Arbitrator’s Award Vacated: Error to Hold that Employee Could Be Denied Family Leave Due to Employer’s Misinterpretation of the Law

Mr. Richey worked as a sales manager at a Toyota dealership. He suffered a back injury while moving furniture at home, and applied for family leave from Toyota. The leave was granted, but Mr. Richey was fired because his employer alleged that he was abusing his family leave by working in a family restaurant he owned while on his family leave. Mr. Richey contended that his work at his restaurant while on leave was limited, light-duty work, and that he really could not do his regular duties at the Toyota dealership. Richey v. Autonation, Inc., 210 Cal. App. 4th 1516 (2012)

When Toyota fired Mr. Richey, Mr. Richey evoked his rights under a mandatory arbitration agreement that Toyota required that he sign as a condition of his employment. After an 11 day hearing, the arbitrator ruled against Mr. Richey on his interference claim, i.e. his claim that Toyota interfered with or denied his right to family leave under the California Family Rights Act (CFRA) and the federal Family Medical Leave Act (FMLA). The arbitrator held that the employer was not liable because it terminated Mr. Richey’s employment because it honestly, but mistakenly, believed he misused his family leave.

Mr. Richey moved to vacate the arbitrator’s award, noting two things: (1) under both state and federal law, an honest mistake based on the employer’s state of mind is not a defense, and; (2) an arbitrator’s error of law that results in a denial of a party’s unwaivable statuatory right (in this instance his right to family leave) exceeds the arbitrator’s power and should be vacated.

The trial court ruled against Mr. Richey, but he didn’t give up, appealing to the California Court of Appeals, which agreed with Mr. Richey – explaining at length that an interference with family leave claim does not require that an employee prove that his or her supervisor had a discriminatory state of mind, like other discrimination claims. Indeed, interference claims are unique; if an employer wrongly denies family leave, it doesn’t matter if the employer was mistaken or honest or didn’t harbor a discriminatory motive. An employee is entitled to his or her family leave, and the employer must simply understand and follow the law. This is a very important point for all employees and the employer to understand.

The Court of Appeals also delved into the issue of when and whether to overturn an arbitrator’s award. While overturning this award, the Court was careful to note that not every arbitrator’s mistake of fact or law warrants the overturning of an arbitrator’s award. However, when the ruling results in the denial of an employee’s non-waivable statuatory rights created by FEHA, the arbitrator’s award exceeded the arbitrator’s power and should be vacated. This is an important door to keep open for employees. Although other cases have made this point before (see, for example, Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665 (2010)), it is important that the Courts reiterate this point so that employees – who may be compelled to arbitrate a claim under the Fair Employment and Housing Act or other civil rights statutes – understand that arbitration may not be their last stop on the road to seeking justice in the legal system.

Jody I. LeWitter

April 2, 2013

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