In Richey v. Autonation, Inc., ___ Cal.4th ___ (January 29, 2015), the California Supreme Court upheld the order of the Los Angeles County Superior Court (Judge Mackey) refusing to vacate an arbitrator’s award to defendant on plaintiff’s claims under the California Family Rights Act (“CFRA”).
When plaintiff began working for defendant employer, he received an employment manual noting that outside work while on approved CFRA leave was prohibited. Plaintiff also signed at that time an arbitration agreement which required that any resolution of a dispute by an arbitrator would be based “solely upon the law governing the claims and defenses set forth in the pleadings and the arbitrator may not invoke any basis . . . other than such controlling law.” Further, the agreement required the arbitrator to include a written reasoned opinion with any decision rendered, and this decision would be final and binding upon the parties. The agreement did not include an express provision stating that courts could review any arbitration award for legal error.
In 2008, plaintiff injured his back and went on leave under the CFRA, based on his physician’s report that he was medically unable to work. While on leave, however, plaintiff continued working at a restaurant that he had owned and operated on the side. Upon learning of this, defendant sent plaintiff a letter stating that employees were not allowed to pursue outside employment while on leave and that plaintiff should call if he had any questions. Plaintiff ignored the letter, never called his employer, and thus never explained how his activity was consistent with his medical leave. Subsequently, defendant terminated plaintiff’s employment on the ground that plaintiff had engaged in outside employment while on a leave of absence, in violation of company policy.
Plaintiff filed a lawsuit asserting multiple claims, including violations of the CFRA. The action was submitted to an 11-day arbitration, at the end of which the arbitrator issued a 19-page written order rejecting each of plaintiff’s contentions. In particular, the arbitrator concluded that defendant was allowed to terminate plaintiff’s employment if it had an “honest belief” that plaintiff was “abusing his medical leave and/or [was] not telling the company the truth about his outside employment,” even if defendant’s belief was mistaken.
Plaintiff sought to vacate the award in part on the ground that the arbitrator “exceeded his powers when he accepted defendants’ honest belief defense as to plaintiff‘s medical condition.” The trial court denied plaintiff‘s motion, finding that ―[t]he fact that the arbitrator may have applied the wrong legal standard does not constitute grounds to vacate the Final Award.‖ Plaintiff then appealed, alleging that defendant violated his right to be reinstated in the same or a comparable employment position following his leave, as the CFRA required. The Court of Appeal reversed, concluding that the arbitrator violated plaintiff‘s right to reinstatement under the CFRA when he applied the honest belief defense to plaintiff‘s claim. Defendant appealed.
The California Supreme Court disagreed. The court first noted the general rule that arbitrators’ decisions are not subject to review for errors of law for fact except in narrow circumstances when the arbitrator has exceeded his or her own powers by issuing an award that violates a party‘s unwaivable statutory right, such as those conferred by the CFRA. The court then went on to address the merits of the appeal. Whether the arbitrator committed error in adopting an untested defense (the “honest belief” defense, although available under the federal Family and Medical Leave Act, has never been tested under the CFRA) was of no consequence because the arbitrator also found that plaintiff was dismissed for violating defendant’s written policy prohibiting outside employment while he was on medical leave. Thus, any error that may have occurred did not prejudice plaintiff in any way. The court left open the question of whether the “honest belief” defense is applicable in CFRA actions.