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California Supreme Court Will Determine (i) Whether to Enforce Arbitration Agreements that Bar Employees from Bringing Claims Before the Labor Commissioner, and (ii) When a Demand for Arbitration Must Be Made to Avoid Waiver

SUMMARY: The Court of Appeal reversed a trial court’s order denying an employer’s motion to compel the employee to arbitrate claims for unpaid wages the employee filed with the California Labor Commissioner.  The appellate court ruled that arbitration, as a means of resolving the dispute, is sufficiently “accessible and affordable” when compared to “Berman” hearings at the Labor Commissioner.  A Berman hearing is a “mini-trial” held at the Labor Commission.  The rules of evidence do not apply.  Following a Berman hearing, either party may appeal the Labor Commission’s decision to the Superior Court.  Thus, matters before the Labor Commission and arbitration resemble ordinary litigation in an “accessible and affordable” forum.  The appellate court also decided that the employer had not waived its right to demand arbitration even though it waited until the morning of the Labor Commissioner’s Berman hearing to demand arbitration.

QUESTIONS FOR THE SUPREME COURT: The California Supreme Court will decide (i) whether an arbitration agreement prohibiting an employee to file a wage claim with the Labor Commissioner provides a sufficiently affordable and accessible arbitration forum making the agreement enforceable, and (ii) how far in advance of a Berman hearing the employer must demand arbitration to avoid waiving the right to enforce the arbitration agreement.  OTO, LLC v. Kho.

Please contact Phillip Maltin for further information about these cases pending before the California Supreme Court.