OTO, L.L.C. v. Kho

IN THE SUPREME COURT OF

CALIFORNIA

OTO, L.L.C.,

Plaintiff and Appellant,

v.

KEN KHO,

Defendant and Respondent;

JULIE A. SU, as Labor Commissioner, etc.,

Intervener and Appellant.

S244630

First Appellate District, Division One

A147564

Alameda County Superior Court

RG15781961

August 29, 2019

Justice Corrigan authored the opinion of the Court, in which

Chief Justice Cantil-Sakauye and Justices Liu, Cuéllar,

Kruger, and Groban concurred.

Justice Chin filed a dissenting opinion.

OTO, L.L.C. v. KHO

S244630

Opinion of the Court by Corrigan, J.

Here, we again consider the enforceability of an agreement

requiring arbitration of wage disputes. Sonic-Calabasas A, Inc.

v. Moreno (2011) 51 Cal.4th 659 (Sonic I) concluded that such

arbitration agreements are categorically unconscionable

because workers waive their statutory rights to a “Berman

hearing” and related procedures designed to assist in the

recovery of unpaid wages. (See Lab. Code, § 98 et seq.)1 Rather

than invalidating the entire agreement, however, Sonic I held

that while Berman protections could not be waived, any party

dissatisfied with the Berman hearing’s result could move the

dispute to arbitration. (Sonic I, at pp. 669, 675.) The United

States Supreme Court vacated that judgment and remanded for

consideration in light of AT&T Mobility LLC v. Concepcion

(2011) 563 U.S. 333 (Concepcion). Thereafter, we determined

Sonic I’s categorical rule of unconscionability was preempted by

the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). (Sonic-

Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1146 (Sonic

II).) We held instead that an arbitration agreement is not

categorically unconscionable solely because it entails a waiver

of the Berman procedure. An agreement to arbitrate wage

disputes can be enforceable so long as it provides an accessible

1

All statutory references are to the Labor Code unless

otherwise stated.

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Opinion of the Court by Corrigan, J.

and affordable process for resolving those disputes. (Id. at

p. 1146.)

We originally granted review in this case to decide

whether an arbitral scheme resembling civil litigation can

constitute a sufficiently accessible and affordable process.

Because the facts here involve an unusually high degree of

procedural unconscionability, however, a definitive resolution of

that specific question is unnecessary. Even if a litigation-like

arbitration procedure may be an acceptable substitute for the

Berman process in other circumstances, an employee may not

be coerced or misled into accepting this trade. Considering the

oppressive circumstances present here, we conclude the

agreement was unconscionable, rendering it unenforceable.

I. BACKGROUND

The relevant facts are not in dispute. Ken Kho was hired

as a service technician for One Toyota of Oakland (One Toyota)

in January 2010.2 Three years later, a human resources “porter”

approached Kho in his workstation and asked him to sign

several documents. Kho was required to sign them immediately

and return them to the porter, who waited in the workstation.

It took Kho three or four minutes to sign them all. He had no

opportunity to read them, nor were their contents explained.

Kho’s first language is Chinese. He was not given copies of the

documents in either language.

One document was titled “Comprehensive Agreement—

Employment At-Will and Arbitration.”3 As the Court of Appeal

2

The auto dealership is licensed as OTO, L.L.C., apparently

an acronym of One Toyota of Oakland.

3

According to the parties, this agreement is essentially the

same as the one involved in the Sonic cases. Although

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Opinion of the Court by Corrigan, J.

observed, “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 contract’s arbitration clause is contained in a dense,

single-spaced paragraph, written in a very small typeface that

fills almost an entire page.4 Subject to limited exceptions,

nearly any employment-related claim made by either party

must be submitted to binding arbitration. Class or collective

proceedings are generally prohibited. Arbitrations must be

conducted before a retired superior court judge, pursuant to the

California Arbitration Act (Code Civ. Proc., § 1280 et seq.), with

full discovery permitted (see Code Civ. Proc., § 1283.05).

Furthermore, “[t]o the extent applicable in civil actions in

California courts,” the agreement requires adherence to “all

rules of pleading (including the right of demurrer), all rules of

impossible to verify without the Sonic record, the assertion may

be at least partially true. Both employers are automotive

dealerships and the contract appears to be a standardized form.

However, the agreements cannot be “identical,” as One Toyota

claims. The Sonic II contract allowed either party to seek review

of an award under California appellate rules of procedure. (See

Sonic II, supra, 57 Cal.4th at pp. 1146-1147.) The agreement

here includes no such term. Sonic II did not resolve whether the

agreement was substantively unconscionable. Instead, noting

that details of the arbitration process might not be reflected on

the face of the agreement, the case was remanded for additional

fact-finding. (See id. at pp. 1147-1148.) Here, once again, we

are faced with a bare agreement. No additional facts about One

Toyota’s arbitration process were developed below.

4

The parties dispute the precise font size. Kho asserts it is

7 points, while One Toyota insists it is 8.5 points. By any

measure, the type is quite small.

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Opinion of the Court by Corrigan, J.

evidence, all rights to resolution of the dispute by means of

motions for summary judgment, judgment on the pleadings, and

judgment under Code of Civil Procedure Section 631.8.”5 The

allocation of arbitration costs is not addressed explicitly.

Instead, the agreement refers to Code of Civil Procedure

section 1284.2, which generally provides that parties to an

arbitration must bear their own expenses. But the agreement

also states that “controlling case law” or statutes will prevail

over Code of Civil Procedure section 1284.2 if there is a conflict.

Kho’s employment ended in April 2014. Several months

later, he filed a complaint with the Labor Commissioner for

unpaid wages. At a settlement conference before a deputy labor

commissioner, One Toyota was represented by counsel; Kho

appeared in propria persona. One Toyota contends its attorney

demanded arbitration at the conference, presenting Kho with a

copy of the signed arbitration agreement, but Kho and the Labor

Commissioner dispute this account. Kho rejected One Toyota’s

settlement offer and requested a Berman hearing. The hearing

was set in August 2015, some nine months later.

On the Friday before the Monday Berman hearing, One

Toyota filed a petition to compel arbitration and stay the

administrative proceedings. It did not serve these papers on

Kho. On the morning of the hearing, One Toyota’s attorney

notified the Labor Commissioner by fax of its petition and asked

that the hearing be taken off calendar. The hearing officer

refused. One Toyota’s attorney appeared at the scheduled time

5

A motion for judgment under Code of Civil Procedure

section 631.8 is the equivalent of a nonsuit motion in a court

trial. (See Ford v. Miller Meat Co. (1994) 28 Cal.App.4th 1196,

1200.)

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Opinion of the Court by Corrigan, J.

but left after serving Kho for the first time with the petition to

compel. Proceeding without One Toyota, the hearing officer

awarded Kho $102,912 in unpaid wages and $55,634 in

liquidated damages, interest, and penalties. One Toyota sought

to vacate the award. The Labor Commissioner intervened on

Kho’s behalf and opposed the motions to compel and vacate. One

Toyota posted the required bond to permit de novo review of the

award under Labor Code section 98.2. (See post, at p. 8.)

The trial court vacated the Labor Commissioner’s award,

concluding the hearing should not have proceeded in One

Toyota’s absence. The court did not compel arbitration,

however. It found a high degree of procedural unconscionability

attended the agreement’s execution, which “created oppression

or surprise due to unequal bargaining power.” The court also

found the agreement substantively unconscionable under Sonic

II because it “fails to provide a speedy, informal and affordable

method of resolving wage claims and has virtually none of the

benefits afforded by the Berman hearing procedure.” The court

observed, “Contrary to the assumption that arbitration is

intended to provide an inexpensive, efficient procedure to

vindicate rights, the agreement in this case seeks, in large part,

to restore the procedural rules and procedures that create

expense and delay in civil litigation.” In light of this ruling, the

court declined to address the Labor Commissioner’s argument

that One Toyota waived its right to arbitrate by waiting too long

to claim it.

The Court of Appeal reversed. Although it noted an

“extraordinarily high” degree of procedural unconscionability in

the agreement’s execution, it concluded the agreement was not

substantively unconscionable. The agreement had no

objectionable terms and could be considered “ ‘harsh or one-

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Opinion of the Court by Corrigan, J.

sided’ only in comparison to the various features of the Labor

Code that seek to level the playing field for wage claimants.”

The arbitration would be sufficiently affordable under Sonic II

because laws external to the agreement require that employers

pay both the costs of arbitration (see Armendariz v. Foundation

Health Psychcare Service, Inc. (2000) 24 Cal.4th 83

(Armendariz)) and a successful claimant’s reasonable attorney

fees (see Lab. Code, § 218.5). Though the selected arbitration

procedure is more complex than a Berman hearing, the court

observed that those hearings are nonbinding and can progress,

at either side’s request, to a de novo proceeding in superior

court. In specifying an arbitral process that resembles civil

litigation, the agreement thus “anticipates a proceeding that is

no more complex than will often be required to resolve a wage

claim under the Berman procedures.” This resolution made it

unnecessary for the court to address the Labor Commissioner’s

cross-appeal from the order vacating her award. Finally, the

court held that One Toyota did not forfeit its right to arbitrate

because there was no showing of prejudice from the company’s

delay in seeking arbitration.

II. DISCUSSION

A. The Berman Process

Before addressing Kho’s unconscionability defense, we

review the statutory procedures he waived by agreeing to

arbitration. We also consider the significance of that waiver in

light of Sonic I and Sonic II.

1. Statutory Procedures Available to Wage Claimants

The Labor Code provides an administrative procedure for

recovery of unpaid wages. When an employer does not pay

wages as required, the employee may either: (1) file a civil

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action in court, or (2) file a wage claim with the Labor

Commissioner under sections 98 to 98.8. The administrative

option was added in 1976 (see Stats. 1976, ch. 1190, §§ 4-11,

pp. 5368-5371) and is commonly known as a “Berman” hearing.6

If an employee files an administrative complaint, the

Labor Commissioner may either accept the matter and conduct

a Berman hearing (§ 98, subd. (a)); prosecute a civil action on

the employee’s behalf (§ 98.3); or take “no further action . . . on

the complaint” (§ 98, subd. (a)). The commissioner’s staff may

try to settle the complaint before holding a hearing or filing suit.

(Dept. of Industrial Relations, Div. of Labor Stds. Enforcement

(DLSE), Policies and Procedures for Wage Claim Processing

(2012 rev.) p. 2.) Subject to extensions of time, Berman hearings

must generally be held within 90 days after a matter is accepted.

(§ 98, subd. (a).)

A Berman hearing is conducted by a deputy commissioner,

who may issue subpoenas. (Cal. Code Regs., tit. 8, §§ 13502,

13506.) The procedure “is designed to provide a speedy,

informal, and affordable method of resolving wage claims.”

(Cuadra v. Millan (1998) 17 Cal.4th 855, 858 (Cuadra).)

Pleadings are limited to a complaint and answer. There is no

discovery process. (§ 98, subd. (d).) Technical rules of evidence

do not apply, and all 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.” (Cal. Code Regs., tit. 8,

§ 13502.) The hearing officer may assist the parties with cross-

examination and explain issues and terms involved. (DLSE,

6

The legislation was sponsored by Assemblyman Howard

Berman. (Post v. Palo/Haklar & Associates (2000) 23 Cal.4th

942, 946.)

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Policies and Procedures for Wage Claim Processing, supra, at

p. 3.) If necessary, a translator will be provided. (Ibid.; see

§ 105, subd. (b).) The claim must be decided within 15 days of

the hearing. (§ 98.1, subd. (a).)

Either party may appeal the decision to the superior court,

which reviews the claim de novo. (§ 98.2, subd. (a).) An

employer who appeals must post an undertaking in the amount

of the award. (Id., subd. (b).) On appeal, the Labor

Commissioner may represent claimants “financially unable to

afford counsel” and must represent any indigent claimant

attempting to uphold the award while objecting to no part of it.

(§ 98.4.) An unappealed decision is a final judgment,

enforceable immediately. (§ 98.2, subds. (d), (e).) The

commissioner is responsible for enforcement (id., subd. (i)),

which is entitled to court priority (id., subd. (e)).

If an employer’s appeal fails, the court determines costs

and reasonable attorney fees incurred by the successful

employee and orders payment by the losing appellant. (§ 98.2,

subd. (c).) Claimants represented by the commissioner may still

recover fees, consistent with the statute’s goal of discouraging

unmeritorious appeals. (Lolley v. Campbell (2002) 28 Cal.4th

367, 376-378 (Lolley).) “An employee is successful if the court

awards an amount greater than zero.” (§ 98.2, subd. (c).) The

statute provides a one-way fee-shifting scheme: An

unsuccessful employer must pay attorney fees but a successful

one may not recover them. (See Arias v. Kardoulias (2012) 207

Cal.App.4th 1429, 1435.) This fee scheme differs from wage

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claims brought in superior court, where the “prevailing party”

may obtain attorney fees. (§ 218.5, subd. (a).)7

The Berman process is optional for both claimants and the

Labor Commissioner. Aggrieved employees may take their

wage claims directly to superior court. (See § 218.) Likewise,

the commissioner may decline to act on a filed complaint. (See

§ 98, subd. (a).) However, Berman procedures can significantly

reduce the costs and risks of pursuing a wage claim. They

provide “an accessible, informal, and affordable” avenue for

employees to seek resolution, with assistance available if

necessary. (Sonic II, supra, 57 Cal.4th at p. 1129.) They

discourage unmeritorious appeals through a bond requirement

and a fee-shifting scheme that favors employees. (See id. at

p. 1130.) They permit the commissioner to represent claimants

on appeal and facilitate award collection. (See ibid.)

2. The Sonic I and Sonic II Decisions

Sonic I and Sonic II addressed the validity of predispute

agreements requiring wage claim arbitration. Sonic I held that

it is against public policy for an employer to require employees

to waive their Berman rights as a condition of employment, and

that an arbitration agreement effectively waiving Berman

rights is substantively unconscionable as a matter of law. (Sonic

7

As amended in 2013, section 218.5, subdivision (a)

provides that “if the prevailing party in the court action is not

an employee, attorney’s fees and costs shall be awarded

pursuant to this section only if the court finds that the employee

brought the court action in bad faith.” (Stats. 2013, ch. 142, § 1)

Although it does not guarantee that wage claimants will be able

to recover their attorney fees, this amendment largely

eliminates the risk that they will be liable for their employer’s

fees.

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I, supra, 51 Cal.4th at pp. 684-687.) However, in construing the

agreement to attempt to harmonize the competing policies at

issue, Sonic I also held that parties could proceed to binding

arbitration after they had completed a Berman hearing. (Id. at

p. 675.) In other words, instead of pursuing a de novo appeal in

superior court, a party dissatisfied with the Labor

Commissioner’s ruling could petition to compel arbitration. (Id.

at p. 676.)

Sonic I’s holdings were short-lived. Two months later, on

a related question, Concepcion, supra, 563 U.S. 333 abrogated

our holding from Discover Bank v. Superior Court (2005) 36

Cal.4th 148 that class arbitration waivers in consumer contracts

are unconscionable. (Concepcion, at pp. 341-344.) The high

court explained that the “overarching purpose of the FAA . . . is

to ensure the enforcement of arbitration agreements according

to their terms so as to facilitate streamlined proceedings.” (Id.

at p. 344.) Because Discover Bank’s classwide arbitration rule

interfered with the “fundamental attributes of arbitration,” such

as efficiency and informality, it was preempted as inconsistent

with the FAA. (Concepcion, at p. 344.) Thereafter, the court

vacated the Sonic I judgment and remanded for our

consideration in light of Concepcion. (Sonic-Calabasas A, Inc. v.

Moreno (2011) 565 U.S. 973.)

On remand, we acknowledged the Supreme Court’s

admonition that states “cannot require a procedure that is

inconsistent with the FAA, even if it is desirable for unrelated

reasons.” (Concepcion, supra, 563 U.S. at p. 351; see Sonic II,

supra, 57 Cal.4th at p. 1141.) Because the court identified

efficiency as a hallmark of arbitration under the FAA,

Concepcion taught that “courts cannot impose unconscionability

rules that interfere with arbitral efficiency, including rules

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Opinion of the Court by Corrigan, J.

forbidding waiver of administrative procedures that delay

arbitration.” (Sonic II, at p. 1141; see Concepcion, at pp. 344-

345.) Accordingly, Sonic I’s categorical rule prohibiting a waiver

of Berman procedures was preempted. (Sonic II, at pp. 1139-

1141.)

Nevertheless, we noted that unconscionability remains a

valid defense to enforcement, even after Concepcion. The

overarching unconscionability question is whether an

agreement is imposed in such an unfair fashion and so unfairly

one-sided that it should not be enforced. Arbitration

agreements could not be deemed categorically unconscionable

simply because they entail a waiver of the Berman proceedings.

(Sonic II, supra, 57 Cal.4th at p. 1146.) However, we provided

that an employee’s Berman waiver, while not dispositive,

remains a significant factor in considering unconscionability.

An agreement’s failure to “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.” (Ibid.)

The Sonic II majority opinion focused repeatedly on the

need for accessible and affordable arbitration, reasoning that

these were key benefits of the Berman process that parties to an

arbitration agreement had decided to forgo. We stopped short

of defining the requirements for an acceptable arbitration

framework, however, and emphasized that arbitration can be

structured in various ways “so that it facilitates accessible,

affordable resolution of wage disputes,” without necessarily

replicating Berman protections. (Sonic II, supra, 57 Cal.4th at

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p. 1147.) So long as the arbitral procedure is relatively “low-

cost” (ibid.) and provides a forum for wage claimants “to pursue

their claims effectively” (ibid.), its adoption in lieu of the

Berman process will not, in itself, be considered unconscionable

(id. at pp. 1147-1148). In short, when an adhesion contract

requires arbitration, “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,” thus effectively blocking every

forum for redress including arbitration itself. (Id. at p. 1148.)

We did not decide whether the Sonic II agreement was

substantively unconscionable under this standard. Recognizing

that unconscionability is a fact-specific defense, we remanded

for the trial court to examine additional evidence regarding the

particulars of the arbitration process set out in the agreement.

(Sonic II, supra, 57 Cal.4th at pp. 1147-1148.)

B. Unconscionability of the Arbitration Agreement

California law strongly favors arbitration. Through the

comprehensive provisions of the California Arbitration Act

(Code Civ. Proc., § 1280 et seq.), “the Legislature has expressed

a ‘strong public policy in favor of arbitration as a speedy and

relatively inexpensive means of dispute resolution.’ ”

(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (Moncharsh).)

As with the FAA (9 U.S.C. § 1 et seq.), California law establishes

“a presumption in favor of arbitrability.” (Engalla v.

Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971.) An

agreement to submit disputes to arbitration “is valid,

enforceable and irrevocable, save upon such grounds as exist for

the revocation of any contract.” (Code Civ. Proc., § 1281; see 9

U.S.C. § 2.)

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“ ‘[G]enerally applicable contract defenses, such as . . .

unconscionability, may be applied to invalidate arbitration

agreements without contravening’ the FAA” or California law.

(Pinnacle Museum Tower Assn. v. Pinnacle Market Development

(US), LLC (2012) 55 Cal.4th 223, 246 (Pinnacle); see Concepcion,

supra, 563 U.S. at p. 339.) Unconscionability can take different

forms depending on the circumstances and terms at issue.

However, the doctrine’s application to arbitration agreements

must rely on the same principles that govern all contracts.

(Sonic II, supra, 57 Cal.4th at p. 1133.) The degree of unfairness

required for unconscionability must be as rigorous and

demanding for arbitration clauses as for any other contract

clause. (Ibid.)

The general principles of unconscionability are well

established. A contract is unconscionable if one of the parties

lacked a meaningful choice in deciding whether to agree and the

contract contains terms that are unreasonably favorable to the

other party. (Sonic II, supra, 57 Cal.4th at p. 1133.) Under this

standard, the unconscionability doctrine “ ‘has both a

procedural and a substantive element.’ ” (Ibid.) “The

procedural element addresses the circumstances of contract

negotiation and formation, focusing on oppression or surprise

due to unequal bargaining power. [Citations.] Substantive

unconscionability pertains to the fairness of an agreement’s

actual terms and to assessments of whether they are overly

harsh or one-sided.” (Pinnacle, supra, 55 Cal.4th at p. 246.)

Both procedural and substantive unconscionability must

be shown for the defense to be established, but “they need not be

present in the same degree.” (Armendariz, supra, 24 Cal.4th at

p. 114.) Instead, they are evaluated on “ ‘a sliding scale.’ ”

(Ibid.) “[T]he more substantively oppressive the contract term,

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the less evidence of procedural unconscionability is required to”

conclude that the term is unenforceable. (Ibid.) Conversely, the

more deceptive or coercive the bargaining tactics employed, the

less substantive unfairness is required. (A & M Produce Co. v.

FMC Corp. (1982) 135 Cal.App.3d 473, 487 (A & M Produce); see

Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th

619, 635; Carmona v. Lincoln Millennium Car Wash, Inc. (2014)

226 Cal.App.4th 74, 85 (Carmona).) A contract’s substantive

fairness “must be considered in light of any procedural

unconscionability” in its making. (Sanchez v. Valencia Holding

Co., LLC (2015) 61 Cal.4th 899, 912 (Sanchez).) “The ultimate

issue in every case is whether the terms of the contract are

sufficiently unfair, in view of all relevant circumstances, that a

court should withhold enforcement.” (Ibid.)

The burden of proving unconscionability rests upon the

party asserting it. (Sanchez, supra, 61 Cal.4th at p. 911; Sonic

II, supra, 57 Cal.4th at p. 1148.) “Where, as here, the evidence

is not in conflict, we review the trial court’s denial of arbitration

de novo.” (Pinnacle, supra, 55 Cal.4th at p. 236.)

1. Procedural Unconscionability

The Court of Appeal observed that the arbitration

agreement’s execution involved an “extraordinarily high” degree

of procedural unconscionability. We agree.

A procedural unconscionability analysis “begins with an

inquiry into whether the contract is one of adhesion.”

(Armendariz, supra, 24 Cal.4th at p. 113.) An adhesive contract

is standardized, generally on a preprinted form, and offered by

the party with superior bargaining power “on a take-it-or-leave-

it basis.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237,

1245 (Baltazar); see Armendariz, at p. 113.) Arbitration

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contracts imposed as a condition of employment are typically

adhesive (see Armendariz, at pp. 114-115; Serpa v. California

Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704), and

the agreement here is no exception. The pertinent question,

then, is whether circumstances of the contract’s formation

created such oppression or surprise that closer scrutiny of its

overall fairness is required. (See Baltazar, at pp. 1245-1246;

Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257,

1267-1268.) “ ‘ “Oppression occurs where a contract involves

lack of negotiation and meaningful choice, surprise where the

allegedly unconscionable provision is hidden within a prolix

printed form.” ’ ” (Pinnacle, supra, 55 Cal.4th at p. 247, italics

added; see De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966,

983.) This record reveals both oppression and surprise.

“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.) With respect to

preemployment arbitration contracts, we have observed that

“the economic pressure exerted by employers on all but the most

sought-after employees may be particularly acute, for the

arbitration agreement stands between the employee and

necessary employment, and few employees are in a position to

refuse a job because of an arbitration requirement.”

(Armendariz, supra, 24 Cal.4th at p. 115.) This economic

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pressure can also be substantial when employees are required

to accept an arbitration agreement in order to keep their job.

Employees who have worked in a job for a substantial length of

time have likely come to rely on the benefits of employment. For

many, the sudden loss of a job may create major disruptions,

including abrupt income reduction and an unplanned reentry

into the job market. In both the prehiring and posthiring

settings, courts must be “particularly attuned” to the danger of

oppression and overreaching. (Armendariz, at p. 115; see

Baltazar, supra, 62 Cal.4th at p. 1244.)

The circumstances here demonstrate significant

oppression. The agreement was presented to Kho in his

workspace, along with other employment-related documents.

Neither its contents nor its significance was explained. One

Toyota admits that Kho was required to sign the agreement to

keep the job he had held for three years. Because the company

used a piece-rate compensation system, any time Kho spent

reviewing the agreement would have reduced his pay.

Moreover, as the Court of Appeal explained, “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.” By having the porter wait for the documents, One

Toyota conveyed an expectation that Kho sign them

immediately, without examination or consultation with counsel.

One Toyota protests that Kho did not ask questions about the

agreement, but there is no indication that the porter had the

knowledge or authority to explain its terms. (See Carmona,

supra, 226 Cal.App.4th at pp. 84-85.) Similarly, although One

Toyota is correct that Kho did not attempt to negotiate, a

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complaining party need not show it tried to negotiate

standardized contract terms to establish procedural

unconscionability. (Carbajal v. CWPSC, Inc. (2016) 245

Cal.App.4th 227, 244; see Sanchez, supra, 61 Cal.4th at p. 914.)

By its conduct, One Toyota conveyed the impression that

negotiation efforts would be futile. Finally, Kho was not given

a copy of the agreement he had signed.8

The facts also support the trial court’s finding of surprise.

The agreement is a paragon of prolixity, only slightly more than

a page long but written in an extremely small font. The single

dense paragraph covering arbitration requires 51 lines. As the

Court of Appeal noted, the text is “visually impenetrable” and

“challenge[s] the limits of legibility.”

The substance of the agreement is similarly opaque. The

sentences are complex, filled with statutory references and legal

jargon. The second sentence alone is 12 lines long. The

arbitration paragraph refers to: the California Fair

Employment and Housing Act; title VII of the Civil Rights Act

of 1964; other unspecified “local, state or federal laws or

regulations”; the National Labor Relations Act; the California

Workers’ Compensation Act; “California Small Claims” actions;

the Department of Fair Employment and Housing; the

Employment Development Department; the “Equal

Opportunity Commission”; the federal and California

8

Nor was Kho offered a version to read in his native

language. (See Subcontracting Concepts (CT), LLC v. De Melo

(2019) 34 Cal.App.5th 201, 211; Carmona, supra, 226

Cal.App.4th at p. 85.) However, because the record does not

reveal the level of Kho’s English proficiency, we cannot

determine the significance of this omission, and we do not rely

on it.

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Opinion of the Court by Corrigan, J.

arbitration acts; and six different sections of California’s Civil

Code and Code of Civil Procedure. A layperson trying to

navigate this block text, printed in tiny font, would not have an

easy journey.

With respect to arbitration costs, the agreement states: “If

CCP § 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 CCP § 1284.2.” Code of Civil

Procedure section 1284.2 states a default rule that, unless the

agreement specifies otherwise, parties to an arbitration will

bear their own expenses. However, Armendariz created an

exception to this general rule for arbitrations of employment-

related disputes. (See Armendariz, supra, 24 Cal.4th at pp. 110-

111.)9 Although the agreement anticipates that the “controlling

case law” of Armendariz would prevail over the statutory default

rule, One Toyota’s obligation to pay arbitration-related costs

would not be evident to anyone without legal knowledge or

access to the relevant authorities. It is difficult to envision that

Kho would have had any idea what the cited code section says

or that a 13-year-old case creates a relevant exception to it. This

example illustrates the difficulty a layperson would have in

9

Under Armendariz, “when an employer imposes

mandatory arbitration as a condition of employment, the

arbitration agreement or arbitration process cannot generally

require the employee to bear any type of expense that the

employee would not be required to bear if he or she were free to

bring the action in court.” (Armendariz, supra, 24 Cal.4th at

pp. 110-111.) Armendariz concerned claims under the

California Fair Employment and Housing Act (Gov. Code,

§ 12900 et seq.), but One Toyota does not dispute that its holding

applies equally to wage claims.

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Opinion of the Court by Corrigan, J.

deciphering key terms. It would have been nearly impossible to

understand the contract’s meaning without legal training and

access to the many statutes it references. Kho had neither.

Under these circumstances, Kho’s signature attesting to have

read and understood the agreement appears formulaic rather

than informed. We agree with the Court of Appeal that the

agreement appears to have been drafted with an aim to thwart,

rather than promote, understanding.

The document itself and the manner of its presentation did

not promote voluntary or informed agreement to its terms.

“Arbitration is favored in this state as a voluntary means of

resolving disputes, and this voluntariness has been its bedrock

justification.” (Armendariz, supra, 24 Cal.4th at p. 115; see

Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 252.)

Arbitration contracts are vigorously enforced out of respect for

the parties’ mutual and voluntary agreement to resolve disputes

by this alternative means. (See, e.g., Moncharsh, supra, 3

Cal.4th at pp. 10-11.) However, an inference of voluntary assent

can be indulged only so far and must yield in the face of

undisputed facts that undermine it. Where an employee is

induced to sign an arbitration agreement through “sharp

practices” and surprise (see Gentry v. Superior Court (2007) 42

Cal.4th 443, 469 (Gentry)),10 the consent rationale carries less

force. “[A]rbitration ‘is a matter of consent, not coercion.’ ”

(Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp. (2010) 559 U.S.

662, 681; see Lamps Plus, Inc. v. Varela (2019) __ U.S. __, __

10

In Iskanian v. CLS Transportation Los Angeles, LLC

(2014) 59 Cal.4th 348, 360, we recognized that Gentry’s holding

regarding class arbitration waivers had been abrogated by

United States Supreme Court precedent.

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Opinion of the Court by Corrigan, J.

[139 S.Ct. 1407, 1415].) On this record, it is virtually impossible

to conclude that Kho knew he was giving up his Berman rights

and voluntarily agreeing to arbitration instead.

2. Substantive Unconscionability

Substantive unconscionability examines the fairness of a

contract’s terms. This analysis “ensures that contracts,

particularly contracts of adhesion, do not impose terms that

have been variously described as ‘ “ ‘overly harsh’ ” ’ (Stirlen v.

Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532), ‘ “unduly

oppressive” ’ (Perdue v. Crocker National Bank (1985) 38 Cal.3d

913, 925), ‘ “so one-sided as to ‘shock the conscience’ ” ’

(Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or ‘unfairly one-sided’

(Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064,] 1071.) All

of these formulations point to the central idea that the

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.’ ” (Sonic II,

supra, 57 Cal.4th at p. 1145.) Unconscionable terms “ ‘impair

the integrity of the bargaining process or otherwise contravene

the public interest or public policy’ ” or attempt to impermissibly

alter fundamental legal duties. (Ibid.) They may include fine-

print terms, unreasonably or unexpectedly harsh terms

regarding price or other central aspects of the transaction, and

terms that undermine the nondrafting party’s reasonable

expectations. (Ibid.; see Sanchez, supra, 61 Cal.4th at p. 911.)

These examples are illustrative, not exhaustive.

Substantive terms that, in the abstract, might not support

an unconscionability finding take on greater weight when

imposed by a procedure that is demonstrably oppressive.

Although procedural unconscionability alone does not invalidate

20

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Opinion of the Court by Corrigan, J.

a contract, its existence requires courts to closely scrutinize the

substantive terms “to ensure they are not manifestly unfair or

one-sided.” (Gentry, supra, 42 Cal.4th at p. 469.) We hold that,

given the substantial procedural unconscionability here, even a

relatively low degree of substantive unconscionability may

suffice to render the agreement unenforceable. (Carmona,

supra, 226 Cal.App.4th at p. 85; A & M Produce, supra, 135

Cal.App.3d at p. 487; see Armendariz, supra, 24 Cal.4th at

p. 114.)

Kho and the Labor Commissioner do not focus on the

fairness of specific, isolated terms in the agreement. Rather,

they contend One Toyota’s arbitral process is so inaccessible and

unaffordable, considered as a whole, that it does not offer an

effective means for resolving wage disputes. (See Sonic II,

supra, 57 Cal.4th at p. 1146.)11 This is a close question, which

cannot be resolved in the abstract. It is important to stress that

the waiver of Berman procedures does not, in itself, render an

arbitration agreement unconscionable. However, a substantive

unconscionability analysis is sensitive to “the context of the

rights and remedies that otherwise would have been available

to the parties.” (Sanchez, supra, 61 Cal.4th at p. 922.) We must

examine both the features of dispute resolution adopted as well

as the features eliminated. (Sonic II, supra, 57 Cal.4th at

p. 1146.)

11

Separately, Kho asserts the agreement is unconscionable

because it potentially extends to enforcement actions that may

be brought by the Labor Commissioner. We do not address this

new argument because, as Kho concedes, no such claims are at

issue here.

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As to accessibility, Kho first observes that, unlike in

Berman proceedings, the agreement does not explain how to

initiate arbitration. Industrial Welfare Commission (IWC) wage

orders, required by law to be posted at the jobsite (Lab. Code,

§ 1183, subd. (d)), direct employees to contact the Labor

Commissioner about wage-related violations, providing for this

purpose both the Department of Industrial Relations website

and a list of local labor commissioner offices. (See, e.g., IWC

wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040); IWC

wage order No. MW-2019 (Cal. Code Regs., tit. 8, § 11000).) An

employee can start the Berman process by filling out a simple

form found on the website and in local offices. The form is

rendered in many languages, and detailed instructions explain

how to complete and file it. In contrast, One Toyota’s agreement

does not mention how to bring a dispute to arbitration, nor does

it suggest where that information might be found.12

Commercial arbitration providers, for example, frequently

provide standardized forms to start the process. Employees can

also contact the provider for information on claim initiation.

The agreement here, however, identifies no commercial

providers. In fact, it does not mention that such providers exist.

It mandates that the arbitrator be a “retired California Superior

Court Judge” but gives no indication how an employee might

find such a person, let alone one willing to arbitrate a wage

12

A second document Kho signed the same day requires

management to be notified in writing about compensation-

related disputes but gives no indication such a notice would be

sufficient to initiate arbitration. (See dis. opn., post, at p. 31.)

Indeed, it would not be, since the agreement imposes no

obligation on One Toyota to take any action upon receiving such

a notice.

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claim. Although some employees might pursue other avenues

for relief and reach arbitration after encountering a motion to

compel, these additional steps will inevitably increase the delay

and expense involved. Other employees may be so confused by

the agreement that they are deterred from bringing their wage

claims at all.13

Kho also contends it would be difficult for an

unsophisticated, unrepresented wage claimant to effectively

navigate the agreement’s arbitral procedure. In the Berman

process, a claimant need only fill out a complaint form, possibly

assisted by a deputy labor commissioner, then attend a

settlement conference and, in some cases, a hearing. (See Sonic

II, supra, 57 Cal.4th at p. 1128.) By contrast, in the arbitration

provided for here, the complaint must be framed in a legal

pleading, and the claimant must respond to discovery demands

and dispositive motions. Whereas a Berman hearing is

conducted by a deputy labor commissioner, who can explain

terminology and assist with witness examination (see ibid.), the

arbitration here must be conducted by a retired superior court

judge, with procedures similar to a formal civil trial. Evidence

must conform to technical rules of evidence, whereas all

13

The dissent argues Kho could have deduced how to initiate

arbitration by the agreement’s reference to the California

Arbitration Act. (Dis. opn., post, at p. 31.) While still

speculative, this assertion would have more force if Kho had

been given a copy of the documents he signed. It is undisputed

he was not. It seems quite a stretch to assert that a mere

reference to the California Arbitration Act in the “visually

impenetrable” (ante, at p. 17) paragraph Kho was given an

inadequate opportunity to review, and which he would have had

to recall without his own copy to assist him, informed Kho how

to initiate arbitration.

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Opinion of the Court by Corrigan, J.

relevant evidence is typically admitted in Berman hearings.

(See ibid.; Cal. Code Regs., tit. 8, § 13502.)14 Collection is also

14

At oral argument, One Toyota’s counsel asserted that

these procedural requirements would not apply in wage claim

arbitrations because arbitrators would know to use simplified,

Berman-like procedures instead. This argument was never

previously made and is contrary to One Toyota’s position

throughout this appeal. In the Court of Appeal, One Toyota

defended the complexity of its arbitral process by arguing that

the agreement’s “rules for discovery and motion practice are

expressly the same as they would be in court—the same rules

that the state legislature deemed fair enough to institute for all

civil proceedings—with the only modifications noted in the four

corners of the arbitration agreement and not requiring reference

to any other documents.” In its briefing here, One Toyota

argued that what “Kho and the Labor Commissioner . . . both

truly desire is an arbitration procedure that resembles the

Berman hearing process. However, an employee is not entitled

to that . . . .” One Toyota never suggested its arbitral process

did, in fact, resemble the Berman procedures. Moreover,

counsel’s representation at oral argument is directly

contradicted by the language of the arbitration agreement. It

states: “To the extent applicable in civil courts, the following

shall apply and be observed: all rules of pleading (including the

right of demurrer), all rules of evidence, all rights to resolution

of the dispute by means of motions for summary judgment,

judgment on the pleadings, and judgment under Code of Civil

Procedure Section 631.8. The arbitrator shall be vested with

authority to determine any and all issues pertaining to the

dispute/claims raised, any such determinations shall be based

solely upon the law governing the claims and defenses pleaded,

and the arbitrator may not invoke any basis (including but not

limited to notions of ‘just cause’) for his/her determinations

other than such controlling law.” (Italics added.) This language

begins in the 32d line of the arbitration paragraph. It clearly

requires the parties to follow the same pleading, evidence, and

motion practice rules that govern civil litigation. Further, by

requiring arbitration before a retired superior court judge, the

agreement ensures the arbitrators will be experienced in

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Opinion of the Court by Corrigan, J.

simplified in the Berman context because the Labor

Commissioner is responsible for enforcing the judgment.

(§ 98.2, subd. (i).) Or, if the employer unsuccessfully appeals the

Labor Commissioner’s award, the claimant can collect on a

posted bond. (§ 98.2, subd. (b).) In arbitration, a successful

claimant must petition to confirm the award and reduce it to an

enforceable judgment. (Code Civ. Proc., §§ 1285, 1287.4.)

The Berman process was specifically designed to give

claimants a “speedy, informal, and affordable method” for

resolving wage disputes. (Cuadra, supra, 17 Cal.4th at

p. 858.)15 The process advances “the very objectives of

‘informality,’ ‘lower costs,’ ‘greater efficiency and speed,’ and use

of ‘expert adjudicators’ that the high court has deemed

‘fundamental attributes of arbitration.’ ” (Sonic II, supra, 57

Cal.4th at p. 1149; see Concepcion, supra, 563 U.S. at pp. 344,

348.)16 By contrast, the arbitration provided for here

enforcing these procedural rules. It is difficult, if not impossible,

to square the strict language of the contract with One Toyota’s

belated assertion.

15

Although the resolution of this particular dispute has not

been speedy, the delay is largely attributable to One Toyota.

Kho filed a claim with the Labor Commissioner in October 2014.

A settlement conference was held the next month, and a Berman

hearing followed nine months later, in August 2015. The Labor

Commissioner issued an award only a week after the hearing,

around 10 months after Kho filed his claim. Litigation over One

Toyota’s motion to compel arbitration then consumed the next

four years.

16

The dissent raises the same criticisms of the Berman

procedure that this court considered at length, and rejected, in

Sonic II, supra, 57 Cal.4th at pages 1160-1162. The Berman

procedures remain the Legislature’s best “solution to the real-

world problems employees face in recovering wages owed.” (Id.

at p. 1162.) These “informal procedures and incentives . . . make

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Opinion of the Court by Corrigan, J.

incorporates the intricacies of civil litigation. An employee must

surrender the benefits and efficiencies of the Berman process

but does not gain in return any of the efficiencies or cost savings

often associated with arbitration.

We observed in Little v. Auto Stiegler, Inc., supra, 29

Cal.4th at page 1075, footnote 1, that litigation-like procedures,

on their own, are not necessarily so one-sided as to make an

arbitration agreement unconscionable. We certainly do not now

suggest that a system of statutory and common law carefully

crafted to ensure fairness to both sides, and subject to

continuous review, is per se unfair.17 However, that carefully

crafted process can be costly, complex, and time-consuming. It

is the opportunity to expedite and simplify the process that can

motivate informed parties to agree to arbitration. Furthermore,

Little’s observation was made in the context of a suit alleging

wrongful demotion and discharge. (Id. at p. 1069.) For such

it more likely employees will be able to recover wages without

incurring substantial attorney fees or the risk of liability for an

employer’s attorney fees,” and help to “ensure that employees

will be able to actually collect a favorable judgment.” (Ibid.)

Now, as in 2013, “[t]he dissent does not persuade us to second-

guess the efficacy of this legislative solution or to depart from

this court’s consistent understanding of the Berman statutes’

benefits.” (Ibid.)

17

It should be evident that our observations here, which the

dissent quotes repeatedly (dis. opn., post, at pp. 1, 19, 42, 45, 48,

55), pertain to civil litigation in general, not to the importation

of civil litigation’s formalities into an arbitration scheme that

was forced on an employee through oppression and surprise as

a substitute for an administrative procedure that we have

repeatedly found to be expedient and affordable. (See, e.g.,

Sonic II, supra, 57 Cal.4th at pp. 1160-1161; Cuadra, supra, 17

Cal.4th at p. 858.)

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Opinion of the Court by Corrigan, J.

claims, it may well be that an arbitration process closely

resembling civil litigation can be as advantageous for the

employee as for the employer. (See id. at p. 1075, fn. 1.) There

is no Berman-like administrative process for wrongful discharge

claims.

Our cases have taken a different approach in evaluating

the compelled arbitration of wage claims, as compared to the

arbitration of other types of disputes. Employees who agree to

arbitrate claims for unpaid wages forgo not just their right to

litigate in court, but also their resort to an expedient, largely

cost-free administrative procedure. We explained repeatedly in

Sonic II that, while the waiver of Berman procedures does not

in itself render an arbitration agreement unconscionable, the

agreement must provide in exchange an accessible and

affordable forum for resolving wage disputes. (Sonic II, supra,

57 Cal.4th at pp. 1146, 1147-1148, 1150.) No specific procedures

are required. (See id. at pp. 1147, 1170-1171.) But the arbitral

scheme must offer employees an effective means to pursue

claims for unpaid wages, and not impose unfair costs or risks on

them or erect other barriers to the vindication of their statutory

rights. (See id. at pp. 1142, 1147-1148, 1157-1158.) When

imposed in a procedurally unconscionable fashion, such barriers

to the vindication of rights may become unenforceable.

It is true, as One Toyota notes, that the results of a

Berman hearing are nonbinding. An appeal by either party will

bring the parties to the superior court for de novo review, where

litigation formalities may apply.18 But, as Sonic II explained,

18

The dissent contends efficiencies of the Berman process

are illusory because de novo appeals will simply bring the

matters to superior court. (Dis. opn., post, at p. 30.) However,

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the prospect of an appeal does not negate the efficiency or

accessibility of the Berman process. (Sonic II, supra, 57 Cal.4th

at pp. 1160-1162, 1167.) Appeals are discouraged by the

requirement that employers post a bond (§ 98.2, subd. (b)) and

pay the costs and attorney fees on appeal of any employee who

recovers even a minimal amount (see § 98.2, subd. (c); Lolley,

supra, 28 Cal.4th at p. 376). If the employer does appeal,

Berman claimants who cannot afford counsel may be

represented by the Labor Commissioner. Representation in a

de novo appeal is guaranteed for indigent claimants who do not

object to the commissioner’s final order. (§ 98.4.) Absent the

agreement, Kho may well have been represented by the Labor

Commissioner in any de novo appeal. Moreover, all claimants

will have a better understanding of how to support their wage

claims as a result of having the commissioner’s assistance

during the Berman process.

the Labor Commissioner explained at oral argument that de

novo appeals are relatively rare. Most of the 30,000 to 40,000

claims filed with the commissioner each year are resolved at the

initial settlement conference, with only around 10,000

proceeding to a Berman hearing. Of those 10,000, fewer than

500 cases result in a de novo appeal. Moreover, although trial

courts generally have the power “ ‘ “to adopt any suitable

method of practice” ’ ” in cases before them (Murphy v. Kenneth

Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1118), the Labor

Commissioner represents that de novo appeals typically proceed

directly to trial, without lengthy pretrial proceedings. Formal

discovery in the superior court, though permissible, is

disfavored except in unusually high-value or complex wage

disputes. (Sales Dimensions v. Superior Court (1979) 90

Cal.App.3d 757, 763.) One Toyota has not challenged these

representations. (See Madera Police Officers Assn. v. City of

Madera (1984) 36 Cal.3d 403, 407, fn. 5.)

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Because the complexity of One Toyota’s arbitral process

effectively requires that employees hire counsel, there is also

force to Kho’s argument that the procedure is not an affordable

option. An arbitration procedure may not impose such costs or

risks on wage claimants that it “ ‘effectively blocks every forum

for the redress of disputes, including arbitration itself.’ ” (Sonic

II, supra, 57 Cal.4th at p. 1148.)

As noted, Armendariz, supra, 24 Cal.4th 83, requires that

employers bear most arbitration costs, which, because they

include the arbitrator’s compensation, can be substantial. The

Armendariz rule mitigates the unfairness of expecting that

employees bear costs of a procedure to which they were required

to agree. Attorney fees are different, however, because they are

not unique to arbitration. It is true that employees are free to

hire counsel, or not, whether they pursue their claims in court

or in arbitration. But wage claimants present a somewhat

special case. These employees can secure free legal assistance

from the Labor Commissioner, both at the Berman hearing and

in any subsequent appeal. While all employees would likely

benefit from having a lawyer in the litigation-like arbitration

process here, only wage claimants have to pay for representation

that was otherwise available to them for free.19

19

One Toyota suggests that the Labor Commissioner could

represent claimants in arbitration. An administrative agency’s

authority is limited to that conferred by statute or the

Constitution. (Ferdig v. State Personnel Bd. (1969) 71 Cal.2d 96,

103; Noble v. Draper (2008) 160 Cal.App.4th 1, 12.) Although

section 98.4 allows the Labor Commissioner to represent

indigent claimants in de novo court proceedings following a

Berman hearing, no statute authorizes the representation of

claimants outside this specific context. The commissioner does

have the power to prosecute its own action for the collection of

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One Toyota notes that employees who hire counsel for

wage-claim arbitrations may be able to recover their legal fees

under an applicable fee-shifting statute. (See Kirby v. Immoos

Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1251.) For example,

section 218.5, subdivision (a) requires the court to award

reasonable attorney fees and costs to the prevailing party in

“any action brought for the nonpayment of wages” if fees are

requested “upon the initiation of the action.” The parties do not

dispute that section 218.5 applies to most of Kho’s claims. While

section 218.5 permits an award of fees to either employees or

employers who prevail (see Kirby, at p. 1251), employers may

recover fees “only if the court finds that the employee brought

the court action in bad faith.” (§ 218.5, subd. (a); see Arave v.

Merrill Lynch, Pierce, Fenner & Smith, Inc. (2018) 19

Cal.App.5th 525, 545.)

Although section 218.5 may mitigate some financial

burden, employees still face a risk that they will not be

designated the prevailing party, rendering their fees

unrecoverable. The prevailing party is the one that succeeds “on

a ‘ “practical level” ’ ” and has “ ‘realized its litigation

objectives.’ ” (Sharif v. Mehusa, Inc. (2015) 241 Cal.App.4th

185, 192.) An employer might be deemed the prevailing party

on a wage claim if the jury denies most or all of the wages

sought, even if the employee prevails on other claims. (See ibid.)

unpaid wages and penalties on behalf of workers who are unable

to afford counsel. (§ 98.3; see § 98, subd. (a).) Whether this

discretionary authority extends to representing wage claimants

in an arbitration is not readily apparent but, in any event, is a

question beyond the scope of this appeal.

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In contrast, the Berman statutes provide fee-shifting to

wage claimants who secure any monetary recovery in an

employer’s appeal. (§ 98.2, subd. (c).) Considering the

simplified administrative procedures that can be navigated in

propria persona, and the availability of the Labor

Commissioner’s representation and favorable fee-shifting in a

de novo appeal, claimants can successfully complete the Berman

process without paying a cent to an attorney. The calculus is

significantly different for employees in the arbitration process

here, despite section 218.5. Assuming they can find counsel

willing to represent them in One Toyota’s complex arbitral

process, these employees will have to pay the attorney if they do

not prevail and may have to pay their employer’s attorney fees

upon a finding of bad faith. (See § 218.5, subd. (a).) Moreover,

since section 218.5, subdivision (a) requires a fee request “upon

the initiation of the action,” employees who hire counsel after

filing suit or starting arbitration may unwittingly forfeit their

right to fees by failing to make a timely request.

Because the arbitration process here is no more

complicated than ordinary civil litigation, it might be

sufficiently accessible for wage claimants who are sophisticated,

or affordable for those able to hire counsel. But an

unconscionability analysis must be sensitive to context. Context

includes both the commercial setting and purpose of the

arbitration contract and any procedural unconscionability in its

formation. (Sanchez, supra, 61 Cal.4th at pp. 911-912.) As

noted, the procedural unconscionability showing here is

exceptionally strong. Although the same contract terms might

pass muster under less coercive circumstances, a worker who is

required to trade the Berman process for arbitration should at

least have a reasonable opportunity to understand the bargain

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he is making. Had One Toyota set out the terms of its

agreement in a legible format and fairly understandable

language, or had it given Kho a reasonable opportunity to seek

clarification or advice, this would be a different case.

Ultimately, the question is whether Kho, through

oppression and surprise, was coerced or misled into making an

unfair bargain. (See Gentry, supra, 42 Cal.4th at pp. 469-470;

see also Sanchez, supra, 61 Cal.4th at p. 912.) The substantive

fairness of this particular agreement must be considered in

terms of what Kho gave up and what he received in return. By

signing the agreement, Kho surrendered the full panoply of

Berman procedures and assistance we have described. What he

got in return was access to a formal and highly structured

arbitration process that closely resembled civil litigation if he

could figure out how to avail himself of its benefits and avoid its

pitfalls. Considering the unusually coercive setting in which

this bargain was entered, we conclude it was sufficiently one-

sided as to render the agreement unenforceable.20

3. Consistency with Federal Law

Our holding rests on generally applicable

unconscionability principles and heeds Concepcion’s counsel

that arbitration agreements be placed “on an equal footing with

other contracts.” (Concepcion, supra, 563 U.S. at p. 339.)

Nevertheless, our dissenting colleague renews several of the

preemption arguments he made in Sonic II, insisting once again

that this court’s approach to unconscionability contradicts the

FAA and United States Supreme Court jurisprudence. (See

20

In light of this conclusion, we need not decide the Labor

Commissioner’s claim, raised below, that One Toyota forfeited

its right to arbitrate.

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Opinion of the Court by Corrigan, J.

Sonic II, supra, 57 Cal.4th at pp. 1184-1192 (conc. & dis. opn. of

Chin, J.).) We respectfully suggest these complaints are

unfounded.

The dissent’s primary objection is that our analysis

evinces hostility to arbitration, discriminates against

arbitration, or improperly prefers a nonarbitral forum. (Dis.

opn., post, at pp. 44-49.) Yet arbitration is premised on the

parties’ mutual consent, not coercion (see Stolt-Nielsen S. A. v.

AnimalFeeds Int’l Corp., supra, 559 U.S. at p. 681), and the

manner of the agreement’s imposition here raises serious

concerns on that score. Moreover, we have repeatedly stressed

that the substantive unconscionability of an arbitration

agreement “is viewed in the context of the rights and remedies

that otherwise would have been available to the parties.”

(Sanchez, supra, 61 Cal.4th at p. 922, citing Sonic II, supra, 57

Cal.4th at pp. 1146–1148.) The dissent supports its claim with

repeated quotations to our observations about civil litigation,

not the arbitral process under review. The argument is thus

premised on a false equivalence between the system of civil

litigation and the complex arbitral procedure adopted in this

case, which features few, if any, of the benefits typically

associated with arbitration and regarded as fundamental. (See

Concepcion, supra, 563 U.S. at pp. 344-345.) While “the Berman

statutes promote the very objectives of ‘informality,’ ‘lower

costs,’ ‘greater efficiency and speed,’ and use of ‘expert

adjudicators’ that the high court has deemed ‘fundamental

attributes of arbitration,’ ” the arbitration agreement here

undermines those objectives by causing an “increase in cost,

procedural rigor, complexity, or formality.” (Sonic II, supra, 57

Cal.4th at p. 1149, quoting Concepcion, supra, 563 U.S. at

p. 348.)

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Opinion of the Court by Corrigan, J.

In comparing Berman’s administrative process with One

Toyota’s arbitral procedure, we have simply evaluated the

bargain at issue. We have not said no arbitration could provide

an appropriate forum for resolution of Kho’s wage claim, but

only that this particular arbitral process, forced upon Kho under

especially oppressive circumstances and erecting new barriers

to the vindication of his rights, is unconscionable.

Citing the protracted appellate proceedings here, the

dissent also complains that evaluating unconscionability claims

will erect the type of “preliminary litigating hurdle” to

arbitration the high court disfavored in American Express Co. v.

Italian Colors Restaurant (2013) 570 U.S. 228, 239. For obvious

reasons, the duration of this particular litigation can hardly be

considered typical. Few cases progress to appeal, and

vanishingly few reach this court. More importantly, the issue

here is very different from that in Italian Colors. Unlike the

“judge-made exception to the FAA” the high court found

problematic (Italian Colors, at p. 235), the unconscionability

defense has long been recognized as a permissible ground for

invalidating arbitration agreements under the FAA’s savings

clause. (9 U.S.C. § 2; see, e.g., Concepcion, supra, 563 U.S. at

p. 339; Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681,

687.) The FAA thus contemplates that unconscionability

claims, like other state law contract defenses, will be resolved

before arbitration is enforced. (See Sonic II, supra, 57 Cal.4th

at p. 1167.) If the defense cannot be addressed before

arbitration, then the savings clause has no meaning. The

dissent also predicts delay from the case-by-case litigation of

accessibility and affordability. (See dis. opn., post, at p. 52.) But

this is an argument with the unconscionability defense itself,

which is inherently fact-specific. Once again, the dissent’s view

34

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Opinion of the Court by Corrigan, J.

would all but eliminate the unconscionability defense to

arbitration agreements, rendering the FAA’s savings clause

meaningless.

“Under the dissent’s sweeping view of FAA preemption, no

unconscionability rule may take into account the surrender of

statutory protections for certain claimants, whether or not those

protections interfere with fundamental attributes of

arbitration.” (Sonic II, supra, 57 Cal.4th at p. 1168.) We

rejected that view in Sonic II and continue to do so. Sonic II’s

“unconscionability rule does not treat arbitration agreements

differently from nonarbitration agreements, does not remotely

foreclose the enforceability of agreements to arbitrate wage

disputes, and does not require such agreements to adopt any

devices or procedures inimical to arbitration’s fundamental

attributes.” (Id. at p. 1171.) Our application of that rule today

fully complies with the FAA and governing law.

C. Status of the Labor Commissioner’s Award

As noted, the trial court granted One Toyota’s motion to

vacate the Labor Commissioner’s award. Because the Court of

Appeal concluded the parties must arbitrate their wage dispute,

it did not address the Labor Commissioner’s cross-appeal from

the order vacating her award. We consider the issue because

the status of the Labor Commissioner’s award has continuing

significance on remand.

As One Toyota acknowledges, the issuance of such an

award has several consequences even if not reduced to an

enforceable judgment. When, as here, a de novo appeal is taken,

the employer must post bond in the amount of the award.

(§ 98.2, subd. (b).) Employees like Kho who do not contest any

aspect of the award can be represented by the Labor

35

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Opinion of the Court by Corrigan, J.

Commissioner in the de novo proceedings (§ 98.4) and obtain

attorney fees if they recover any amount. (§ 98.2, subd. (c); see

Lolley, supra, 28 Cal.4th at p. 377.) Kho’s access to these

benefits on remand depends on the status of the Labor

Commissioner’s award.21 A properly vacated award could make

these benefits unavailable. However, it appears the order

vacating the award was made in error.

On the morning of the scheduled Berman hearing, One

Toyota faxed the Labor Commissioner a letter. The company

explained it had filed a petition to compel arbitration and

requested the hearing be taken off calendar until arbitration

was complete. The Labor Commissioner refused, proceeded

with the hearing in One Toyota’s absence, and made an award

for Kho.22 The trial court found that One Toyota was

substantially justified in refusing to participate in the Berman

hearing and that enforcing the award would violate One

Toyota’s right to a fair administrative hearing. The procedural

21

After the trial court vacated the award, One Toyota

obtained an order releasing its appeal bond. Whether

section 98.2, subdivision (b) requires reinstatement or the

posting of a new bond is a matter the trial court may consider

on remand.

22

One Toyota argues the Labor Commissioner created a

“catch-22” by asserting that One Toyota would waive its right to

arbitrate if it participated in the Berman hearing. The record

directly belies this claim. After One Toyota refused to

participate in the hearing, the hearing officer notified it in

writing: “[I]n the event that your client disagrees with the

Order, Decision, or Award in this matter you will then have the

opportunity to file an appeal or compel arbitration at that time.”

(Italics added.) One Toyota cites nothing in the record to

support its “catch-22” assertion.

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Opinion of the Court by Corrigan, J.

posture here requires reversal of the trial court’s order granting

relief from the award.

The court purportedly relied on Code of Civil Procedure

section 1094.5, subdivision (b). That statute authorizes a writ

of mandate if an administrative tribunal “has proceeded

without, or in excess of, jurisdiction; whether there was a fair

trial; and whether there was any prejudicial abuse of

discretion.” (Code Civ. Proc., § 1094.5, subd. (b).) The difficulty

is One Toyota did not petition for a writ of mandate. (See Code

Civ. Proc., § 1094.5, subd. (a).) It simply filed a motion to vacate

the award. Moreover, administrative mandate applies only to

the results of “a proceeding in which by law a hearing is required

to be given. . . .” (Ibid., italics added.; see Keeler v. Superior

Court (1956) 46 Cal.2d 596, 598-599.) There is no requirement

that a Berman hearing be held on a wage complaint. The Labor

Commissioner has discretion to hold a hearing, prosecute the

case in court, or take “no further action . . . on the complaint.”

(Lab. Code, § 98, subd. (a).) Accordingly, Berman “hearings are

not subject to review under Code of Civil Procedure section

1094.5.” (Corrales v. Bradstreet (2007) 153 Cal.App.4th 33, 55.)

More fundamentally, One Toyota was not entitled to relief

on its motion because it failed to exhaust its administrative

remedies. The Labor Code outlines two alternatives for

challenging a Berman award. (See Gonzalez v. Beck (2007) 158

Cal.App.4th 598, 605.) First, either party can file an appeal in

the superior court. (§ 98.2.) Second, a defendant who has failed

to answer or appear in the Berman proceedings can apply to the

Labor Commissioner for relief under Code of Civil Procedure

section 473. (Lab. Code, § 98, subd. (f).) Although an

application to the Labor Commissioner need not precede a de

novo appeal (see Jones v. Basich (1986) 176 Cal.App.3d 513,

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Opinion of the Court by Corrigan, J.

518), this administrative recourse must be sought before a

motion to vacate the commissioner’s decision. Section 98,

subdivision (f) states: “No right to relief, including the claim

that the findings or award of the Labor Commissioner or

judgment entered thereon are void upon their face, shall accrue

to the defendant in any court unless prior application is made to

the Labor Commissioner in accordance with this chapter.” (See

Gonzalez, at pp. 605-606.) One Toyota tried to pursue both lines

of attack. It filed a de novo appeal and made a motion to vacate.

Because it failed to seek relief from the Labor Commissioner,

however, it was barred from obtaining the latter relief. (§ 98,

subd. (f).)

If One Toyota wished to halt the Berman proceedings

while pursuing arbitration, it could have requested a stay. The

filing of a petition to compel arbitration does not automatically

stay ongoing proceedings; the party seeking arbitration must

request one. (Brock v. Kaiser Foundation Hospitals (1992) 10

Cal.App.4th 1790, 1796.) Under Code of Civil Procedure

section 1281.4, “[i]f an application has been made to a court of

competent jurisdiction . . . for an order to arbitrate a controversy

which is an issue involved in an action or proceeding pending

before a court of this State and such application is

undetermined, the court in which such action or proceeding is

pending shall, upon motion of a party to such action or

proceeding, stay the action or proceeding until the application

for an order to arbitrate is determined . . . .” (Italics added.)

One Toyota’s petition to compel did, somewhat vaguely, ask the

court to stay “this action,” but it gave the court no opportunity

to rule on its request. The petition was filed with the court on

the Friday before a Monday Berman hearing. One Toyota did

not ask the court for an emergency stay in light of its late filing,

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Opinion of the Court by Corrigan, J.

and no stay order was actually issued before One Toyota’s

counsel unilaterally left the hearing.

One Toyota argues the terms of Code of Civil Procedure

section 1281.4 do not apply because Berman proceedings are not

“pending before a court of this State.” This assertion

undermines One Toyota’s attempt to excuse its nonparticipation

in the hearing and ignores the rule from Brock that a motion to

compel does not effect an automatic stay. Moreover, even if the

language of section 1281.4 does not explicitly encompass

proceedings before the Labor Commissioner, the superior court

likely had the power to stay these administrative proceedings

under Code of Civil Procedure section 1281.8, subdivision (a),

which authorizes a range of provisional remedies in aid of

arbitration, including injunctive relief. Failing that, the court

could have issued a stay under its inherent power. “[A] court

ordinarily has inherent power, in its discretion, to stay

proceedings when such a stay will accommodate the ends of

justice.” (People v. Bell (1984) 159 Cal.App.3d 323, 329.) As the

court in Landis v. North American Co. (1936) 299 U.S. 248, 254

explained, “the power to stay proceedings is incidental to the

power inherent in every court to control the disposition of the

causes on its docket with economy of time and effort for itself,

for counsel, and for litigants.”

One Toyota did not obtain a stay, but simply refused to

participate in a hearing that had been set months before. Under

these circumstances, the Labor Commissioner did not act

improperly in proceeding with the hearing after One Toyota and

its counsel chose to depart. Vacating that award was error.

Nevertheless, One Toyota properly appealed the award under

section 98.2, which forestalled the Labor Commissioner’s

decision, terminated her jurisdiction, and vested jurisdiction in

39

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Opinion of the Court by Corrigan, J.

the superior court. (Murphy v. Kenneth Cole Productions, Inc.,

supra, 40 Cal.4th at p. 1116.) Although the appeal terminates

the commissioner’s jurisdiction, Kho will have the benefit of the

Labor Code’s post-Berman hearing protections on remand. (See

§§ 98.2, 98.4.)

III. DISPOSITION

The decision of the Court of Appeal is reversed. The

matter is remanded for return to the trial court for proceedings

on One Toyota’s de novo appeal from the Labor Commissioner’s

award.

CORRIGAN, J.

We Concur:

CANTIL-SAKAUYE, C. J.

LIU, J.

CUÉLLAR, J.

KRUGER, J.

GROBAN, J.

40

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S244630

Dissenting Opinion by Justice Chin

Today, the majority holds that an arbitration agreement

is substantively unconscionable — and therefore

unenforceable — precisely because it prescribes procedures that,

according to the majority, have been “carefully crafted to ensure

fairness to both sides.” (Maj. opn., ante, at p. 25.) If you find

that conclusion hard to grasp and counterintuitive, so do I. It is

based on the majority’s view that arbitration with such

procedures, though not unaffordable or inaccessible in the

abstract or “per se unfair” (maj. opn., ante, at p. 25), is not as

advantageous for employees with unpaid wage claims as the

potentially multitiered, multistep, combined administrative and

judicial statutory process known as the Berman procedure. I

believe the majority’s analysis and conclusion to be incorrect

under state law in numerous respects. I also believe the Federal

Arbitration Act (FAA; 9 U.S.C. § 1 et seq.), as authoritatively

construed in binding United States Supreme Court decisions,

precludes the majority from invalidating this arbitration

agreement based on its subjective view that, for the purpose of

“vindicati[ng]” employees’ “statutory rights,” the prescribed

arbitration procedure is not as effective as the statutory Berman

procedure. (Maj. opn., ante, at p. 25.) I therefore dissent.

DISCUSSION

To explain why I do not join the majority, I begin by

summarizing relevant state law unconscionability principles. I

OTO, L.L.C. v. KHO

Chin, J., dissenting

then explain my disagreement with the majority’s view that “a

relatively low degree of substantive” unfairness may be

sufficient to render an arbitration agreement unenforceable on

the grounds of unconscionability (maj. opn., ante, at p. 20), and

with the majority’s analysis of procedural and substantive

unconscionability. Finally, I explain why I believe the majority’s

analysis and conclusion are inconsistent with, and therefore

preempted by, the FAA, as the United States Supreme Court

has construed that law.

A. State Law Principles of Arbitration and

Unconscionability.

Several state law legal principles must guide our analysis.

First, as the majority acknowledges, “California law strongly

favors arbitration.” (Maj. opn., ante, at p. 12.) The clearest

expression of this state policy appears in Code of Civil Procedure

section 1281, which declares that “[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.”

This section establishes the “fundamental policy” of California's

arbitration scheme: “that arbitration agreements will be

enforced in accordance with their terms.” (Vandenberg v.

Superior Court (1999) 21 Cal.4th 815, 836, fn. 10.) It creates “a

presumption in favor of arbitrability [citation] and a

requirement that an arbitration agreement must be enforced on

the basis of state law standards that apply to contracts in

general.” (Engalla v. Permanente Medical Group, Inc. (1997) 15

Cal.4th 951, 971-972.) The majority, after briefly mentioning

arbitration’s favored status under state law early in its opinion,

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Chin, J., dissenting

essentially ignores this principle in its analysis and in its refusal

to enforce the arbitration agreement here.

Second, although the doctrine of unconscionability, as a

generally applicable contract defense, may be applied to

invalidate an arbitration agreement, as the majority notes, the

doctrine’s “application” in the arbitration context “must rely on

the same principles that govern all contracts,” and “[t]he degree

of unfairness required for unconscionability must be as rigorous

and demanding for arbitration clauses as for any other contract

clause.” (Maj. opn., ante, at p. 13.)

Third, under our generally applicable principles of

unconscionability, “[a] party cannot avoid a contractual

obligation merely by complaining that the deal, in retrospect,

was unfair or a bad bargain” (Sanchez v. Valencia Holding Co.,

LLC (2015) 61 Cal.4th 899, 911 (Sanchez)) or by showing that

the contract “gives one side a greater benefit” (Pinnacle

Museum Tower Assn. v. Pinnacle Market Development (US),

LLC (2012) 55 Cal.4th 223, 246 (Pinnacle)). Under state law,

“[n]ot all one-sided contract provisions are unconscionable”

(Sanchez, at p. 911), and even the “fact that the bargain is a very

hard or unreasonable one is not generally sufficient per se to

induce . . . courts to interfere” (Boyce v. Fisk (1895) 110 Cal. 107,

116). Instead, the party seeking to invalidate an arbitration

agreement must show “a substantial degree of unfairness

beyond ‘a simple old-fashioned bad bargain.’ ” (Sonic–Calabasas

A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1160, italics added

(Sonic II).) The contract “must be ‘so one-sided as to “shock the

conscience” ’ ” (Pinnacle, at p. 246), or, as alternatively

formulated, “ ‘overly harsh,’ ‘unduly oppressive,’ [or]

‘unreasonably favorable.’ ” (Sanchez, at p. 911.)

3

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Chin, J., dissenting

Fourth, “contracts of adhesion . . . are indispensable facts

of modern life” and “are generally enforced” even though they

“contain a degree of procedural unconscionability.” (Gentry v.

Superior Court (2007) 42 Cal.4th 443, 469 (Gentry); see AT&T

Mobility LLC v. Concepcion (2011) 563 U.S. 333, 346-347

(Concepcion) [“the times in which consumer contracts were

anything other than adhesive are long past”].) “[A] contract of

adhesion is fully enforceable according to its terms” unless it

violates the “reasonable expectations of the weaker or ‘adhering’

party” or is “unduly oppressive or ‘unconscionable.’ ” (Graham

v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819, 820 (Graham).)

Fifth, the party seeking to avoid the contract must

establish both procedural and substantive unconscionability,

“the former focusing on ‘ “oppression” ’ or ‘ “surprise” ’ due to

unequal bargaining power, the latter on ‘ “overly harsh” ’ or

‘ “one-sided” ’ results.” (Armendariz v. Foundation Health

Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)

Although both must be present, we have stated that “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.”

(Ibid.)

B. The Majority’s Sliding Scale.

At this point, I note my first concern about the majority’s

analysis: its assertion that “a relatively low degree of

4

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Chin, J., dissenting

substantive unconscionability may suffice to render” an

arbitration agreement “unenforceable” if the level of procedural

unconscionability is “substantial.” (Maj. opn., ante, at p. 20.) To

begin with, it is unclear what the majority means by “relatively

low” (ibid.), and the majority sheds no light on this question.

The majority’s unadorned and unexplained assertion inevitably

poses — but does not answer — the following questions: Low

“relative[]” to what, and how “low” is enough?

Nor do our precedents support or give meaning to the

majority’s statement. The only decision from this court the

majority cites for its assertion is Armendariz. (Maj. opn., ante,

at p. 21.) However, the majority notably precedes this citation

with a “see” signal, which is the signal we use to introduce

decisions that provide only “weaker support” for a given

proposition, i.e., decisions that, as here relevant, “only indirectly

support the text” or contain “supporting dicta.” (Cal. Style

Manual (4th ed. 2000) § 1:4, p. 9.) Clearly, then, the majority

itself does not believe that Armendariz provides more than

indirect and weak support for its view.

To the extent Armendariz bears on the issue, it states, as

noted above, that the “ ‘sliding scale’ ” used in connection with

procedural and substantive unconscionability “ ‘disregards the

regularity of the procedural process of the contract formation . . .

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.”

(Armendariz, supra, 24 Cal.4th at p. 114.) As is obvious, the

main point of this passage is that where the degree of

substantive unconscionability is high — i.e., the contract terms

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Chin, J., dissenting

are extremely harsh or unreasonable — “evidence of procedural

unconscionability” becomes less important, i.e., a court may

“ ‘disregard[] the regularity of the procedural process of the

contract formation’ ” and find the contract unconscionable based

solely on the high level of substantive unfairness. (Ibid.) This

court’s use of the phrase “vice versa” at the end of the second

sentence (ibid.) means only that evidence of procedural

unfairness becomes more important to a finding of

unconscionability as the degree of substantive unfairness

decreases. That is not the same as saying that “a relatively low

degree of substantive unconscionability may suffice” where the

degree of procedural unconscionability is “substantial.” (Maj.

opn., ante, at p. 20.) Notably, the majority cites not a single case

in which we have applied Armendariz in the manner the

majority now suggests.

Indeed, the very concept of “a relatively low degree of

substantive unconscionability” (maj. opn., ante, at p. 20) is

inconsistent with our prior pronouncements that a court may

not invalidate “one-sided contract provisions” upon a mere

showing that “the deal, in retrospect, was unfair or a bad

bargain” (Sanchez, supra, 61 Cal.4th at p. 911) or “gives one side

a greater benefit” (Pinnacle, supra, 55 Cal.4th at p. 246); that

the contract “must be ‘so one-sided as to “shock the

conscience” ’ ” (Id. at p. 246), or “ ‘overly harsh,’ ‘unduly

oppressive,’ [or] ‘unreasonably favorable’ ” (Sanchez, at p. 911);

and that the party alleging unconscionability must establish “a

substantial degree of unfairness beyond ‘a simple old-fashioned

bad bargain’ ” (Sonic II, 57 Cal.4th at p. 1160, italics added).

The majority’s assertion that “a relatively low degree of

substantive unconscionability may suffice” (maj. opn., ante, at p.

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Chin, J., dissenting

22) simply cannot be squared with these principles, and the

majority does not even attempt to do so.

For its assertion, the majority more directly relies on two

Court of Appeal decisions (maj. opn., ante, at p. 22), but neither

is persuasive. In the first — Carmona v. Lincoln Millennium

Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85 — the Court of

Appeal stated: “In light of the high degree of procedural

unconscionability, even a low degree of substantive

unconscionability could render the arbitration agreement

unconscionable.” But the court cited no authority of any kind to

support this bare assertion. (Ibid.) And the statement was

dictum because, in the very next sentence, the court stated that

“[t]he degree of substantive unconscionability here was not

particularly low.” (Ibid., italics added.)

In the second decision the majority cites — A & M Produce

Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 487 (A & M

Produce) — the Court of Appeal stated that the enforceability of

a clause containing an “unreasonable risk reallocation[] . . . is

tied to the procedural aspects of unconscionability [citation]

such that the greater the unfair surprise or inequality of

bargaining power, the less unreasonable the risk reallocation

which will be tolerated.” But in making this statement, the

court cited no supporting decision from either California or any

other jurisdiction; indeed, it acknowledged that regarding “the

importance of both” procedural and substantive

unconscionability, there was “little California precedent directly

on point.” (Ibid.) Moreover, like the statement in Carmona, the

statement in A & M was dictum, because the court never

subsequently applied it in analyzing the unconscionability

issue. In any event, read carefully, the statement says no more

than did Armendariz, i.e., that evidence of procedural

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Chin, J., dissenting

unfairness becomes more important to a finding of

unconscionability as the degree of substantive unfairness

decreases. Again, that is not the same as saying that “a

relatively low degree of substantive unconscionability may

suffice” where the degree of procedural unconscionability is

“substantial.” (Maj. opn., ante, at p. 20.) Thus, neither A & M

nor Carmona constitutes reasoned or persuasive support for the

majority’s view, and no published California decision has

actually applied either that or a similar view to the facts of a

case.

This is an important issue, because the majority’s new rule

will significantly impact the enforceability of virtually all

mandatory, predispute arbitration agreements in the

employment context. This court has observed that “the

economic pressure” employers exert “on all but the most sought-

after employees” to sign such mandatory arbitration contracts

“may be particularly acute,” because the contract “stands

between the employee and necessary employment, and few

employees are in a position to refuse a job because of an

arbitration requirement.” (Armendariz, supra, 24 Cal.4th at p.

115; see Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245

(Baltazar); Sanchez, supra, 61 Cal.4th at p. 919; Sonic II, supra,

57 Cal.4th at p. 1134; Sonic-Calabasas A, Inc. v. Moreno (2011)

51 Cal.4th 659, 685 (Sonic I); Little v. Auto Steigler, Inc. (2003)

29 Cal.4th 1064, 1071 (Little).) Given this observation, in the

typical case of an employee who cannot afford to refuse or lose a

job because of an arbitration requirement, even were the other

procedural circumstances the majority discusses supported by

the record and recognized as significant by our case law —

considerations I address below — those circumstances would

not make the degree of procedural unconscionability here higher

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Chin, J., dissenting

in any analytically or legally relevant sense. Supporting this

view is the fact that the majority in Sonic I found a “significant

element of procedural unconscionability” (Sonic I, supra, 51

Cal.4th at p. 686) based solely on the ground that “the

agreement was one of adhesion and imposed as a condition of

employment” (id. at p. 685, fn. 10).

For this reason, the majority’s assurance that an identical

arbitration provision “might pass muster under less coercive

circumstances” (maj. opn., ante, at p. 31) rings hollow. Because

of the economic pressures faced by prospective and existing

employees, the majority’s finding of unconscionability will

surely be the rule in the vast majority of cases in the

employment context, regardless of the other circumstances the

majority cites. In other words, with few exceptions, as to

employees presented with a “sign or you’re unemployed” choice,

the ability to read, reflect, and understand the agreement does

not make the situation “less coercive” in any meaningful sense.

(Maj. opn., ante, at p. 29.) More broadly, because it would not

be difficult for a court to find a “relatively low degree of

substantive” unfairness in an adhesion contract (maj. opn., ante,

at p. 20), the majority’s new rule casts significant doubt on the

enforceability of many contractual terms in the employment

context, not just arbitration provisions.

C. Procedural Unconscionability.

I now turn to my next point of disagreement with the

majority: its analysis of procedural unconscionability. Several

aspects of that analysis are inconsistent with both established

California law and the record in this case.

First, in finding “significant oppression” (maj. opn., ante,

at p. 16), the majority emphasizes that Kho “had no opportunity

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Chin, J., dissenting

to read” the documents his employer — plaintiff One Toyota of

Oakland (OTO) — asked him to sign (maj. opn., ante, at p. 2),

and that OTO, by having an employee from its human resources

department “wait for the documents, . . . conveyed an

expectation that Kho sign them immediately, without

examination or consultation with counsel” (maj. opn., ante, at p.

16). However, in Sanchez, our procedural unconscionability

discussion gave no weight to sworn statements of the party

resisting arbitration that he “ ‘was presented with a stack of

documents,’ ” “ ‘was simply told . . . where to sign and/or initial

each one,’ ” and “ ‘was not given an opportunity to read any of

[them].’ ” (Sanchez, supra, 61 Cal.4th at p. 909.) Instead, we

explained that “even when a customer is assured it is not

necessary to read a standard form contract with an arbitration

clause, ‘it is generally unreasonable, in reliance on such

assurances, to neglect to read a written contract before signing

it.’ ” (Id. at p. 915.) Several of our Courts of Appeal have applied

this principle in the context of employment arbitration

agreements. (Avery v. Integrated Healthcare Holdings, Inc.

(2013) 218 Cal.App.4th 50, 65-66; 24-Hour Fitness, Inc. v.

Superior Court (1998) 66 Cal.App.4th 1199, 1215.) Moreover, in

Sonic I, supra, 29 Cal.4th at page 686, the majority’s discussion

of procedural unconscionability noted that “many employees

may not give careful scrutiny to routine personnel documents

that employers ask them to sign.” These precedents are

inconsistent with the majority’s view that the degree of

procedural unconscionability here was higher because Kho did

not have an opportunity to read the documents and OTO

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Chin, J., dissenting

“conveyed an expectation that [he] sign them immediately,

without examination.”1 (Maj. opn., ante, at p. 16.)

Second, I disagree with the majority insofar as it

emphasizes that “[n]either [the] contents nor significance” of the

arbitration agreement “was explained” to Kho, that “there is no

indication” in the record the employee who presented the

agreement “had the knowledge or authority to explain its

terms,” and that OTO, by “select[ing] a low-level employee . . . to

present the [a]greement, creat[ed] the impression that no

request for an explanation was expected and any such request

would be unavailing.” (Maj. opn., ante, at p. 16.) The majority’s

reliance on the absence of evidence regarding the employee’s

ability and authority to explain the agreement’s terms is

inconsistent with the fact that Kho bears “[t]he burden of

proving unconscionability.” (Maj. opn., ante, at p. 14.) More

broadly, the majority’s consideration of these circumstances is

inconsistent with Sanchez and with the FAA. In Sanchez,

regarding procedural unconscionability, we stated that the

party seeking to enforce an arbitration agreement “was under

no obligation to highlight the arbitration clause of its contract”

and was not “required to specifically call that clause to [the other

party’s] attention.” (Sanchez, supra, 61 Cal.4th at p. 914.) We

1

The majority’s emphasis on these facts is also inconsistent

with its own assertions that the arbitration agreement’s text is

“ ‘visually impenetrable’ ” and virtually illegible (maj. opn., ante,

at p. 17), and that its “substance” is so “opaque” (ibid.) that “[i]t

would have been nearly impossible” for Kho “to understand the

contract’s meaning” (maj. opn., ante, at p. 18). If these

assertions are accurate, then why does the majority find it

significant that Kho had no opportunity to read the agreement?

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Chin, J., dissenting

also stated that “[a]ny state law imposing such an obligation

would be preempted by the FAA.” (Ibid.)

Third, I disagree that the “degree of procedural

unconscionability” here was “unusually” or “ ‘extraordinarily

high’ ” (maj. opn., ante, at pp. 2, 14) because “Kho was required

to sign the agreement to keep the job he had held for three years”

and OTO’s conduct “conveyed the impression that negotiation

efforts would be futile” (maj. opn., ante, at pp. 17, 18). These

circumstances are what make the contract adhesive in the first

place; as the majority earlier explains, “[a]n adhesive contract is

standardized, generally on a preprinted form, and offered by the

party with superior bargaining power ‘on a take-it-or-leave-it

basis.’ ” (Maj. opn., ante, at p. 14.) They are also characteristics

of all “mandatory employment arbitration agreements,” which

this court has defined as “arbitration agreements that are

conditions of new or continuing employment.” (Sonic II, supra,

57 Cal.4th at p. 1130.) Thus, these circumstances neither

distinguish this case in any way nor support a finding that there

was a degree of procedural unconscionability beyond that found

with any adhesive, mandatory employment arbitration

agreement.

Regarding surprise, the majority begins its analysis by

assailing the arbitration agreement as being “a paragon of

prolixity.” (Maj. opn., ante, at p. 17.) However, “prolixity”

simply means the state or quality of being lengthy, protracted

and drawn out, perhaps unduly or unnecessarily so. (12 Oxford

English Dict. (2d ed.1989) p. 608; Webster’s 3d New Internat.

Dict. (2002) p. 1814; see Black’s Law Dict. (10th ed. 2014) p.

1406, col. 1 [“prolixity” is “[t]he unnecessary and superfluous

recitation of facts and legal arguments in pleading or

evidence”].) It is doubtful that the arbitration agreement in this

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Chin, J., dissenting

case, consisting of a “single” paragraph with “51 lines,” meets

this definition, let alone constitutes a “paragon” — i.e., a perfect

example — of this concept. (Maj. opn., ante, at p. 17.)

In any event, contrary to what the majority suggests, our

cases establish that prolixity itself is not problematic; for

purposes of a procedural unconscionability analysis, surprise

“ ‘ “occurs . . . where the allegedly unconscionable provision is

hidden within a prolix printed form.” ’ ” (Pinnacle, supra, 55

Cal.4th at p. 247, italics added.) There is nothing hidden about

the arbitration agreement in this case. It is not buried in a

multipage document that addresses numerous other matters,

but appears in a relatively short document that almost

exclusively addresses arbitration. In a heading at the top of the

agreement’s first page, set apart from the body of the agreement,

the word “ARBITRATION” appears in large, bolded, all caps

type. In a stand-alone provision at the top of the second page,

the agreement states, in large, all caps, italicized type, that Kho

is “AGREEING TO THIS BINDING ARBITRATION

PROVISION.” When Kho signed the arbitration agreement, he

also signed a separate two-page agreement containing a stand-

alone, bolded-type paragraph explaining that the parties

understood and were voluntarily agreeing to resolve “any

disputes” regarding Kho’s employment “exclusively in

accordance with binding arbitration,” and setting forth some of

the features of the arbitration procedure, i.e., “a retired

California Superior Court Judge” will conduct the arbitration

and “[t]he arbitration proceedings shall be governed by the

Federal Arbitration Act, and carried out in conformity with the

procedures of the California Arbitration Act.” The separate

agreement also expressly stated that Kho had executed or would

“execute a more comprehensive arbitration agreement with the

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Chin, J., dissenting

Company.” In finding surprise, the majority simply ignores

these considerations, as well as precedent finding no surprise

under analogous circumstances. (Pinnacle, supra, 55 Cal.4th at

p. 247, fn. 12 [in finding no surprise, citing fact that arbitration

provisions “appear in a separate article under a bold,

capitalized, and underlined caption titled ‘ARTICLE XVIII

CONSTRUCTION DISPUTES’ ”]; Bigler v. Harker School

(2013) 213 Cal.App.4th 727, 737 [no surprise where arbitration

clause “located at the top of the second page in a two-page

document with the heading ‘Arbitration’ in boldfaced font”];

Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th

1159, 1165 [emphasizing that arbitration provision “was printed

on a separate page” with “ ‘Arbitration Addendum’ at the top,”

and “was signed separately”].)

For the preceding reasons, I conclude that the arbitration

provision here is not unusual and that its substance does not

contribute to a finding that the “degree of procedural

unconscionability” in this case was, as the majority asserts,

“unusually” and “ ‘extraordinarily high.’ ” (Maj. opn., ante, at

pp. 2, 14.) Supporting this conclusion is the fact that in cases

involving a virtually identical arbitration provision, we did not

find an element of surprise that increased the degree of

procedural unconscionability. (Sonic II, supra, 57 Cal.4th at pp.

1125-1126; Sonic I, supra, 51 Cal.4th at pp. 669-670; Little,

supra, 29 Cal.4th at pp. 1069-1070.)

The majority concludes its discussion of procedural

unconscionability with a line of analysis that California courts

have long and uniformly rejected. The majority suggests that

the arbitration agreement here is unenforceable because: (1)

arbitration “ ‘ “is a matter of consent, not coercion” ’ ”; and (2) we

cannot “infer[]” that Kho’s “consent” to arbitrate was

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Chin, J., dissenting

“voluntary,” given that his execution of the arbitration

agreement was “induced . . . through ‘sharp practices’ and

surprise” and he almost certainly did not know “he was giving

up his Berman rights.” (Maj. opn., ante, at p. 19.) However,

almost 40 years ago, we held that contracts of adhesion are “fully

enforceable according to [their] terms” absent certain

circumstances (Graham, supra, 28 Cal.3d at p. 819), even

though they do not fit “the classical model of ‘free’ contracting

by parties of equal or near-equal bargaining strength,” given

that the weaker party’s only choices are “ ‘to adhere to the

contract or reject it’ ” (id. at p. 817). About 20 years later, we

held that mandatory employment arbitration contracts are

enforceable unless they contain “one-sided, substantively

unconscionable terms,” even though “voluntariness” is the

“bedrock justification” for arbitration and almost all employees

presented with such contracts are under “acute” “economic

pressure” to sign and effectively have no “choice” but to do so.

(Armendariz, supra, 24 Cal.4th at p. 115.) In subsequent years,

we have repeatedly affirmed that mandatory employment

arbitration agreements are enforceable unless substantively

unconscionable. (Baltazar, supra, 62 Cal.4th 1237, 1241; Sonic

II, supra, 57 Cal.4th at p. 1125; Sonic I, supra, 51 Cal.4th at p.

677; Pearson Dental Supplies, Inc. v. Superior Court (2010) 48

Cal.4th 665, 677; Little, supra, 29 Cal.4th at pp. 1068-1069.)

Consistent with our decisions, California’s Courts of

Appeal have expressly rejected the majority’s lack-of-consent

line of analysis. For example, in A & M Produce, supra, 135

Cal.App.3d at pp. 486-487, the court explained: “[T]he mere fact

that a contract term is not read or understood by the nondrafting

party or that the drafting party occupies a superior bargaining

position will not authorize a court to refuse to enforce the

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Chin, J., dissenting

contract. Although an argument can be made that contract

terms not actively negotiated between the parties fall outside

the ‘circle of assent’ which constitutes the actual agreement

[citation], commercial practicalities dictate that unbargained-

for terms only be denied enforcement where they are also

substantively unreasonable.” (Fn. omitted; see also Franco v.

Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, 956

[“waivers that are obtained as a condition of employment . . . are

not categorically invalid or unenforceable”]; Gutierrez v.

Autowest, Inc. (2003) 114 Cal.App.4th 77, 88 [“unbargained-for

term” in contract of adhesion, even if “not read or understood by

the nondrafting party,” is enforceable unless “substantively

unreasonable”]; Lagatree v. Luce, Forward, Hamilton & Scripps

(1999) 74 Cal.App.4th 1105, 1129 [“compulsory nature of a

predispute arbitration agreement does not render the

agreement unenforceable on grounds of coercion or for lack of

voluntariness”]; San Francisco Newspaper Printing Co. v.

Superior Court (1985) 170 Cal.App. 3d 438, 443 [“failing to read

the contract is no excuse, otherwise all contracts of adhesion

would be unenforceable at the whim of the adhering party”].)

Insofar as the majority’s analysis is contrary to this unbroken

line of California authority, I disagree with it.2

2

To the extent the majority’s FAA preemption analysis

raises a similar “concern[]” about “consent” (maj. opn., ante, at

p. 33), it is erroneous for the same reason. (See Lamps Plus,

Inc. v. Varela (2019) __ U.S. __, __ [139 S.Ct. 1407, 1420] (dis.

opn. of Ginsburg, J.) [“Arbitration clauses, the Court has

decreed, may preclude judicial remedies even when submission

to arbitration is made a take-it-or-leave-it condition of

employment”]; Carnival Cruise Lines, Inc. v. Shute (1991) 499

U.S. 585, 600 (dis. opn. of Stevens, J.) [“contracts of adhesion . . .

offered on a take-or-leave basis” are enforceable if reasonable,

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Chin, J., dissenting

Nevertheless, I ultimately agree there was sufficient

procedural unconscionability here — given the adhesive nature

of the contract and the circumstances under which OTO

presented it to Kho for signature — to warrant scrutiny of the

agreement’s substantive unconscionability. To that issue, I now

turn.

D. Substantive Unconscionability.

The majority’s analysis of substantive unconscionability is

difficult to follow, largely due to its shifting approach to that

issue. Initially, the majority seems to suggest that substantive

unconscionability is irrelevant because there was “an unusually

high degree of procedural unconscionability” here, and “an

employee may not be coerced or misled into . . . trad[ing]” the

Berman process for “a litigation-like arbitration procedure,”

“[e]ven if” that procedure “may be an acceptable substitute for

the Berman process in other circumstances.” (Maj. opn., ante,

at p. 2.) Later, however, the majority expressly acknowledges

that “[b]oth procedural and substantive unconscionability must

be shown for the [unconscionability] defense to be established”

(maj. opn., ante, at p. 13) and asserts that at least “a relatively

low degree of substantive unconscionability” is required to void

the agreement, notwithstanding “the substantial procedural

unconscionability here” (maj. opn., ante, at p. 21). At one point,

notwithstanding argument that they cannot “justifiably be

enforced . . . under traditional contract theory because the

adhering party generally enters into them without manifesting

knowing and voluntary consent to all their terms”].) The

majority’s discussion of lack of consent, though off the mark as

to Kho’s unconscionability claim and FAA preemption, would be

apropos had Kho asserted and pursued a separate contract

defense: fraud in the execution of the contract.

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Chin, J., dissenting

the majority indicates that “ ‘the [substantive] 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,’ thus effectively

blocking every forum for redress including arbitration itself.”

(Maj. opn., ante, at p. 12.) At another point, the majority

indicates that the question is whether the arbitral scheme

“offer[s] employees an effective means to pursue claims for

unpaid wages, and [does] not impose unfair costs or risks on

them or erect other barriers to the vindication of their statutory

rights.” (Maj. opn., ante, at p. 27.) At still another point, the

majority states that the question is whether “the bargain”

between the parties “was sufficiently one-sided as to render the

agreement unenforceable” (maj. opn., ante, at p. 32), i.e., “so

unfairly one-sided that it should not be enforced” (maj. opn.,

ante, at p. 11). Finally, shifting gears one last time, the majority

declares in the final paragraph of its analysis that the

substantively unconscionable “question” here “[u]ltimately” is

whether the bargain was simply “unfair.” (Maj. opn., ante, at p.

32.)

This court’s most relevant decision on the issue — Sonic

II — is quite specific as to the applicable standard. Under the

majority opinion in that case, an agreement requiring

arbitration of claims otherwise subject to the Berman procedure

is not substantively unconscionable “so long as the arbitral

scheme, however designed, provides employees with an

accessible, affordable process for resolving wage disputes that

does not ‘effectively block[] every forum for the redress of [wage]

disputes, including arbitration itself.’ ” (Sonic II, supra, 57

Cal.4th at pp. 1157-1158.) The majority here expressly

acknowledges that the majority opinion in Sonic II “focused

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Chin, J., dissenting

repeatedly on the need for accessible and affordable arbitration”

(maj. opn., ante, at p. 11), and that under Sonic II, “[a]n

agreement to arbitrate wage disputes can be enforceable so long

as it provides an accessible and affordable process for resolving

those disputes” (maj. opn., ante, at pp. 1-2). Indeed, the majority

even sets forth the Sonic II test at several points. (Maj. opn.,

ante, at pp. 12, 29). Surprisingly, however, it never applies that

test; it nowhere states that arbitration under the agreement

here is inaccessible or unaffordable to the point that it

“ ‘effectively block[s] every forum for the redress of [wage]

disputes, including arbitration itself.’ ” (Sonic II, at p. 1158.)

Indeed, in several ways, the majority’s analysis supports

the conclusion that the arbitration agreement here does not

meet the Sonic II test for substantive unconscionability. To

begin with, the majority concedes that that the arbitration

process here — which permits “discovery” (maj. opn., ante, at p.

3) and calls for “the same pleading, evidence, and motion

practice rules that govern civil litigation” (maj. opn., ante, at p.

24, fn. 14) — is no more complicated than ordinary civil

litigation . . . .” (Maj. opn., ante, at p. 31.) Thus, arbitration

under the agreement cannot be any more unaffordable or

inaccessible for Kho than “ordinary civil litigation” (ibid.), a

system that, according to the majority, has been “carefully

crafted to ensure fairness to both sides” and is not “per se unfair”

(maj. opn., ante, at p. 26). The majority also concedes that under

the arbitration agreement, Kho would be entitled to “reasonable

attorney fees and costs” were he to be “the prevailing party in

‘any action brought for the nonpayment of wages.’ ” (Maj. opn.,

ante, at p. 30.) This aspect of the agreement, the majority

observes, “may mitigate some financial burden” of the

arbitration. (Ibid.)

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Chin, J., dissenting

The majority also recognizes that in Little, we held in the

arbitration context that use of “litigation-like procedures” does

“not necessarily . . . make” a mandatory employment arbitration

agreement “unconscionable.” (Maj. opn., ante, at p. 26, italics

added.) Notably, in reaching this conclusion, we rejected the

claim that “such procedures detract from the inherent

informality of arbitration” and necessarily “inordinately benefit

[employers] rather than [employees].” (Little, supra, 29 Cal.4th

at p. 1075, fn. 1.) Consistent with Little’s analysis, the majority

concedes that, for certain claims, “it may well be that an

arbitration process closely resembling civil litigation can be as

advantageous for the employee as for the employer.” (Maj. opn.,

ante, at pp. 26-27.)

Inexplicably discarding Sonic II’s test for substantive

unconscionability, the majority bases it conclusion on the

alternative substantive unconscionability tests it sets forth.

According to the majority, because “Kho surrendered the full

panoply of Berman procedures and assistance,” and “received”

nothing “in return” but “access to a formal and highly structured

arbitration process,” his “bargain” with OTO was both “unfair”

and “sufficiently one-sided as to render the [arbitration]

agreement unenforceable.” (Maj. opn., ante, at p. 32.)

I disagree with the majority’s analysis and conclusion in

several respects. Initially, as already explained, our precedents

establish that for an agreement to be substantively

unconscionable, it is not enough that it is merely “unfair” or

“one-sided.” (Maj. opn., ante, at p. 32.) Rather, it must cause “a

substantial degree of unfairness beyond ‘a simple old-fashioned

bad bargain.’ ” (Sonic II, supra, 57 Cal.4th at p. 1160, italics

added.) It “must be ‘so one-sided as to “shock the conscience” ’ ”

(Pinnacle, supra, 55 Cal.4th at p. 246), or, as alternatively

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Chin, J., dissenting

formulated, “ ‘overly harsh,’ ‘unduly oppressive,’ [or]

‘unreasonably favorable.’ ” (Sanchez, supra, 61 Cal.4th at p.

911.)

Next, to the extent an evaluation of the benefits Kho

relinquished and received is necessary, the majority’s analysis

is improperly narrow. As the majority acknowledges, “ ‘the

unconscionability inquiry requires a court to examine the

totality of the agreement’s substantive terms’ ” and to determine

the fairness of the parties’ “ ‘overall bargain.’ ” (Maj. opn., ante,

at p. 11.) Consistent with this observation, under basic contract

law, “new and different consideration” is not required for “every

individual promise in a contract.” (Martin v. World Savings &

Loan Assn. (2001) 92 Cal.App.4th 803, 809.) Instead, “one

promise in a contract ‘may be consideration for several counter

promises.’ ” (Ibid; see Foley v. Interactive Data Corp. (1988) 47

Cal.3d 654, 679 [“ ‘ “[a] single and undivided consideration may

be bargained for and given as the agreed equivalent of one

promise or of two promises or of many promises” ’ ”].)

Viewed from this perspective, Kho received several

substantial benefits “in return” for agreeing to arbitration.

(Maj. opn., ante, at p. 29.) First and foremost, he received the

benefit of continued employment. Kho was an at-will employee

and, according to the majority, “was required to sign the

agreement to keep [his] job.” (Maj. opn., ante, at p. 16.) Under

our precedents, Kho’s “ ‘continuing employment’ ” under such

circumstances constitutes “ ‘consideration’ ” from OTO that

“ ‘support[s]’ ” the arbitration agreement. (Asmus v. Pacific Bell

(2000) 23 Cal.4th 1, 14; see DiGiacinto v. Ameriko-Omserv Corp.

(1997) 59 Cal.App.4th 629, 638 [“ ‘neither party to an at-will

relationship has any obligation to perform in the future, and so

doing so can provide valuable consideration for a modification of

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Chin, J., dissenting

the contract’ ”].) Second, the agreement here, considered in its

entirety, is not merely a Berman waiver, but is a broad, bilateral

arbitration provision that applies, with only a few exceptions, to

“all disputes” between the parties “arising from, related to, or

having any relationship or connection whatsoever with [Kho’s]

seeking employment with, employment by, or other association

with” OTO. It thus confers on Kho the benefits of arbitration as

to claims not subject to the Berman procedure, unless it may be

said there are no such benefits in any covered context. The

majority improperly ignores these benefits and incorrectly

evaluates the arbitration agreement as if it were only “a waiver

of Berman procedures.” (Maj. opn., ante, at p. 11.)

Moreover, under basic contract law, the receipt of a benefit

is not the exclusive measure of consideration; “a detriment to”

one party is sufficient consideration for a contract even if the

other contracting party receives no “benefit for his promise.”

(Westphal v. Nevills (1891) 92 Cal. 545, 548.) As here relevant,

“ ‘[a]ny suspension or forbearance of a legal right constitutes a

sufficient consideration.’ ” (Adolph Ramish, Inc. v. Woodruff

(1934) 2 Cal.2d 190, 207.) In this case, OTO’s “promise[] . . . to

arbitrate [its] disputes” with Kho and “to forego” its right to

“judicial determination” of those disputes — including the right

to a jury trial — “provide[d] consideration” for the agreement,

as did Kho’s similar promise. (Strotz v. Dean Witter Reynolds,

Inc. (1990) 223 Cal.App.3d 208, 216; see Peleg v. Neiman Marcus

Group, Inc. (2012) 204 Cal.App.4th 1425, 1449 [“ ‘mutual

promises to submit all employment disputes to arbitration

constituted sufficient consideration, because both parties were

bound to the promises to arbitrate’ ”].)

In any event, even insofar as the agreement constitutes a

Berman waiver, I disagree that Kho received nothing “in return”

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Chin, J., dissenting

but “access to a formal and highly structured arbitration

process.” (Maj. opn., ante, at p. 29.) The Berman procedure is

potentially a three-step process. First is the administrative

hearing, assuming the Labor Commissioner, as a matter of

discretion, accepts the matter and decides to hold a hearing.

(Maj. opn., ante, at p. 7.) Step two is a trial de novo in superior

court (maj. opn., ante, at p. 8), which either party may request

without having even participated in the administrative

procedure. (Jones v. Basich (1986) 176 Cal.App.3d 513.) This

de novo proceeding is “ ‘ “a trial anew in the fullest sense” ’ ”

(Post v. Palo/Haklar & Associates (2000) 23 Cal.4th 942, 948),

in which the superior court proceeds “ ‘as a court of original

jurisdiction, with full power to hear and determine [the matter]

as if it had never been before the labor commissioner’ ” (Murphy

v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1119).

Thus, as the majority notes, in the de novo proceeding,

“litigation formalities may apply.” (Maj. opn., ante, at p. 26.)

Moreover, the administrative decision “is ‘entitled to no weight

whatsoever.’ ” (Post, at p. 948) and the employer “is not bound

by the defenses it raised” at the Berman hearing; it may

“abandon, change, or add defenses not brought before the Labor

Commissioner” (Murphy, at p. 1119) and may present “entirely

new evidence” (Post, at p. 948). Step three of the Berman

procedure is “a conventional appeal to an appropriate appellate

court” after the trial court’s decision upon the de novo hearing.

(Ibid.)

In signing the arbitration agreement, as to claims covered

by the Berman statutes, Kho gained access to a procedure with

no preliminary, nonbinding administrative process; no potential

for formal civil litigation in court; only limited judicial review;

and some, but not all, of the “litigation formalities” that, as the

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Chin, J., dissenting

majority concedes, may apply in a de novo proceeding under the

Berman statutes. (Maj. opn., ante, at p. 26.) And he gained

OTO’s legal commitment and obligation to pay any and all costs

“unique” to this procedure. (Armendariz, supra, 24 Cal.4th at p.

113.) Thus, “in return” for waiving the Berman procedure, Kho

received considerably more than just “access to a formal and

highly structured arbitration process.” (Maj. opn., ante, at p.

29.) The majority may think he made a “ ‘bad bargain’ ” (Sonic

II, supra, 57 Cal.4th at p. 1160), that he “could have done better”

(id. at p. 1148), or that the agreement “ ‘gives [OTO] a greater

benefit’ ” (id. at p. 1160), but our precedents preclude us from

declaring an agreement to be unconscionable and unenforceable

on any of those grounds.

In an attempt to diminish the value of what Kho received

and inflate the value of what he gave up, the majority asserts

that the Berman procedures “discourage[]” de novo proceedings

by requiring appealing employers to post undertakings and

requiring unsuccessful appellants to pay the other side’s costs

and reasonable attorney fees. (Maj. opn., ante, at p. 26.) But

the former requirement would seem to provide little

disincentive, given that the employer’s only alternative to filing

an appeal and posting an undertaking is actually paying the

award. And the latter provision also discourages employees from

appealing, because it requires them to pay costs and attorney

fees if they appeal and are “unsuccessful,” meaning they do not

obtain an “award[] . . . greater than zero.” (Lab. Code, § 98.2,

subd. (c).) Of course, the record here provides further reason to

doubt the deterrent value of these provisions; after the

administrative decision, OTO, which declined even to

participate in the Berman hearing, filed for a de novo trial,

completely undeterred by the statutes. In any event, having

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Chin, J., dissenting

provisions that assertedly provide some undetermined and

factually unproven disincentive to seeking a trial de novo is not

at all the same as having access to an arbitration procedure that

enables Kho to eliminate even the possibility that recovery of

unpaid wages will require a formal civil trial in court — with

attendant “litigation formalities” (maj. opn., ante, at p.

27) — after a preliminary and nonbinding administrative

procedure or as a matter of first resort in lieu of that procedure.

As the majority explains, “[i]t is the opportunity to expedite and

simplify the process that can motivate informed parties to agree

to arbitration.”3 (Maj. opn., ante, at p. 26.)

3

In rejecting my analysis, the majority relies on the

statement of counsel for the Labor Commissioner at oral

argument that his “understand[ing]” is that there are “probably”

fewer than 500 de novo proceedings per year. (See maj. opn.,

ante, at p. 27, fn. 17.) Reliance on this statement of counsel’s

“understand[ing],” which obviously lacks foundation and is

hearsay, is improper under our “ ‘settled’ ” rule that “ ‘on a direct

appeal from a judgment [we] will not consider matters outside

the record.’ ” (People v. Gardner (1969) 71 Cal.2d 843, 854.) The

majority in both Sonic I and Sonic II followed this settled rule

and expressly declined to rely on factual representations about

the arbitration process counsel made “[a]t oral argument” in an

effort to support the arbitration agreement’s validity. (Sonic II,

supra, 57 Cal.4th at p. 1147; Sonic I, supra, 51 Cal.4th at p. 681,

fn. 4.) It is noteworthy that the majority here ignores the rule

in order to establish the arbitration agreement’s invalidity, an

issue on which Kho bears the burden of proof. The majority’s

inadequate response — that OTO did not “challenge[]” counsel’s

statement (maj. opn., ante, at p. 28, fn. 18) — fails to recognize

that counsel made the statement during rebuttal argument,

after OTO’s argument, so OTO had no opportunity to respond.

In any event, the majority’s response misses an essential point:

By agreeing to arbitration, Kho eliminated any possibility that

recovery of unpaid wages would require a formal civil trial in

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Chin, J., dissenting

The majority’s view that Kho received little or nothing “in

return” (maj. opn., ante, at p. 32) for the Berman waiver rests on

numerous other exaggerations, unproven or erroneous

assumptions, miscalculations, and/or mischaracterizations

regarding the value of the Berman procedures. First, as the

majority acknowledges, when an employee files an

administrative claim, “[t]here is no [statutory] requirement that

a Berman hearing be held” (maj. opn., ante, at p. 32) and the

Labor Commissioner has “discretion to . . . take ‘no further

action . . . on the complaint’ ” (ibid., quoting Lab. Code, § 98,

subd. (a)). Thus, when Kho signed the arbitration agreement —

which is the relevant time for assessing unconscionability (Civ.

Code, § 1670.5, subd. (a)) — it was entirely speculative whether

any of the Berman procedure’s asserted benefits would be

available to him, and the only thing he actually relinquished

was the opportunity to ask the Labor Commissioner to exercise

discretion to conduct legally nonbinding administrative

proceedings on a claim.

Second, the majority’s view that the Berman

administrative procedure is more advantageous for employees

because it has “no discovery process” (maj. opn., ante, at p. 7) is

inconsistent with our case law. In Armendariz, supra, 24

Cal.4th 83, which involved a mandatory employment arbitration

agreement, the majority held that “the provision of adequate

discovery” is one of the “minimum requirements” of a valid and

enforceable arbitration provision (id. at p. 91, italics added) and

explained that “from [an] employee’s point of view,” more

“limited discovery” is typically one of the “potential

court, either after a nonbinding administrative procedure or in

lieu of such a procedure.

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Chin, J., dissenting

disadvantages” of arbitration (id. at p. 115, italics added). In

Gentry, supra, 42 Cal.4th at page 457, the majority extended the

discovery requirement to an unpaid wage claim. Kho’s actions

confirm this court’s previous statements regarding the

importance of discovery to employees with wage claims; during

the administrative Berman proceedings, he “requested that a

subpoena be issued for various work related documents.”

Third, the Berman procedure is not, as the majority

asserts, necessarily “ ‘speedy’ ” or “expedient.” (Maj. opn., ante,

at pp. 24, 25.) As explained above, a Berman procedure is

potentially a three-step, combined administrative and judicial

process, which may include a civil trial in court with “litigation

formalities.” (Maj. opn., ante, at p. 16.) This three-step process

has the potential to substantially delay any recovery. Indeed,

the first administrative step by itself can take years. (Sonic I,

supra, 51 Cal.4th at p. 681, fn. 5.) [noting several

“documented” cases in which it took “slightly under one year” to

commence the Berman hearing, and one in which it took

“slightly under four years”].) In this case, for example, the

Berman hearing was not held for about 10 months after Kho

filed his claim, and the Labor Commissioner’s award was made

some 16 months after Kho’s termination. Two weeks later, OTO

requested a trial de novo. (Maj. opn., ante, at pp. 5, 33.) Thus,

nothing at the time that Kho signed the contract — and nothing

that actually happened in the Berman proceedings that followed

Kho’s termination — supports the majority’s view that, by

signing the arbitration agreement, Kho gave up a “ ‘speedy’ ” or

“expedient” administrative procedure. (Maj. opn., ante, at pp.

24, 25.) Nor is there any basis in the record for the majority’s

implicit conclusion that arbitration under the agreement

here — which involves no preliminary, nonbinding

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Chin, J., dissenting

administrative process and only limited appellate review —

would take longer than the Berman procedure. The majority’s

reliance on factually unsupported and unproven assumptions

about the Berman procedure’s speed is contrary to the fact that

Kho bears “[t]he burden of proving unconscionability.”4 (Maj.

opn., ante, at p. 14.)

Indeed, in light of the facts of this case and the Sonic II

majority’s discussion of this issue, the majority’s steadfast

reliance here on the asserted speediness of the Berman

procedure is as ironic as it is legally erroneous. In Sonic II, I

argued that the potentially three-step Berman procedure is not

necessarily “speedier or more streamlined than arbitration.”

(Sonic II, supra, 57 Cal.4th at p. 1181 (conc. & dis. opn. of Chin,

J.).) The majority rejected my argument, asserting it rested on

“bare assertions” that had “no evidentiary support.” (Sonic II,

at p. 1167.) At the same time, the majority left the question

open, “direct[ing] the trial court on remand to consider” this

issue — and the claim of unconscionability — “in light of any

relevant evidence.” (Sonic II, supra, 54 Cal.4th at p. 1162.)

Contrary to that admonition, the majority here dismisses the

4

The majority concedes that resolution of this case through

the Berman administrative process “has not been speedy,” but

asserts that “the delay is largely attributable to” OTO. (Maj.

opn., ante, at p. 25, fn. 14.) The majority offers no factual basis

for this assertion, and nothing in the record supports it. For

example, nothing indicates why it took several months just for

Kho to receive a response from the Labor Commissioner to his

request for a Berman hearing, or why the hearing was finally

set for “some 9 months” after he made his request. (Maj. opn.,

ante, at p. 4.) In any event, whether OTO or a representative of

the Labor Commissioner was responsible for the delay is

irrelevant to my point that the Berman process is not

necessarily speedy.

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Chin, J., dissenting

“relevant evidence” in the record showing that the Berman

procedure is not speedy. (Ibid.) Instead of considering that

evidence, the majority does precisely what the Sonic II majority

incorrectly accused me of doing in that case: relying on “bare

assertions” that have “no evidentiary support.”5 (Sonic II, at p.

1167.)

Fourth, the Berman procedure is not as “ ‘informal’ ” as

the majority suggests. (Maj. opn., ante, at p. 7.) The Labor

Commissioner’s published policies and procedures stress that

Berman hearings “are formal procedures” at which each party

has the right to be represented by counsel, to present evidence,

to testify under oath, to have other witnesses testify under oath,

to cross-examine the opposing party and witnesses, and to

subpoena witnesses, documents and records. (Dept. of

Industrial Relations, Div. of Labor Stds. Enforcement (DLSE),

Policies and Procedures for Wage Claim Processing (2012 rev.)

pp. 2–4 (DLSE Policies).) Moreover, the judicial trial de novo

procedure to which either side is entitled after a Berman

5

The Sonic II majority was incorrect about my analysis

because I expressly referenced the fact that the employer in that

case had “documented” three cases in which it took “a year or

more” just to commence the Berman hearing. (Sonic II, supra,

57 Cal.4th at p. 1181 (conc. & dis. opn. of Chin, J.); see Sonic I,

51 Cal.4th, supra, at p. 681, fn. 5 [petition to compel arbitration

“documented” two cases in which it took “slightly under one

year” to commence the Berman hearing, and one in which it took

“slightly under four years”].) The Sonic II majority simply chose

to ignore this reference and the documented evidence in the

record. The majority here adopts the same head-in-the-sand

approach, simply dismissing evidence that the Berman

procedure is not, in reality, speedy, and relying instead on

assertions about what the Berman procedure was, in theory “

‘designed to provide.’ ” (Maj. opn., ante, at p. 7.)

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Chin, J., dissenting

hearing is ordinary civil litigation, including both trial in the

superior court and appeal. At both judicial levels, as the

majority acknowledges, “litigation formalities may apply.” (Maj.

opn., ante, at p. 26.) Thus, all of the features of the arbitration

agreement that are problematic for the majority — a superior

court judge, discovery, and rules of pleading, evidence and

motion practice — are actually built into the Berman procedure,

and then some.

The majority emphasizes that the deputy labor

commissioner who conducts the Berman hearing “can explain

terminology and assist with witness examination.” (Maj. opn.,

ante, at p. 22.) But nothing requires the hearing officer to

provide such help; the decision whether to do so is left to the

hearing officer’s “sole authority and discretion.” (DLSE Policies,

supra, at p. 3.) In any event, nothing in the arbitration

agreement precludes the arbitrator from providing similar

assistance, and the majority never asserts otherwise. (See Sonic

II, supra, 57 Cal.4th at p. 1164 [“arbitrators have discretion to

decide on features of arbitration that are not specified in the

agreement”]; Sanchez v. Western Pizza Enterprises, Inc. (2009)

172 Cal.App.4th 154, 177 [“An arbitrator ordinarily has broad

discretion with respect to the procedures and law governing the

arbitration”].)

Fifth, the majority’s discussion of the relative ease of

initiating arbitration and the Berman procedure is faulty in

several respects. The arbitration agreement is problematic for

the majority because it “does not explain how to initiate

arbitration.” (Maj. opn., ante, at p. 21.) However, the second

agreement Kho signed when he executed the arbitration

agreement informed him that he should “notify the Dealership’s

General Manager in writing” if he “dispute[d] the amount of

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Chin, J., dissenting

wages paid to” him. This agreement informed Kho that all he

had to do to initiate arbitration was to submit to OTO a written

claim for unpaid wages. Moreover, the arbitration agreement

itself expressly referenced and incorporated — by both name

and specific statutory citation — the California Arbitration Act

(Code Civ. Proc., § 1280 et seq.), which sets forth the petition

procedure for initiating arbitration if “a party to the

[arbitration] agreement refuses to arbitrate” a controversy.

(Code Civ. Proc., § 1281.2.) Notably, although we dealt with

similar arbitration agreements in Sonic I, Sonic II, and Little,

in none of those decisions did we even mention their failure to

explain how to initiate arbitration.

On the other side of its “initiation” equation, the majority,

in relying on two wage orders of the Industrial Welfare

Commission (IWC) (maj. opn., ante, at p. 22), is truly grasping

at straws. To begin with, the majority does not suggest, and

nothing in the record indicates, that these wage orders were

ever handed to Koh, in his possession, or called to his attention

in any way. Indeed, Kho could not have seen one of the wage

orders, because it post-dated his employment with OTO by

almost five years. (IWC Wage Order No. MW-2019.) The other

order states, contrary to the majority’s assertion, that posting is

unnecessary “[w]here the location of work or other conditions

make [posting] impractical,” in which case the employer need

only “keep a copy of th[e] order and make it available to every

employee upon request.” (IWC Wage Order No. 4-2001, § 22.)

Again, the majority does not suggest, and nothing in the record

indicates, that the wage order was actually posted at Kho’s

worksite.

Even had the wage order that actually existed when Kho

worked at OTO been posted, nothing suggests Kho ever saw it,

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Chin, J., dissenting

let alone read it. And even had he read it, he surely would not

have understood it if, as the majority asserts, “[i]t would have

been nearly impossible” for him “to understand” the arbitration

agreement’s meaning given his lack of “legal training and access

to” the statutes it references. (Maj. opn., ante, at p. 19.) To the

extent, if any, the text of the single paragraph arbitration

agreement is, as the majority asserts, “ ‘visually impenetrable’ ”

(maj. opn., ante, at p. 17), the text of the wage order —

comprising 10 pages of densely packed, single-spaced type with

22 sections, multiple subsections, and multiple subparts to the

multiple subsections — is far more visually impenetrable. And

to the extent, if any, the arbitration agreement’s “substance” is,

as the majority asserts “opaque” (maj. opn., ante, at p. 17), again,

the wage order’s substance is far more opaque. The wage order

contains more “statutory references and legal jargon” than the

arbitration agreement, and its “legal jargon” is much more

complicated than the arbitration agreement’s. (Maj. opn., ante,

at p. 17.) To borrow the words of the majority, “a layperson

trying to navigate” the wage order “text would not have an easy

journey.” (Maj. opn., ante, at p. 18.) Indeed, assuming the wage

order applied to Kho — something the majority does not actually

assert — it would have been hard for him to have understood

this fact even had he read it; in complexly structured, multipart

sections containing highly technical “legal jargon” and many

“statutory references” (maj. opn., ante, at p. 18), the first three

pages of the wage order set forth 21 definitions and numerous

coverage exemptions (Wage Order No. 4-2001, §§ 1, 2).

As for informing Kho about the Berman procedure, the

wage order contains not a single mention of that procedure as a

means for resolving wage disputes, either by name or by

statutory reference. Nor, contrary to the majority’s suggestion,

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Chin, J., dissenting

does the sentence on which the majority relies even expressly

refer to “wage-related violations.” (Maj. opn., ante, at p. 22.) It

refers instead only generally to “QUESTIONS ABOUT

ENFORCEMENT of the Industrial Welfare Commission orders

and reports of violations.” (Wage Order No. 4-2001, p. 9.) For

Kho to have known that this sentence related to “wage-related

violations” (maj. opn., ante, at p. 22), he would have needed to

understand that the acts he wanted to challenge were addressed

by the wage order and constituted violations of its complicated,

legally technical provisions. Finally, the sentence in question

appears at the end of the 10-page wage order, after the last of its

22 sections. (Wage Order No. 4-2001, p. 9.) Thus, Kho would

not have even come across it unless he first made his way all the

way through the rest of the long, complex, legally technical wage

order. In other words, this sentence, unlike the arbitration

provision, truly is “ ‘ “hidden within a prolix printed form.” ’ ”

(Pinnacle, supra, 55 Cal.4th at p. 247, italics added.)

The other wage order — which, again, did not exist during

Kho’s employment with OTO — is, in addition, similarly

problematic. Though shorter, it comprises five sections of

densely-packed, single-spaced, small font type; written in very

technical legal jargon; containing both statutory references and

references to other wage orders; setting forth exceptions to its

application; and including complicated charts. (Wage Order

No. MW-2019.) It makes no mention of the Berman procedure,

either by name or by statutory reference, and contains no

express reference to “wage-related violations.” (Maj. opn., ante,

at p. 22.) Instead, at the bottom, in tiny type, its states that

“Questions about enforcement should be directed to the Labor

Commissioner’s Office.” (Wage Order No. MW-2019.)

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Chin, J., dissenting

In short, the wage orders that, according to the majority,

demonstrate the Berman procedure’s superiority in terms of

initiating action, demonstrate just the opposite. To the extent,

if any, the arbitration agreement is problematic in the ways the

majority asserts, the wage orders are more problematic in each

of those ways. And they are problematic in additional ways that

the majority does not even assert characterize the arbitration

agreement.

In addition, the majority’s assertion about only needing to

“fill[] out a simple form” to initiate the Berman procedure (maj.

opn., ante, at p. 21) is inaccurate. Upon examination, the form

to which the majority refers turns out not to be so “simple” at

all. (Maj. opn., ante, at p. 21.) It requires an employee to know

and provide a considerable amount of detailed information,

including: whether the claim is “about a public works project”;

whether there is “a union contract covering [the] employment,”

in which case a copy should be attached; the “total number of

[the employer’s] employees”; and a complete breakdown of the

unpaid amounts into “regular wages,” “overtime wages,” “meal

period wages,” “rest period wages,” “split shift premium,”

“reporting time pay,” “commissions,” “vacation wages,”

“business expenses,” “unlawful deductions,” and “other.”

(DLSE, Initial Report of Claim (DLSE Form 1) (rev. July 2012).)

This is far more information than is necessary to file a civil

complaint. Indeed, unlike the majority, the DLSE recognizes

that the claim initiation form is not so simple; with it, the DLSE

offers two pages of densely-packed “Instructions for Filing A

Wage Claim” and, attached to the instructions, a densely-

packed, three-page “Guide to Completing ‘Initial Report or

Claim’ Form (DLSE Form 1).”

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Chin, J., dissenting

Moreover, initiating the Berman procedure may actually

require more than filling out that single form. Additional forms

must be filled out and submitted “if the claim involves

“commission pay” or “vacation wages,” or “if the plaintiff’s work

hours or days of work varied per week or were irregular and the

plaintiff is seeking unpaid wages or premium pay for meal or

rest period violations.” (DLSE Policies, supra, at p. 1.)

Employees are also directed to submit a variety of other

supporting documents — time records, paychecks and paystubs,

bounced checks, notice of employment information — if they

have them. (Ibid.) Given the above, the majority has

exaggerated the ease of initiating the Berman procedure.

Sixth, the majority’s discussion of how “[c]ollection . . . in

the Berman context” is “simplified” compared to arbitration

(maj. opn., ante, at p. 23) ignores aspects of arbitration that

undermine its view. The majority emphasizes that where “the

employer unsuccessfully appeals the Labor Commissioner’s

award, the claimant can collect on a posted bond.” (Maj. opn.,

ante, at p. 24.) However, an employee who arbitrates a

controversy may obtain provisional remedies — such as an

attachment or a preliminary injunction requiring payment of

wages during the arbitration — in connection with the

controversy. (Code Civ. Proc., § 1281.8.) No comparable

provision enables an employee actually to obtain any payment

during the Berman procedure.

Seventh, the majority’s discussion of the relative costs of

arbitration and the Berman procedure is misleading and

incomplete. According to the majority, by agreeing to arbitrate

a wage claim, an employee gives up a “largely cost-free

administrative procedure.” (Maj. opn., ante, at p. 25.) But an

employee who requests a subpoena for documents, records or

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Chin, J., dissenting

witnesses — as Kho did in this case — is responsible for the

“[c]osts incurred in the service of a subpoena, witness fees and

mileage.” (DLSE Policies, supra, at p. 3.) And employees who

file de novo appeals from awards by the Labor Commissioner

must pay (1) a court filing fee (Lab. Code, § 98.2, subd. (a)) and

(2) the employer’s “costs and reasonable attorney’s fees” if they

fail to recover “an amount greater than zero” (id., subd. (c)). In

any event, as the majority correctly notes, the arbitration

agreement “anticipates” that, consistent with Armendariz, OTO

has the “obligation to pay arbitration-related costs.” (Maj. opn.,

ante, at p. 18.) Thus, if there are any costs “unique to

arbitration” under the agreement — such as costs incident to

discovery, preparation of proper pleadings, and/or motion

practice — then OTO must pay them. (Armendariz, supra, 24

Cal.4th at p. 113.) As the majority explains, this payment

obligation “mitigates the unfairness of expecting that [Kho] bear

costs of a procedure to which [he was] required to agree.” (Maj.

opn., ante, at p. 29, italics added.)

So it turns out that the majority’s only real concern about

costs relates to “[a]ttorney fees,” which, says the majority, are

“different” from other costs “because they are not unique to

arbitration.” (Maj. opn., ante, at pp. 26-27.) According to the

majority, “employees can secure free legal assistance from the

Labor Commissioner, both at the Berman hearing and in any

subsequent appeal.” (Maj. opn., ante, at p. 27.) By contrast, in

the arbitration, they must “pay for [legal] representation.”

(Ibid.)

The majority’s analysis is problematic for several reasons.

First, to be clear, according to the majority, the commissioner

may not provide an employee with “representation” by “a

lawyer” at a Berman hearing (maj. opn., ante, at p. 27), because

36

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Chin, J., dissenting

“no statute authorizes” such representation (maj. opn., ante, at

p. 27, fn. 13). Instead, in terms of providing “free legal

assistance” (maj. opn., ante, at p. 27) at the Berman hearing, the

commissioner only may “assist . . . with cross-examination and

explain issues and terms involved” (maj. opn., ante, at p. 8).

Second, as noted above, nothing in the arbitration agreement

precludes the arbitrator from providing similar assistance, and

the majority never asserts otherwise. Third, even as to de novo

appeals, not all employees are eligible for legal representation

by the commissioner, and even fewer are absolutely entitled to

such representation. Employees who are “financially []able to

afford counsel” are not eligible for representation by the

commissioner. (Lab. Code, § 98.4.) If they are “financially

unable to afford counsel,” but are “objecting to any part of the

Labor Commissioner’s final order,” they are eligible for

representation, but the commissioner has discretion not to

provide it. (Ibid.) Thus, employees requesting a trial de novo

are never guaranteed representation by the commissioner,

because they are, by definition, objecting to part of the final

order; representation of such employees is always a matter for

the commissioner’s discretion. Only those employees who are

both “financially unable to afford counsel” and “not objecting to

any part of the Labor Commissioner’s final order” are statutorily

guaranteed representation by the commissioner. (Ibid.)

Fourth, the majority gives short shrift to OTO’s claim that

“the Labor Commissioner could represent claimants in

arbitration.” (Maj. opn., ante, at p. 27, fn. 13.) The majority

states that “no statute authorizes the representation of [wage]

claimants outside th[e] specific context” of de novo proceedings

following a Berman hearing. (Maj. opn., ante, at p. 27, fn. 13.)

However, Labor Code section 98.3, subdivision (a), states that

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Chin, J., dissenting

“[t]he Labor Commissioner may prosecute all actions for the

collection of wages, penalties, and demands of persons who in

the judgment of the Labor Commissioner are financially unable

to employ counsel and the Labor Commissioner believes have

claims which are valid and enforceable.” The majority asserts

that this statute only gives the commissioner “the power to

prosecute its own action . . . on behalf of workers” (maj. opn.,

ante, at p. 27, fn. 13), but the statutory language on its face does

not seem so confined, and the majority offers no analysis for its

restrictive reading. Moreover, Labor Code section 98.3,

subdivision (b), states that “[t]he Labor Commissioner may

prosecute action for the collection of wages and other moneys

payable to employees or to the state arising out of an

employment relationship or order of the Industrial Welfare

Commission.” These provisions, and OTO’s argument, merit

more in depth and definitive consideration if, as the majority

reasons, the asserted unavailability of free counsel in

arbitration is the primary reason the arbitration agreement is

substantively unconscionable.

Finally, the majority’s comparison of the employee’s

ability to recover attorney fees in arbitration and in a Berman

procedure is misleading. As noted above, the parties agree —

and the majority does not dispute — that were Kho to hire

counsel to assist in an arbitration and were he to prevail, as “to

most of [his] claims,” he would be entitled to “reasonable

attorney fees and costs” under Labor Code section 218.5. (Maj.

opn., ante, at p. 27.) Nevertheless, the majority continues, he

“face[s] a risk that [he] will not be designated the prevailing

party” under the fee statute. (Maj. opn., ante, at p. 28.) By

contrast, the majority asserts, “The Berman statutes provide

fee-shifting to wage claimants who secure any monetary

38

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Chin, J., dissenting

recovery in an employer’s appeal.” (Maj. opn., ante, at p. 28.) Of

course, this means that claimants who recover nothing in an

employer’s appeal are not entitled to recover attorney fees. And

the majority’s use of the limiting phrase “in an employer’s

appeal” (ibid.) means that in an appeal by the employee, the

employee may not recover attorney fees under any

circumstances, even upon securing full monetary recovery.

(Sonic I, supra, 51 Cal.4th at p. 673 [in de novo proceeding,

“successful appellants may not obtain [attorney] fees”].)

Moreover, appealing employees, even if “financially unable to

afford counsel,” are not guaranteed representation by the Labor

Commissioner, because they would be “objecting to [some] part

of the Labor Commissioner’s final order.” (Lab. Code, § 98.4.)

In this respect, arbitration, by making attorney fees potentially

available to employees even if they are appealing parties, is

actually more accessible and affordable for employees.

The majority offers little response to my detailed analysis,

other than to say I am simply “rais[ing] the same criticisms of

the Berman procedure that [the majority] considered at length,

and rejected” in Sonic II. (Maj. opn., ante, at p. 25, fn. 15.)

Although some of the points I make here about the Berman

procedure are the same as points I made in Sonic II, many are

not. The majority simply ignores the points that are new. It

also ignores the evidence I cite to refute its assessment of the

Berman procedure, which is based solely on this court’s

assertions about what that procedure was, in theory “ ‘designed

to provide.’ ” (Maj. opn., ante, at p. 7.)

Moreover, contrary to the majority’s assertion, I am not

making “criticisms” of the Berman procedure. (Maj. opn., ante,

at p. 25, fn. 15.) I am simply pointing out relevant aspects of the

Berman procedure that are inherent in the statutory provisions

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Chin, J., dissenting

themselves or that have revealed themselves through actual

administration of those provisions. This level of detailed inquiry

is necessary because of the basis for the majority’s

unconscionability finding: its assessment of the Berman

procedure’s benefits relative to those of the arbitration

procedure. A proper evaluation of that finding requires close

examination of the majority’s assumptions and of any real,

substantive differences between the two procedures. The court

should not cavalierly invalidate this arbitration agreement

based on erroneous assumptions or assertions about its

procedures as compared to the Berman procedure. In light of

the above considerations, it is impossible to reach a reliable,

accurate, or definitive conclusion that the Berman procedure is

less costly than the arbitration procedure. Given the

uncertainties regarding such a comparison, the majority’s

analysis provides an insufficient basis for concluding that Kho

has carried his burden to prove that the agreement was

“unconscionable at the time it was made.” (Civ. Code, § 1670.5,

subd. (a).)

Of course, reasonable people may reach different

conclusions about the inchoate value, at the time the arbitration

agreement was signed, of a Berman procedure’s potential

benefits in comparison to the inchoate value of the arbitration

procedure’s potential benefits. But a court’s after-the-fact,

subjective assessment of the relative benefits of the two

procedures should not be the basis for exercising the judicial

power to declare that an agreement was “unconscionable at the

time it was made” (Civ. Code, § 1670.5, subd. (a)), and thus

unenforceable. This should be especially true where, as here,

the basis for the court’s conclusion is that the arbitration

procedure is simply too much like a procedure — ordinary civil

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Chin, J., dissenting

litigation — that, according to the majority, has been “carefully

crafted to ensure fairness to both sides.” (Maj. opn., ante, at p.

25.)

Which brings me to my next point of disagreement with

the majority: its view that our case law allows invalidation of

this arbitration agreement based on the relative benefits of the

arbitration procedure and the Berman procedure. To be sure,

the majority in Sonic II, supra, 57 Cal.4th at page 1149, said

that a court, “in determining whether an arbitration agreement

is unconscionable,” may “consider the value of benefits provided

by the Berman statutes” that the employee has “surrender[ed].”

However, the Sonic II majority also emphasized: that an

“employee’s surrender of such benefits does not necessarily

make the agreement unconscionable” (id. at p. 1125); that a

finding of substantive unconscionability may not be “premised

on the superiority of the Berman hearing as a dispute resolution

forum” (id. at p. 1149); that “the unconscionability doctrine does

not mandate the adoption of any particular form of dispute

resolution mechanism, and courts may not decline to enforce an

arbitration agreement simply on the ground that it appears to

be a bad bargain or that one party could have done better” (id.

at p. 1148); that “[t]he unconscionability inquiry is not a license

for courts to impose their renditions of an ideal arbitral scheme”

(ibid.); that the party seeking to compel arbitration need not

“justify the [arbitration] agreement through provision of

benefits comparable to those othe

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