Inc. v.
Moreno (2011) 51 Cal.4th 659, 680 (Sonic I).) Notwithstanding its designation as a
“comprehensive” employment contract, the one and one-quarter page contract is merely
an arbitration clause grafted onto an acknowledgment of at-will employment. The clause,
written in a tiny font size, consists of a dense, single-spaced paragraph that occupies
nearly the entirety of the first page.3 The terms of the clause are broad, requiring
arbitration of “any claim, dispute, and/or controversy” by either party against the other.
Although arbitration under the Agreement purports to be subject to the procedures of the
California Arbitration Act (CAA; Code Civ. Proc., § 1280 et seq.), the clause requires
any arbitration to be conducted by a retired California superior court judge and in

claims. Both Kho and the deputy commissioner who conducted the hearing denied that
the issue of arbitration was raised, and One Toyota acknowledged there is no written
record reflecting this interaction. The trial court did not resolve this issue of fact.
              3
               The clause is written in seven-point font size. For purposes of demonstration, this sentence is written in seven-
point font.   A copy of the Agreement is attached as an appendix to this decision.

                                                                 3
conformance with California laws governing pleading and evidence. Accordingly, the
clause permits the full extent of discovery authorized by the CAA, authorizes demurrers
and motions for summary judgment, among all other California pleadings, and requires
the arbitration hearing to be conducted pursuant to the Evidence Code. It anticipates, in
short, ordinary civil litigation, followed by the equivalent of a civil bench trial, except
that one or both parties must finance the judge and facilities. With respect to the
allocation of the costs of arbitration, the clause states: “If [Code of Civil Procedure
section] 1284.2 conflicts with other substantive statutory provisions or controlling case
law, the allocation of costs and arbitrator fees shall be governed by said statutory
provisions or controlling case law instead of [Code of Civil Procedure section] 1284.2.”4
       In opposing the petition to compel, Kho explained the circumstances of his
execution of the Agreement: “After working for One Toyota of Oakland for
approximately 3 years, Alba, who was a ‘porter’ employed with [the human resources
department of] One Toyota of Oakland, brought . . . paperwork for me to sign. This
happened approximately in February 2013. [¶] . . . I remember working at my station and
Alba asked me to sign several additional documents in February 2013. I was not asked to
come into the human resources office to review the documents and I was required to sign
and return them immediately to Alba, who was waiting in my work station for me to
finish signing them. It took about 3–4 minutes for me to sign these documents. After I
signed them, I gave the documents back to Alba and I was not given an opportunity to
read what those documents were. [¶] . . . I was not provided with a copy of the documents
signed on [sic] February 2013. No one from One Toyota of Oakland read to [sic] the
contents of the documents to me nor did they explain to me that I was signing an
arbitration agreement and waiving any of my rights. [¶] . . . [A]t no point during my

       4
         Code of Civil Procedure section 1284.2 states: “Unless the arbitration agreement
otherwise provides or the parties to the arbitration otherwise agree, each party to the
arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator,
together with other expenses of the arbitration incurred or approved by the neutral
arbitrator, not including counsel fees or witness fees or other expenses incurred by a party
for his own benefit.”

                                              4
employment with One Toyota of Oakland did I receive a copy of the arbitration
agreement. My first language is Chinese and a copy of this agreement was not provided
in my native language.”
       One Toyota did not dispute Kho’s account.
       The trial court denied the petition to compel. In an extensive written decision, the
court found “that there was a high level of procedural unconscionability connected with
the execution of the arbitration agreement in this case.” It noted Kho was not given time
to review the Agreement, was given no explanation of it, and was not given a copy
afterward, which the court found “consistent with the conclusion that the arbitration
provision was imposed on [Kho] under circumstances that created oppression or surprise
due to unequal bargaining power.” The court also found the Agreement substantively
unconscionable under Sonic II because it deprived Kho of the advantages of the
commissioner’s procedures, which provide for a relatively quick, inexpensive method for
resolving wage claims that is designed to accommodate pro se claimants, like Kho,
without providing an “accessible and affordable” alternative. As the court noted, the
Agreement anticipates close to a full trial, which would necessitate the hiring of counsel,
but it does not provide for the recovery of attorney fees to incentivize counsel. Because
the court denied the petition to compel, it declined to address Kho’s argument that One
Toyota’s last-minute assertion of its right to arbitrate waived that right. Although the
court denied the petition to compel, it did grant One Toyota’s motion to vacate the ODA,
concluding that the agency abused its discretion in proceeding with the hearing after
having been informed that Kho had executed an agreement to arbitrate that could moot
the proceeding.
       One Toyota has appealed the denial of its petition to compel arbitration, while the
commissioner, as intervener, has cross-appealed the order vacating the ODA. Kho has
not appeared personally or by counsel, but the commissioner has filed a respondent’s
brief asserting arguments on his behalf.

                                             5
                                     II. DISCUSSION
A. Governing Law
       1. Unconscionability
       “ ‘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.’ [Citation.] A party seeking to
compel arbitration of a dispute ‘bears the burden of proving the existence of an
arbitration agreement, and the party opposing arbitration bears the burden of proving any
defense, such as unconscionability.’ ” (Jenks v. DLA Piper Rudnick Gray Cary US LLP
(2015) 243 Cal.App.4th 1, 8.) The Supreme Court summarized the doctrine of
unconscionability in the context of arbitration agreements in Sanchez v. Valencia Holding
Co., LLC (2015) 61 Cal.4th 899 (Sanchez):
       “ ‘ “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.” ’ [Citation.] 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.” ’ [Citation.]
       “ ‘ “The prevailing view is that [procedural and substantive unconscionability]
must both be present in order for a court to exercise its discretion to refuse to enforce a
contract or clause under the doctrine of unconscionability.” [Citation.] But they need not
be present in the same degree. “Essentially a sliding scale is invoked which disregards
the regularity of the procedural process of the contract formation, that creates the terms,
in proportion to the greater harshness or unreasonableness of the substantive terms
themselves.” [Citations.] In other words, the more substantively oppressive the contract
term, the less evidence of procedural unconscionability is required to come to the
conclusion that the term is unenforceable, and vice versa.’ [Citation.] Courts may find a
contract as a whole ‘or any clause of the contract’ to be unconscionable. [Citation.]

                                              6
        “As we stated in Sonic II: ‘The unconscionability doctrine ensures that contracts,
particularly contracts of adhesion, do not impose terms that have been variously
described as “ ‘ “overly harsh” ’ ” [citation], “ ‘unduly oppressive’ ” [citation], “ ‘so one-
sided as to “shock the conscience” ’ ” [citation], or “unfairly one-sided” [citation]. All of
these formulations point to the central idea that unconscionability doctrine is concerned
not with “a simple old-fashioned bad bargain” [citation], but with terms that are
“unreasonably favorable to the more powerful party” [citation]. These include “terms
that impair the integrity of the bargaining process or otherwise contravene the public
interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt
to alter in an impermissible manner fundamental duties otherwise imposed by the law,
fine-print terms, or provisions that seek to negate the reasonable expectations of the
nondrafting party, or unreasonably and unexpectedly harsh terms having to do with price
or other central aspects of the transaction.” ’ ” (Sanchez, supra, 61 Cal.4th at pp. 910–
911.)
        When, as here, the evidence is not in dispute, we review de novo a trial court’s
decision on a petition to compel arbitration. (Lane v. Francis Capital Management LLC
(2014) 224 Cal.App.4th 676, 683.)
        2. Litigation of Wage Claims
        Claims for unpaid wages filed by California workers are investigated by
California’s Division of Labor Standards Enforcement, headed by the commissioner.
(Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1237
(Aleman).) The handling of such claims was explained in Sonic I, supra, 51 Cal.4th 659,
which held that the right to the commissioner’s procedures cannot be waived:5
        “ ‘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. [Citations.] Or the employee may

        5
            This holding was overruled by Sonic II, supra, 57 Cal.4th 1109.

                                               7
seek administrative relief by filing a wage claim with the commissioner pursuant to a
special statutory scheme codified in [Labor Code] 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.’ [Citations.]
       “Once an employee files a complaint with the Labor Commissioner for
nonpayment of wages, [Labor Code] 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.]” ’ [Citation.] . . . [P]rior 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. [Citation.]
       “A Berman hearing is conducted by a deputy commissioner, who has the authority
to issue subpoenas. [Citations.] ‘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. [Citation.] The commissioner must decide the
claim within 15 days after the hearing. [Citation.]’ [Citation.] 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.’ [Citation.] The hearing officer is authorized to assist the parties in
cross-examining witnesses and to explain issues and terms not understood by the parties.
[Citation.] The parties have a right to have a translator present. [Citations.]
       “Once judgment is entered in the Berman hearing, enforcement of the judgment is
to be a court priority. [Citation.] The Labor Commissioner is charged with the

                                              8
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 [Labor Code] Section 240.’
[Citation.]
       “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 decision will be deemed a judgment, final immediately, and enforceable
as a judgment in a civil action. [Citation.] 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.’ [Citation.] 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. [Citation.]
       “Under [Labor Code] 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. [Citation.] This is in contrast
to [Labor Code] 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.[6]

       6
         Following the issuance of Sonic I, this contrast between Berman proceedings and
Labor Code section 281.5 was substantially mitigated when that section was amended to
provide that a prevailing employee in a wage dispute can recover attorney fees, while a
prevailing employer can recover such fees only if the employee brought the action in bad
faith. (Stats. 2013, ch. 142, § 1.)

                                              9
       “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. [Citation.] Such claimants represented by
the Labor Commissioner may still collect attorney fees pursuant to [Labor Code]
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. [Citation.]
       “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
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.” (Sonic I, supra, 51 Cal.4th at pp. 671–674, fn. omitted.)
       3. Substantive Unconscionability in the Context of Wage Claim Arbitration
       In Sonic I, the Supreme Court held an arbitration clause that has the effect of
waiving an employee’s statutory right to Berman procedures to be substantively
unconscionable. (Sonic I, supra, 51 Cal.4th at p. 686.) The circumstances of Sonic I
were virtually indistinguishable from those presented here. The respondent was an auto
dealership employee who had filed a wage claim with the commissioner. The arbitration

                                             10
clause in his employment contract appears to have been very similar to that in the
Agreement. (Id. at pp. 669, 680; see Sonic II, supra, 57 Cal.4th at p. 1146.)
       In Sonic II, the Supreme Court acknowledged that Sonic I’s holding of per se
unconscionability was inconsistent with the United States Supreme Court’s intervening
decision in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333. (Sonic II, supra,
57 Cal.4th at p. 1141.) At the same time, Sonic II recognized that unconscionability
remained a valid defense to a petition to compel arbitration of a wage claim, at least
under the correct circumstances. (Id. at p. 1142.) With respect to an adhesive contract,
“the unconscionability doctrine is concerned . . . with terms that are ‘unreasonably
favorable to the more powerful party’ [citation].” (Id. at p. 1145.) Accordingly, the court
concluded, “the waivability of a Berman hearing in favor of arbitration does not end the
unconscionability inquiry” and remanded the matter to the trial court to conduct a “fact-
specific inquiry” regarding “the totality of the agreement’s substantive terms as well as
the circumstances of its formation to determine whether the overall bargain was
unreasonably one-sided.” (Id. at p. 1146.)
       In discussing the nature of this inquiry, the court explained, “The Berman statutes
include various features designed to lower the costs and risks for employees in pursuing
wage claims . . . . Waiver of these protections does not necessarily render an arbitration
agreement unenforceable, nor does it render an arbitration agreement unconscionable per
se. But waiver of these protections in the context of an agreement that does not provide
an employee with an accessible and affordable arbitral forum for resolving wage disputes
may support a finding of unconscionability. As with any contract, the unconscionability
inquiry requires a court to examine the totality of the agreement’s substantive terms as
well as the circumstances of its formation to determine whether the overall bargain was
unreasonably one-sided.” (Sonic II, supra, 57 Cal.4th at p. 1146.) While Sonic II later
reiterated that waiver of Berman hearing protections alone would not support a finding of
unconscionability (id. at p. 1147), it provided no further guidance regarding the type of
“affordable and accessible” procedure that would stand as a suitable substitute. Rather,
the court merely repeated that “in the context of a standard contract of adhesion setting

                                             11
forth conditions of employment, the unconscionability inquiry focuses on whether the
arbitral scheme imposes costs and risks on a wage claimant that make the resolution of
the wage dispute inaccessible and unaffordable, and thereby ‘effectively blocks every
forum for the redress of disputes, including arbitration itself.’ ” (Id. at p. 1148.)
       Although Sonic II remanded the matter for an inquiry into both the procedural and
substantive unconscionability of the arbitration clause in question, we assume that the
dual requirements of affordability and accessibility are concerned only with substantive
unconscionability. Both of these features are determined by the substantive terms of the
arbitration agreement, not by the manner of its execution or its form. The requirements
of affordability and accessibility therefore set the minimum standard that an arbitration
clause requiring waiver of Berman procedures must meet to avoid a finding of
substantive unconscionability as a result of that waiver.
B. Unconscionability of the Agreement
       1. Procedural Unconscionability
       A contract is adhesive, and therefore procedurally unconscionable to a degree, if
“written on a preprinted form and offered on a take-it-or-leave-it basis.” (Baltazar v.
Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245; Carbajal v. CWPSC, Inc. (2016)
245 Cal.App.4th 227, 243 [“ ‘It is well settled that adhesion contracts in the employment
context, that is, those contracts offered to employees on a take-it-or-leave-it
basis, typically contain some aspects of procedural unconscionability.’ ”].) Given the
circumstances of Kho’s execution of the Agreement, there is no question that it was a
contract of adhesion. The issue here is whether, as the trial court found, the
circumstances of its formation created a greater degree of procedural unconscionability,
requiring “ ‘closer scrutiny’ of the agreement’s substantive fairness.” (Farrar v. Direct
Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1268.) We conclude they did.
       “Procedural unconscionability pertains to the making of the agreement and
requires oppression or surprise.” (Magno v. The College Network, Inc. (2016)
1 Cal.App.5th 277, 285.) “The ‘oppression’ component of procedural unconscionability
‘arises from an inequality of bargaining power of the parties to the contract and an

                                              12
absence of real negotiation or a meaningful choice on the part of the weaker party.’
[Citation.] ‘Surprise is defined as “ ‘the extent to which the supposedly agreed-upon
terms of the bargain are hidden in the prolix printed form drafted by the party seeking to
enforce the disputed terms.’ ” ’ ” (Lennar Homes of California, Inc. v. Stephens (2014)
232 Cal.App.4th 673, 688.) “The circumstances relevant to establishing oppression
include, but are not limited to (1) the amount of time the party is given to consider the
proposed contract; (2) the amount and type of pressure exerted on the party to sign the
proposed contract; (3) the length of the proposed contract and the length and complexity
of the challenged provision; (4) the education and experience of the party; and
(5) whether the party’s review of the proposed contract was aided by an attorney.”
(Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th
1332, 1348, fn. omitted.)
       The circumstances of Kho’s execution of the Agreement demonstrated a high
degree of oppression. As noted, the Agreement was not negotiated but presented on a
take-it-or-leave-it basis. Further, the Agreement was submitted to Kho for signature at a
time when One Toyota was already his employer; in the absence of any explanation, Kho
could have inferred that execution of the document was expected of him as a condition of
his employment. To avoid this implication, One Toyota could have excused Kho from
his work station, submitted the Agreement to him with an explanation of both its purpose
and meaning, and explained its significance, if any, for his further employment. It chose
to do none of those things. Instead, the document was presented to him at his work
station, where he was under pressure to perform his job. Not only did One Toyota
provide no explanation for its demand for his signature, it selected a low level employee,
a “porter,” to present the Agreement, creating the impression that no request for an
explanation was expected and any such request would be unavailing. These
circumstances were highly coercive and appear intended to thwart, rather than promote,
voluntary and informed consent.
       The issue of surprise is less clear-cut, but it is by no means absent. The
Agreement seems intended as a parody of the classic adhesion contract. Written in a

                                             13
single block, without paragraphs to delineate different topics, the arbitration clause is
visually impenetrable. Because the entire Agreement occupies less than two pages, there
was no practical need for One Toyota to choose a small typeface. Yet the font chosen is
so small as to challenge the limits of legibility. Further, the language is legalistic, and the
text is complex. The second sentence of the arbitration clause manages to occupy 11
lines of text, notwithstanding the tiny typeface. Some of the language, such as the
reference to Code of Civil Procedure section 1284.2, requires a specialist’s legal training
to understand. It cannot be said that One Toyota was attempting to hide the ball by
burying the arbitration clause in an otherwise prolix agreement, since the Agreement
consists almost entirely of the arbitration clause. Yet the Agreement is drafted and
composed in a manner, again, to thwart rather than promote understanding.7 For these
reasons, we conclude that the degree of procedural unconscionability was extraordinarily
high.
        2. Substantive Unconscionability
        Although we find a high degree of procedural unconscionability, we conclude the
Agreement is not substantively unconscionable under the standard of Sonic II, which
requires enforcement of a Berman hearing waiver if the arbitration clause provides an
“accessible and affordable arbitral forum.”8 (Sonic II, supra, 57 Cal.4th at p. 1146.)
        The commissioner first argues that the Agreement is substantively unconscionable
under general arbitration law because it is unduly harsh or one-sided. (E.g., Sanchez,
supra, 61 Cal.4th at p. 911.) In the abstract, however, the arbitration provisions of the

        7
        Because the record contains no information about Kho’s English facility, we are
less concerned with the failure to present him with a version of the Agreement written in
Chinese, his native language. Many American immigrants who were born speaking
another language are fluent in written English.
        8
         This requirement applies only to an arbitration clause contained in a contract of
adhesion. While we find it unnecessary to review the procedural unconscionability of
Kho’s execution of the Agreement, we have no doubt that the Agreement was a contract
of adhesion, given the circumstances of its execution. (See Sonic II, supra, 57 Cal.4th at
p. 1133 [a contract of adhesion is drafted by a party of superior bargaining strength and
gives to the other party only the opportunity to adhere to the contract or reject it].)

                                              14
Agreement are neither harsh nor one-sided. The arbitration clause does not, for example,
require arbitration of claims most likely to be filed by an employee while excluding those
of an employer. (E.g., Carbajal v. CWPSC, Inc., supra, 245 Cal.App.4th at p. 248.) Nor
does it contain any other substantive features that appear, on their face, designed to
benefit the employer. (See id. at pp. 250–251 [arbitration clause required each party to
bear own fees, effectively waiving various employee fee recovery statutes].) The
Agreement anticipates a proceeding very much like ordinary civil litigation, with no
special procedural features that would tend to favor One Toyota—any more, at least, than
the complexity and expense of civil litigation naturally tends to favor a party with greater
sophistication and financial resources.
       Rather, the Agreement can be argued “harsh or one-sided” only in comparison to
the various features of the Labor Code that seek to level the playing field for wage
claimants—features that, as the Supreme Court characterized them, are “designed to
lower the costs and risks for employees in pursuing wage claims, including procedural
informality, assistance of a translator, use of an expert adjudicator who is authorized to
help the parties by questioning witnesses and explaining issues and terms, and provisions
on fee shifting, mandatory undertaking, and assistance of the Labor Commissioner as
counsel to help employees defend and enforce any award on appeal.” (Sonic II, supra,
57 Cal.4th at p. 1146.) The premise of Sonic II, however, was that these various features
lawfully could be waived by an arbitration agreement governing wage claims, and the
court presumably factored the permissibility of such a waiver into its unconscionability
standard. As the court held, “Waiver of these protections does not necessarily render an
arbitration agreement unenforceable, nor does it render an arbitration agreement
unconscionable per se. But waiver of these protections in the context of an agreement
that does not provide an employee with an accessible and affordable arbitral forum for
resolving wage disputes may support a finding of unconscionability.” (Ibid.) In other
words, waiver of the various employee-friendly wage claim provisions of the Labor Code
does not make an arbitration agreement unconscionable so long as the resulting

                                             15
arbitration procedure is “affordable and accessible.” We proceed on that assumption in
considering the Agreement.
       As to the first factor, affordability, One Toyota acknowledges that it must pay all
costs of arbitration under the Agreement. As noted above, the Agreement provides that
the parties will split the costs of arbitration, as required by Code of Civil Procedure
section 1284.2, unless “statutory provisions or controlling case law” provide otherwise.
With respect to wage claims, One Toyota concedes that the Supreme Court’s decision in
Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83
(Armendariz) requires an employer to pay the costs of arbitration, notwithstanding
section 1284.2. Armendariz held that certain statutory rights cannot be waived and that
arbitration agreements encompassing such rights “must be subject to particular
scrutiny.”9 (Armendariz, at pp. 100, 101.) Given the importance of these rights,
Armendariz held, an agreement requiring their arbitration must be interpreted to require
the employer to pay any costs of arbitration “that the employee would not be required to
bear if he or she were free to bring the action in court.” (Id. at pp. 110–111.)
Accordingly, the Agreement’s silence on arbitration costs must be interpreted under
Armendariz to require One Toyota to pay the costs of arbitration. Because Kho will not
be required to pay any costs of arbitration not required by the civil courts, the Sonic II
requirement of affordability is presumably satisfied here.
       We find no merit in the commissioner’s argument that the Agreement is
unconscionable because it does not expressly inform Kho that One Toyota must pay the
arbitral costs of a wage claim. The Agreement was intended to deal with a wide variety
of legal claims potentially asserted by an employee against his or her employer, or vice
versa. It is therefore not surprising that it does not contain any provision specifically
addressing the allocation of costs for wage claim arbitration. Although the Agreement
does not discuss the law applicable to cost-sharing with respect to any specific claim, it

       9
         Although Armendariz concerned the rights established by the California Fair
Employment and Housing Act (Gov. Code, § 12900 et seq.), One Toyota does not dispute
that statutory wage rights are similarly unwaivable.

                                             16
does recognize that there are statutory and common law exceptions to the general rule of
cost-sharing established by Code of Civil Procedure section 1284.2, implicitly
acknowledging the possibility, with respect to some claims, that One Toyota will be
required to pay the costs. The arbitration clause is not unconscionable merely because it
does not attempt to characterize those claims.
       The trial court held, and the commissioner argues, that the arbitration envisioned
by the Agreement is not affordable because it will require Kho to retain counsel, while
the Labor Code permits a wage claimant to be represented by the commissioner in a de
novo proceeding following the Berman hearing and provides for recovery of attorney fees
to a prevailing wage claimant.10 (Lab. Code, §§ 98.2, subd. (c), 98.4.) We do not agree
that the absence of representation by the commissioner makes arbitration unaffordable for
purposes of Sonic II. First, legal representation for an employee is the most obvious
expense arising in connection with wage claim arbitration. If the Sonic II court believed
an arbitration agreement must provide for free counsel to avoid unconscionability, it
easily could have said so, just as Armendariz expressly required the payment of other
arbitration costs. Sonic II did not articulate this requirement, and its silence on the point
is suggestive. Second, it must be understood that a wage claimant has no absolute right
to counsel in the de novo portion of wage claim litigation. Representation lies in the
discretion of the commissioner, unless the claimant has already prevailed at the Berman
hearing and does not challenge that award. The Agreement therefore does not necessarily
require an expense beyond that necessary under Labor Code procedures. Third, the
claimant is not required to retain counsel for the arbitration but may proceed in pro. per.
While this is certainly not the best approach, it is the option facing every litigant in
ordinary civil litigation. The type of proceeding envisioned by the Agreement, while it is

       10
          Labor Code section 98.4 provides: “The Labor Commissioner may, upon the
request of a claimant financially unable to afford counsel, represent such claimant in the
de novo proceedings provided for in Section 98.2. In the event that such claimant is
attempting to uphold the amount awarded by the Labor Commissioner and is not
objecting to any part of the Labor Commissioner’s final order, the Labor Commissioner
shall represent the claimant.”

                                              17
potentially more complex than a typical arbitration hearing, is no more complex than the
civil litigation required for a de novo hearing under the Labor Code. We conclude that
the absence of free representation does not make a wage claim arbitration unaffordable.
       Nor does the lack of an express employee-favorable attorney fees provision,
similar to Labor Code section 98.2, subdivision (c), cause the Agreement to be
unconscionable, since the Agreement requires the application of another, similarly
favorable provision of the Labor Code. Although the Agreement is silent as to the award
of attorney fees, it requires the arbitrator to apply “the law governing the claims and
defenses pleaded.” Section 98.2 would not apply to an arbitration under the Agreement
because it governs only de novo appeals from a Berman hearing. Labor Code
section 218.5, however, applies more generally to “any action brought for the
nonpayment of wages” and requires an award of reasonable attorney fees to a prevailing
employee, while granting fees to a prevailing employer only if the employee’s action was
brought in bad faith. (Id., subd. (a).) In some circumstances this provision would be
more favorable to an employee than section 98.2, since the latter allows an award of
attorney fees to an employer whenever an appealing employee fails to recover any wages,
regardless of the employee’s good faith. As One Toyota concedes, the required
application of Labor Code section 218.5 has essentially the same legal effect as
section 98.2, subdivision (c).
       While the factors affecting “accessibility” are not explored in Sonic II, we find
nothing in the proceeding required by the Agreement that would cause it to be
inaccessible to an employee. The commissioner argues that the Agreement should be
found unconscionable because it replaced the relative simplicity of the Berman hearing
with a complex proceeding resembling civil litigation. If the Labor Code required only a
Berman hearing to resolve wage claims, the argument might have some force. The result
of a Berman hearing, however, is nonbinding. An appeal by either party effectively
nullifies the result, in favor of a de novo proceeding in superior court—in other words, in
favor of ordinary civil litigation. Because the type of proceeding outlined by the
Agreement is similar to civil litigation, it anticipates a proceeding that is no more

                                             18
complex than will often be required to resolve a wage claim under the Berman
procedures. Such a proceeding is presumably not inaccessible for purposes of Sonic II.
       The commissioner contends the proceeding anticipated by the Agreement is
inaccessible because the Agreement does not contain a provision specifying the means
for initiating an arbitration. While a well-drawn arbitration clause would have specified
such means, the failure to designate a manner of commencing arbitration does not render
the clause unconscionable. The failure actually introduces flexibility, since an arbitration
presumably can be commenced in any reasonable manner. Although in a roundabout
way, Kho effectively commenced an arbitration by filing a wage claim with the
commissioner, thereby compelling One Toyota either to litigate under the Labor Code or
respond with a petition to compel. A variety of other means would undoubtedly be
recognized as sufficient for commencement of an arbitration. Nor do we find the
proceeding inaccessible because the Agreement does not refer to a particular arbitration
sponsor or set of rules. As noted, the Agreement provides that the proceeding will be
governed by the pleading rules of the Code of Civil Procedure and by the Evidence Code,
as applicable in California courts.
       3. Enforcement of the Agreement
       As our discussion likely makes clear, we are disturbed by the manner in which the
Agreement was drafted and presented to Kho for signature. Nonetheless, California
arbitration law has consistently required both procedural and substantive
unconscionability before an arbitration provision will be refused enforcement. (Sanchez,
supra, 61 Cal.4th at p. 910 [unconscionability requires both procedural and substantive
unconscionability]; Aleman, supra, 241 Cal.App.4th 1233, 1248 [where no procedural
unconscionability, arbitration agreement could not be found unconscionable].) Although
a high degree of procedural unconscionability ordinarily imposes “ ‘closer scrutiny’ of
the agreement’s substantive fairness” (Farrar v. Direct Commerce, Inc., supra,
9 Cal.App.5th at p. 1268), Sonic II appears to establish affordability and accessibility as a
safe harbor when the claim of substantive unconscionability is premised on the waiver of
Berman procedures. Given our conclusion that the Agreement is not substantively

                                             19
unconscionable under Sonic II, we must reverse the trial court’s order denying the
petition to compel arbitration.
C. Waiver
       Although the commissioner does not contend on appeal that One Toyota waived
its right to arbitrate entirely, it does contend that One Toyota’s delay in asserting its right
to arbitrate waived its right to avoid a Berman hearing.
       We discussed the law relating to waiver of arbitral rights through delay in Gloster
v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438:
       “ ‘State law, like the [Federal Arbitration Act (9 U.S.C. § 1 et seq.)], reflects a
strong policy favoring arbitration agreements and requires close judicial scrutiny of
waiver claims. [Citation.] Although a court may deny a petition to compel arbitration on
the ground of waiver [citation], waivers are not to be lightly inferred and the party
seeking to establish a waiver bears a heavy burden of proof.’ [Citation.]
       “ ‘Both state and federal law emphasize that no single test delineates the nature of
the conduct that will constitute a waiver of arbitration. [Citations.] “ ‘In the past,
California courts have found a waiver of the right to demand arbitration in a variety of
contexts, ranging from situations in which the party seeking to compel arbitration has
previously taken steps inconsistent with an intent to invoke arbitration [citations] to
instances in which the petitioning party has unreasonably delayed in undertaking the
procedure. . . .’ ” . . .’ [Citation.]
       “ ‘[W]hether litigation results in prejudice to the party opposing arbitration is
critical in waiver determinations.’ [Citation.] ‘ “ ‘The moving party’s mere participation
in litigation is not enough [to support a finding of waiver]; the party who seeks to
establish waiver must show that some prejudice has resulted from the other party’s delay
in seeking arbitration.’ [Citation.]” [Citations.] [¶] . . . [¶] . . . “[C]ourts will not find
prejudice where the party opposing arbitration shows only that it incurred court costs and
legal expenses.” [Citation.]’ [Citation.] ‘Rather, courts assess prejudice with the
recognition that California’s arbitration statutes reflect “ ‘a strong public policy in favor
of arbitration as a speedy and relatively inexpensive means of dispute resolution’ ” and

                                                20
are intended “ ‘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.’ ”
[Citation.] Prejudice typically is found only where the petitioning party’s conduct has
substantially undermined this important public policy or substantially impaired the other
side’s ability to take advantage of the benefits and efficiencies of arbitration. [¶] For
example, courts have found prejudice where the petitioning party used the judicial
discovery processes to gain information about the other side’s case that could not have
been gained in arbitration [citations]; where a party unduly delayed and waited until the
eve of trial to seek arbitration [citation]; or where the lengthy nature of the delays
associated with the petitioning party’s attempts to litigate resulted in lost evidence
[citation].’ ” (Gloster v. Sonic Automotive, Inc., supra, 226 Cal.App.4th at pp. 447–448.)
       In her briefs, the commissioner did not attempt to demonstrate prejudice accruing
from One Toyota’s delay in asserting its right to arbitrate, and we find none. The first
portion of the Berman procedure involves settlement discussions. We would be reluctant
to require an employer to forego settlement discussions in order to preserve the right to
arbitration, since such discussions seem of potential benefit to both sides of a wage
dispute. While it would have been preferable for One Toyota to have asserted its right to
arbitration immediately upon the failure of settlement discussions in order to avoid
inconvenience to Kho and the commissioner, inconvenience does not equal prejudice.11
Neither Kho nor the commissioner was required to spend substantial time or funds in
preparation for the Berman hearing, which is informal by design. At oral argument, the

       11
         In finding that One Toyota did not forfeit its right to arbitration by waiting until
the 11th hour to file its petition to compel, we do not mean to suggest we condone its
conduct. At oral argument, One Toyota insisted it waited until the morning of the
hearing to inform Kho and the commissioner of its decision on the chance the matter
would settle on the eve of the hearing. Yet the record reveals that One Toyota’s last
settlement effort occurred months before the hearing, and it made no attempt to settle at
the Berman hearing, where its attorney stayed only long enough to serve Kho with
papers. While we find no forfeiture in the absence of prejudice, we do find an
unacceptable lack of courtesy.

                                              21
commissioner argued Kho was prejudiced by delay, but we find there was no significant
delay. The Berman hearing proceeded as scheduled. Although that will now be followed
by an arbitration proceeding, One Toyota’s assertion of its right to a trial de novo ensured
that Kho’s wage claim would not be resolved promptly even in the absence of arbitration.
One Toyota’s assertion of its right immediately prior to the commencement of the
hearing therefore caused no prejudice. In the absence of prejudice, we cannot find One
Toyota to have waived its right to assert the Agreement.
       Without discussing the extensive case law governing waiver of the right to
arbitrate, the commissioner cites language from Sonic II in an attempt to argue that the
decision requires a petition to compel arbitration to be filed sufficiently far in advance of
a scheduled Berman hearing to allow the petition to be decided prior to the hearing. It is
clear, however, that Sonic II was not concerned with waiver and did not purport to render
any holding with respect to that issue. The commissioner’s attempt to construe the
decision as establishing a deadline for the filing of a petition to compel must therefore be
rejected. (See People v. Brooks (2017) 3 Cal.5th 1, 110 [“It is axiomatic that a case is not
authority for an issue that was not considered.”].)
D. The Commissioner’s Cross-appeal
       Given our conclusion that Kho waived his right to pursue the Berman procedures
in favor of the arbitration procedure contained in the Agreement, the commissioner’s
appeal of the order vacating the ODA is moot. Even if we concluded the trial court erred
in vacating the ODA, we could not render effective relief because Kho was not entitled to
a Berman hearing in the first place. (See McClatchy v. Coblentz, Patch, Duffy & Bass,
LLP (2016) 247 Cal.App.4th 368, 375 [matter is moot when the court cannot grant
effective relief].) We accordingly affirm the trial court’s order vacating the ODA.
                                    III. DISPOSITION
       The trial court’s denial of One Toyota’s petition to compel arbitration is reversed,
and its order vacating the ODA is affirmed. The matter is remanded to the trial court
with directions to enter a new order granting the petition to compel arbitration. One
Toyota may recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

                                             22
                                 _________________________
                                 Margulies, J.

We concur:

_________________________
Humes, P.J.

_________________________
Banke, J.

A147564

                            23
Appendix, page 1 of 2

         24
Appendix, page 2 of 2

         25
Trial Court: Alameda County Superior Court

Trial Judge: Hon. Evelio Grillo

Counsel:

Fine, Boggs & Perkins, John P. Boggs and Roman Zhuk for Plaintiff and Appellant

Fernando Flores for Intervener and Appellant.

No appearance for Defendant and Respondent.

                                          26