14 Cal. App. 5th 691
Cal. Ct. App. 5th2017Background
- Ken Kho, an auto mechanic, filed a wage claim with the California Labor Commissioner after termination; a deputy commissioner conducted a Berman hearing and awarded Kho over $100,000.
- One Toyota had an arbitration agreement (signed by Kho while employed, presented at his workstation in a short, pressured encounter) requiring arbitration by a retired superior court judge under California pleading and evidence rules.
- One Toyota filed a petition to compel arbitration the morning of the scheduled Berman hearing; the deputy commissioner proceeded in the employer’s absence and issued an ODA.
- The trial court denied One Toyota’s petition to compel arbitration, finding high procedural unconscionability and substantive unconscionability under Sonic-Calabasas (because the arbitration resembled civil litigation, would likely require counsel, and did not expressly provide attorney fee recovery). The trial court vacated the ODA for proceeding after notice of the arbitration agreement.
- The Court of Appeal reversed the denial of the petition to compel arbitration, concluding that (despite high procedural unconscionability) the arbitration agreement met Sonic II’s substantive standard of being an "affordable and accessible" alternative to Berman procedures; it affirmed vacatur of the ODA as moot and found no waiver based on One Toyota’s timing.
Issues
| Issue | Plaintiff's Argument (Commissioner/Kho) | Defendant's Argument (One Toyota) | Held |
|---|---|---|---|
| Whether the arbitration agreement is procedurally unconscionable | Agreement was adhesionary and was presented in a coercive, surprise-laden manner (signed quickly at workstation, tiny font, no explanation) | Agreement was a standard employment arbitration clause | Court: High degree of procedural unconscionability found. |
| Whether the agreement is substantively unconscionable under Sonic II (i.e., does it unacceptably waive Berman protections without providing an affordable, accessible alternative) | Arbitration is like civil litigation, will force claimant to hire counsel, and fails to expressly provide fee-shifting — thus not affordable/accessible | Employer will pay arbitration costs under Armendariz; Labor Code fee provisions (e.g., §218.5) apply in arbitration; claimant can proceed pro se; arbitration is no more complex than de novo court litigation | Court: Not substantively unconscionable under Sonic II — arbitration satisfies affordability and accessibility requirements. |
| Whether One Toyota waived its right to arbitrate by waiting until the morning of the hearing | Delay prejudiced Kho and commissioner by forcing a Berman hearing to proceed and causing surprise | Employer’s short delay did not cause prejudice; settlement efforts justified some delay | Court: No waiver — no substantial prejudice shown. |
| Whether vacatur of the ODA should be reversed on cross-appeal | Commissioner: vacatur improper because Berman process was valid | One Toyota: arbitration governs; vacatur moot if arbitration compelled | Court: Cross-appeal moot; order vacating ODA affirmed (no effective relief possible) |
Key Cases Cited
- Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (acknowledging unconscionability defense to Berman-waiving arbitration and requiring inquiry into affordability/accessibility)
- Sonic-Calabasas A, Inc. v. Moreno, 51 Cal.4th 659 (discussing Berman procedures and holding Berman rights may be waived only under certain scrutiny)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (summarizing unconscionability doctrine—procedural and substantive elements)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (employer must bear arbitration costs that employee would not bear in court for certain statutory rights)
- Gloster v. Sonic Automotive, Inc., 226 Cal.App.4th 438 (state-law waiver analysis: heavy burden to prove waiver; prejudice is central inquiry)