California Supreme Court Clarifies When An Arbitration Award May Be Corrected

On January 29, 2015, the California Supreme Court issued a decision clarifying the circumstances under which an arbitrator's award may be corrected. In Richey v. Autonation, Inc., No. BC408319 (Cal. Jan. 29, 2015), the court examined an arbitrator's award and concluded that, although the arbitrator may have committed error in applying the defendants' proffered "honest belief" defense (a defense not provisioned under California law) the plaintiff was nevertheless afforded his statutory rights. The court explained that, because the arbitrator determined the plaintiff's employment was terminated for violating his employer's policy prohibiting outside employment while on medical leave, the plaintiff was not prejudiced by the arbitrator's arguably misplaced application of the honest belief defense.

Factual Summary

The plaintiff began working for defendant Power Toyota Cerritos in 2004. Upon hire, the plaintiff signed an agreement requiring that any employment dispute be settled by arbitration. Also upon hire, the plaintiff received an employment manual prohibiting outside employment while on a medical leave.

Around October 2007, while the plaintiff was still employed full time by the defendant, he began laying the groundwork for the February 2008 opening of his restaurant. His supervisors at the defendant took notice of his slipping performance and attendance, and met with him in February 2008 to discuss the need for improvement.

On March 10, 2008, the plaintiff injured his back at home, resulting in his physician declaring him medically unable to work. On March 28, 2008, the plaintiff sought and received a medical leave under the California Family Rights Act (CFRA) and the federal Family and Medical Leave Act (FMLA) from the defendant. The defendant also granted subsequent requests by the plaintiff to extend his leave.

On April 11, 2008, the plaintiff's supervisor sent him a letter reminding him of the defendant's policy that employees were not to pursue outside employment while on medical leave and that he should call if he had questions. The plaintiff ignored this letter. On April 18, 2008, the defendant sent an employee to observe the plaintiff's restaurant. The employee testified observing plaintiff sweep, bend and deploy a hammer.

The defendant terminated the plaintiff's employment on May 1, 2008, 27 days prior to the expiration of his medical leave. In its termination letter, the defendant explained that its decision was based on the...