The Continuing Saga of Arbitration Agreements & Unconscionability

10.31.2013
Nossaman eAlert

In light of the United States Supreme Court decision in AT&T Mobility LLC v. Concepcion, the California Supreme Court recently reversed its own prior decision where it had held that an arbitration agreement that requires an employee to waive the right to a hearing [Berman hearing] before the state labor commissioner is contrary to public policy and unenforceable. Thus, in Sonic-Calabasas A, Inc. v. Moreno, the California Supreme Court held that the Federal Arbitration Act preempts (trumps) California state law categorically prohibiting the waiver of a Division of Labor Standards Enforcement Berman hearing in a mandatory pre-dispute arbitration agreement. However, a majority of the Court held that arbitration agreements can be invalidated where the employee can show that such agreements are found to be unconscionable whenever it is unreasonably favorable to the more powerful party so long as the basis for finding the unconscionability does not interfere with fundamental attributes of arbitration.

The Court has thus remanded the case to the trial court to determine whether the arbitration agreement in this case was otherwise so unconscionable as to be unenforceable. So stay tuned…

In light of this decision, employers who do not have arbitration agreements should consider whether they should implement them and those with arbitration agreements should revisit them to ensure that they do not contain provisions that could be construed as unconscionable and unenforceable because they unfairly advantage the employer.

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