Unwaivable Rights Under California Family Rights Act Were Compromised, And The Parties Had Agreed That The Arbitrator Was To Resolve The Dispute “Based Solely Upon The Law”
Plaintiff Richey sued his employer for, among other things, violating the Moore-Brown-Roberti Family Rights Act (CFRA). The employer had terminated Richey, believing he had misused medical leave by working part time in a restaurant he owned. Richey’s claims were submitted to arbitration under an arbitration agreement providing, “[r]esolution of the dispute shall be based solely upon the law governing the claims and defenses set forth in the pleadings.” The arbitrator denied Richey’s CFRA claim based on the employer’s “honest belief or honest suspicion defense” that Richey misused his medical leave. After the trial court denied Richey’s motion to vacate, and the trial court confirmed the arbitrator’s award, Richey appealed. Richey v. Autonation, Inc., et al., Case No. B234711 (2nd Dist. Div. 7 Nov. 13, 2012) (Perluss, P.J.) (published).
Ordinarily an arbitrator’s award cannot be vacated under CCP 1286.2 just because the arbitrator has made a legal or factual mistake. However, the Court of Appeal did not buy the “honest belief” defense under California law, believing further that the arbitrator’s “clear legal error” resulted in a waiver of statutory rights under CFRA. Furthermore, the arbitrator’s application of the “honest belief” defense resulted in a misallocation of the burden of proof, because the employer bears the burden of proving the employee was not eligible for reinstatement.
While the Court of Appeal cited to the language of the Supreme Court “’that an arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA [Fair Employment and Housing Act]’ . . . because the enforcement of such rights was for the public benefit and was not waivable”, Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665, 667 (2010), the Court in hedged its ruling here. In Richey, the Court of Appeal said that “[w]e . . . need not decide whether it is proper to vacate an arbitration award based on any legal error in connection with mandatory arbitration of an employee’s unwaivable statutory rights.” (italics in the original). Ducking determination of that issue, the Court instead relied upon the language that the parties agreed the arbitrator would resolve any claim “solely upon the law”, adding that where “the purported legal error goes to both express, unwaivable statutory rights (the guarantee of reinstatement) and the proper allocation of the burden of proof, judicial review is essential to ensure the arbitrator has complied with the requirements of CFRA.” Thus, our takeaway is that in the employment context, where there are (i) unwaivable statutory rights involved; (ii) serious errors of law; and (iii) an agreement to rule “solely upon the law”, the Court will provide judicial review to ensure compliance with CFRA.
This leaves unresolved whether there are so-called “unwaivable statutory rights” of employees that may nevertheless be waived by an arbitration agreement, and what errors of law concerning unwaivable statutory rights will result in setting aside an arbitration award.
Note: The California Supreme Court has relied on statutory rights to invalidate a class action waiver in the context of employee rights. Gentry v. Superior Court, 42 Cal.4th 443 (2007). But the continuing viability of Gentry is an issue. See our October 16, 2012 post relating to Gentry and Iskanian v. CLS Transp. Los Angeles, 208 Cal.App.4th 949 (2012) (case concluding that Concepcion invalidated Gentry).
The judgment confirming the arbitration award was reversed and the matter remanded.
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