California Supreme Court: Arbitration Agreement Can Waive Labor Commissioner Hearings. I think.

We posted about the California Supreme Court's decision in Sonic-Calabassas A, Inc. v. Moreno (2011) 51 Cal.4th 659  here.  In that case, the California Supreme Court decided that an employer cannot make an employee skip a labor commissioner hearing in favor of arbitration.

The U.S. Supreme Court then issued its opinion in AT&T Mobility v. Concepcion (discussed here).  The California Supreme Court agreed to reconsider Moreno in light of Concepcion.  In the meantime, Moreno's author, Justice Moreno (no relation) and Chief Justice Ronald George retired.  Justice Goodwin Liu and Chief Justice Tani Cantil-Sakauye joined the Court.

Many thought the Court would re-examine its arbitration / unconscionability case law and come up with some clear standard for what is "unconscionable."  Because the California Supreme Court's jurisprudence on arbitration agreements plainly is inconsistent with the U.S. Supreme Court's interpretation of the Federal Arbitration Act. (Don't take it just from me.  Justices Chin and Baxter in their dissent in this case say the same thing.)

Well, if you were one of those people, you were half right.  The Court indeed re-examined its jurisprudence in a long, scholarly opinion.  And the Court decided (5-2) that Concepcion indeed overruled Moreno I.  Therefore, we know after this opinion that employers are not absolutely required to allow employees to go to the Labor Commissioner before arbitrating wage claims if they so choose.

But the Court also held that state courts can continue to invalidate arbitration agreements as "unconscionable" under the case law that has developed in California over several years.  "Scholarly" does not mean "clear."  After this case,  we know precious little about how to draft an enforceable arbitration agreement.  In fact, I am more confused than ever after reading this opinion.  I will read it again to see if I can come up with some rules.

I remain confused because the Court does not explain well what is "unconscionable" in an arbitration agreement. The Court does not draw a clear rule for how a court decides if it must defer to the agreement to arbitrate under the Federal Arbitration Act, or apply the California courts' maze of rules that the courts have developed following the Armendariz case.

The California Supreme Court is considering arbitration in several pending cases that have been briefed but not yet heard.  We will have to wait a bit longer for some clearer guidance, or wait for the U.S. Supreme Court to review Armendariz or one of its progeny. In the meantime, if you have an hour or so,  there are about 95 pages of majority and dissent opinion to read here.

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