RICHEY v. AUTONATIONRespondents’ Petition for ReviewCal.December 24, 2012AZ S20°535 No. S : ETL, COURT _ FILED In the Supreme Court of the State of California DEC 24 2012 Frank A. McGuire Ci Avery Richey, ines SIS Plaintiff and Appellant, Deputy , Vv. AutoNation,Inc., et al. Defendants and Respondents. Court of Appeal Case No. B234711 Los Angeles County Superior Court; Case No.BC408319 ~Hon. Malcolm H. Mackey Petition for Review SNELL & WILMER L.L.P. Frank Cronin #69840) Richard A. Derevan #60960) Erin Denniston (#247785) Christopher B. Pinzon (#254110) 600 Anton Blvd., Suite 1400 Costa Mesa, California 92626 Tel: (714) 427-7000 Fax: (714) 427-7799 e-mail: rderevan@swlaw.com cpinzon@swlaw.com Attorneys for Petitioners Autonation, Inc, Webb Automotive Group, Inc., Rudy Sandoval, and Mr. Wheels, Inc. 16336600.1 No. S In the Supreme Courtof the State of California Avery Richey, Plaintiff and Appellant, Vv. AutoNation, Inc., et al. Defendants and Respondents. Court of Appeal Case No. B234711 Los Angeles County Superior Court; Case No.BC408319 Hon. Malcolm H. Mackey Petition for Review SNELL & WILMER L.L.P. Frank Cronin (#69840) Richard A. Derevan (#60960) Erin Denniston (#247785) Christopher B. Pinzon (#254110) 600 Anton Blvd., Suite 1400 Costa Mesa, California 92626 Tel: (714) 427-7000 Fax: (714) 427-7799 e-mail: rderevan@swlaw.com cpinzon@swlaw.com - Attorneysfor Petitioners Autonation, Inc, Webb Automotive Group,Inc., Rudy Sandoval, and Mr. Wheels, Inc. 16336600.1 TABLE OF CONTENTS Page Petition for REVieW ......c..cccccccccccccsssseseccceeeescenaeeeceeeseseeeseeeeteeseeeseeeeees 1 Issues Presented for Review............cssssseeescneseeeceeeeeeeeeeneteees 1 Why Review Should Be Granted..............cccccssssccceceeccneeeeeeseeseseeeneees 2 Statementof the Case ...........ccescsssccccecessnneeeeeereeeceeseaueaeeeeeeseaeeeenes 12 Legal Discussion ............ccccesseeeeeeeneeeees Lesseeeceesseeeecessceeaeeeeeesesens wees L4 I This Court Should Limit Review of Arbitration Awards Involving “Unwaivable Rights”; Otherwise Plaintiff-Employees Will Have Broader Review than IN Court Trials...........cccccccceccceccccsccccesssancnscceseseceeeeteveeeeeessaes 14 II This Court Should Adopt the Good Faith Belief Defense .........ccccccccccesssssseececceceecccesceecaussusuesesesseceseseeeceeseensees 18 Conclusion deseuecaaucaeaassecececccessececaucsesesecenuaaauecaseeseaaeseceseeseseesseseseacgess 22 Certificate of Word Count.........cccccccccccccceeecceeseseecetsesseeeeessntneeeeeenes 23 TABLE OF AUTHORITIES Page Cases Adamson v. Multi Community Diversified Services, Inc. (10th Cir. 2008) 514 F.3d 11386......0.0....8. seseedecneaeaesenneneaeeeeeaes 19 Arguelles-Romero v. Superior Court (2010) 184 Cal.App.4th 825 2.0... cessccccecccecesssseeeccessneuseeeeeeeesaes6 Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 838............ccccessecesssstecceeessssseeeaes 2, 3, 6, 7, 8, 16 Bachelder v. America West Airlines, Inc. (9th Cir. 2001) 259 F.3d 1112.eeeeeeeeeeeeeteteeeeenenens 19-21 Bickel v. Sunrise Assisted Living (2012) 206 Cal.App.4th Lon... ccccccsssscetsseecceceeseceeeeeees seseseeesennees 7 Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269.000... ecccccccccsssssssecesssssneneeeceeeessseeeeeeeeeeee8 Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal4th 1384.0... ccccccssscssnsaceceneeeeeeeeeeeeeeees 14-15 Collins v. D.R. Horton Inc. _ (9th Cir. 2007) 505 F.8d 874.0... .cessceceeeeeesSe eeessnececeesssnesesece 18 D.C. v. Harvard-Westlake School (2009) 176 Cal.App.4th 886 ............cccccccccceseseceeeeeeeeeeeneeeeees1-8 Denham v. Superior Court (1970) 2 Cal.3d 557 oo. cccccessssecccsssssssseeeeescesssseeaeaseesssssseasees 16 Depariment of Personnel Admin. v. California ‘ Correctional Peace Officers Ass’n (2007) 152 Cal.App.4th 1198 oo... cccccccccceessceeeceessnseeesseeees 8 Dudley v. Dept. of Transp. (2001) 90 Cal.App.4th 255.00... ccccssssseceeeeeessssecesseresssessnees 18 Edwards v. Arthur Andersen LLP (2008) 44 Cal4th 987.0... cccccssccesssssseceeeseeseeseeeseeeesessesenaneees6 Faust v. California Portland Cement Co. (2007) 150 CalApp.4th 864.0...eeeessereeeesteeeeeeteesneees 20, 21 TABLE OF AUTHORITIES (continued) Page Gentry v. Superior Court | (2007) 42 Cal4th 448.0...cccceeeeeeesteeeeeveseseseeeteeeteeeeees «.. D, 7 Gutierrez v. Autowest, Inc. (2008) 114 Cal.App.4th 77 ........ccccccccscccceceseeeeseeeeeeeeensseeeeeceseeeeees 6 Guz v. Bechtel Nat'l, Inc. (2000) 24 Cal.4th 817.0... cccccccccccecsssseteeeeeserssseeeeececesseeeeseeseees 19 In re Marriage of Ditto . (1988) 2038 CalApp.3d 643 00.0... ccceesseeeeeeeterreeeeees seeneaeeeeees 16 Independent Ass’n ofMailbox Center Owners, Inc. v. Superior Court (2005) 183 CalApp.4th 396 wo.ccccccccceesesseeeesssneeeneaseeeeees 7 Jordan v. Dept. ofMotor Vehicles ~ (2002) 100 Cal.App.4th 481 0...ccccccceceeseeseeeeesnnneneaeeeerees8 Kariotis v. Navistar Int'l. Transp. Corp. (7th Cir. 1997) 1381 F.3d 672.00... ccescseccseeteeeeeenes 9-11, 19, 21 Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.00.00... ccccccsssssssneecceeeeeecececeeeesssnesssneenenss6 Liu v. Amway Corp. (9th Cir. 2008) 847 F.3d 1125.0... cecesseeseeneececeeeeeeeneeees 20, 21 Lonicki v. Sutter Health Central . (2008) 43 Cal.4th 201... cccccccccccssssssseceeeeeeseeeeecececeeseseeeesees 21 McDaneld v. Eastern Mun. Water Dist. Bd. (2008) 109 Cal.App.4th702.0... cccccsscceceeeeeeseeneneeees 10, 11, 17 Moncharshv. Heily & Blase (1992) 3 Cal.4th Loo.ccseesseeseeneeseeteeseeeeneneesseenes 8, 9, 15,17 Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665.00... ccccccccccececsseeceeeeetesennseeeees 2-6, 15-18 Pollard v. Rea Magnet Wire Co. (7th Cir. 1987) 824 F.2d 557.0... ccscscsncccceecessncceeeeersseneeeeeees 19 Rogers v. County of Los Angeles (2011) 198 Cal.App.4th 480 0... cccccccccnsteeeeteseeeseetseeseeseenens 9 -iil- TABLE OF AUTHORITIES (continued) Page Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154.000.ca eecaaaecaueccecaccenseeeseeeeceaees 5 Scruggs v. Carrier Corp. (7th Cir. 2012) 688 F.3d 821...eesoe eeeesersesseneessesaenes 10 Constitution Cal. Const., art. VI, § 13 0... eeeeeceesetceceeceeseeeeeeeeeesseeeenseeeseneees 17 Cal. Const., art. XVI, § 6.0.0... ccceeeeeeeeesereeeeesuutatesusssessessisestessesssee8 Statutes 29 U.S.C. § 2612(a) oo. ccececcccccccccccceteceeeecersessaeerseesaesseeseseenesesseessenees9 Bus. & Prof. Code § 16700 ...........cccccccccsessececceresnsessneeeeeeeresseaveeseseeees 7 Bus. & Prof. Code § 17200 ...ssssscssssssssssssssssssssssseecesssssssssnnnsssseessannaae 7 Civ. Code § 51.7 ..........ccccsssceceseccecenceseeeeeereeeseeseseseeeeesessesessaseseseesneees 7 Civ. Codec § 52.1... eccccccccccceeeeeccecesseseeseneenecneaeeeseaeeeeseseessenseeeenseseees 7 Civ. Code § 1750 csssccccsssssssecsssssecssseessecesssssssesseessssssstsesessetesessesaneesssees 6 Civ. Code § 2981..........:cccccccssceccesseeeeneeeererseeeeesaeeeeseeeneeeeeseseceseeseeseees6 Civ. Code § 2985.7.........ccccccscceeccsseeeeeeeeeesseeasesseeaensesensseesseseeseuseseees6 Civ. Code § 3426 ccscccccssssssccsssssesssesesesseseeers cceccsssssucsssssssssesssssssssceesssT Code Civ. Proc. § 475 ............. pou csseeeececeseeeceeeecssecauaaeeceeeeensneeeeeeeens 17 Code Civ. Proc. § 682 wc.cccccccccccccccsssseeessnecnensneeecaeeeeeceeseeenseseseveoes 16 Code Civ. Proc. § 634.0... ceeeeeeeeLeeuesceseenenseccessecesecceueaeosasecenensess 16 Corp. Code § 81000 0.00... cecccccceesseneceecceeaseeeesecaseeuseeeeeerensepnsessesess 7 Ed. Code § 44929.21..cccccccscsscssesessssesessesstsssvesseessneesssssesseessesssseesesesen8 Gov. Code § 8512.0... cccccccccccessecccseceeeeceescceceeeeessececsseaaceessenseneeaeeesees 8 Gov. Code § 8524... cccccccccecccneeeececessneeenssseseossssaceeneusesereeeseeseess8 Gov. Code § 12900 cecssccsssscccsssssscscssssssssssseseessesssssessessessnsseseeeseesa: Gov. Code § 12945.1 oo... ecccccccecseeeceeesereceeesseeeeeessesesesenseussssesesesees 1 ~iv- TABLE OF AUTHORITIES (continued) Page Gov. Code § 12945.2 .......cccccccccccssseecessnececeseeeeeeeeseeeeensseusessnseeesseeeenes 1 Gov. Code § 12945.2(a)......cccccccccccessssseceeetsseeesneeceesesseeseresenseeees 4,9 Lab. Code § 510 ...cssssssssssesssssessssussesssssssssnsssssssenssseceeceeseeeseustseseee 5 Lab. Code § 1194.0... ceccccesssccnsececeeeerscceereceessseseeeseesessssseseesaseaneeens 5 Lab. Code § 2802........ccccccseseecseereereneeeeteteseeneeeeesteeeesVeveeeseesseseeeeeees6 Lab. Code § 2804.........ccccccccssssesseccceeeesssecereceerersauensseesesseessesseeeeeenaees6 Welf. & Inst. Code § 15600 ......... cc eeeessseeeeeeceeeeeseeseeeeeseceeseeeeeeeeees 7 Welf. & Inst. Code § 15657 ooo... ccecccccceeeeeeeceeeeeenneeeenststsesceseeeeneeess 7 Rule | Cal. Rules of Court, Rule 3.1590 0.0... eeccececneeeeeeerseeeceeteeeeeees 16 Regulations 2, CCR § 7297.2(C) cessesscssecsessssecsssessesssuvessevessscssssssesssseesessessecssisenees 18 29 CFR § 825.216(a).........ccssccsseseeeeeecseeeeeersseveseevensess peeeeeeseaeeeeceeeees 18 Other Authorities | Linda J. Demaine & Deborah R. Hensler, “Volunteering” to Arbitrate Through Predispute Arbitration Clauses: The Average Consumer's Experience, 67 L. & Contemp. Probs. 55, 62-64 11.30 (2004) ....eeeeeccecccccccrececcnsteceeeeeeecsessenssessnnecssseeasseeeseesseeeesseeeeee 5 Theodore Eisenberget al., Arbitration’s Summer Soldiers: An Empirical Study ofArbitration Clauses in Consumer and Nonconsumer Contracts, Al U. Mich. J.L. Reform 871, 882-84 (2008).....:.......:.ccssseeeveeeees4 Petition for Review AutoNation, Inc., Webb Automotive Group,Inc., Mr. Wheels, Inc., and Rudy Sandoval (collectively, AutoNation) petition for review of a decision of the court of appeal vacating an arbitration award which held that AutoNation had legal grounds. to terminate plaintiff, Avery Richey, while he was on approved | medical leave under the California Family Rights Act, Government Codesections 12945.1, 12945.2 (CFRA). The court of appeal’s decision is published at 210 Cal.App.4th 1516. A copy of the opinion and a copyof the order on rehearing modifying the opinion with no change in judgmentare attachedto this petition as exhibits A and B,respectively. Issues Presented for Review This case presents the following issues for review: 1. Whatis the proper standard ofjudicial review of an arbitration award involving an employee’s “unwaivable rights” wherethe arbitrator decides the case by written decision following an evidentiary hearing on the merits of the plaintiff- employee’s claim? 2. Does an employer violate CFRA by terminating an employee on approved medical leave where the employer has an honestbelief that the employee is abusing the leave or violating companypolicy? WhyReview Should Be Granted This petition for review presents two issues. Thefirst is an issue of arbitration law this court hastwice deferred given the proceduralposture of the cases this court had before it, but which is squarely presented here. The second is an issue of employment law that has generated conflicting rulings in both federal and California courts. Both are deservingof this court’s time. 1. In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 100 this court held that in the case of an “unwaivablestatutory rights,” an arbitrator has the obligation to “issue a written arbitration decision that will reveal, howeverbriefly, the essential findings and conclusions on which the award is based.” 24 Cal.4th at 107. Because Armendariz arose from a court of appeal decision compelling the parties to arbitrate and not from the merits of an arbitration award, however, this court said that it had “no occasion to articulate precisely what standard of judicial review is ‘sufficient to ensure 29 that arbitrators comply with the requirementsof [a] statute. Ibid. Ten yearslater, this court revisited the issueof judicial review of an arbitration award involving unwaivablerights. Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665. In Pearson Dental, a 4-3 decision, this court said that it was “faced precisely with the question that was prematurely posed in Armendariz, i.e., the proper standard of judicial review of arbitration awards arising from mandatory arbitration employment agreements that arbitrate claims asserting the employee’s unwaivable statutory rights.” 48 Cal.4th at 679. Once again, however, this court did not resolve the scope of review. In Pearson Dental, the “arbitrator's award ... did not even comply with the requirementsset forth in Armendariz” (48 Cal.4th at 679) and the arbitrator made whatthis court called a “clear legal error’ on a procedural issue, incorrectly holding plaintiffs case to be time-barred. Ibid. Because the arbitrator’s clear legal error prevented plaintiffs claims from being heard on the merits, this court said it would articulate only a “narrow|] rule is sufficient for [the case’s] resolution.” Ibid. The narrow rule this court stated is that where an “employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on unwaivable statutory rights, because of an arbitration award based on legalerror, the trial court does not err in vacating the award.” Id. at 680. Stated in other terms, this court said, “an arbitrator whose legal error has barred an employee subject to a mandatory arbitration agreement from obtaining a hearing on the merits of a claim based on such [unwaivable] right has exceeded his or her powers... .” [bid. Before deciding to issue the “narrow”rule, this court passed on the opportunity to issue a more generalrule by(i) rejecting the defendant-employer’s position that “that all Armendariz requires is a written arbitral award”and(ii) refusing to consider the plaintiffs broader argument that the standard of review should be that “all legal errors are reviewable in this context, or that all errors involving the arbitration statute itself are reviewable.” 48 Cal.4th at 679. This court left that issue for another day. Ibid. That dayis here. In this case, there were 11 days of evidentiary hearings on the meritsof plaintiffs claims. The arbitrator issued a 19-page written decision finding in AutoNation’s favor. The trial court confirmed the award, but the court of appeal ordered it to be vacated on the theory that the arbitrator had made anerrorof law in applying ani affirmative defense—the “honest belief’ defense—to defeat Richey’s claims. The court of appeal held that the honest belief defense “is incompatible with California statutes, regulations, and case law and deprived Richey of his unwaivable statutory right to reinstatement under [Government Code] section 12945.2, subdivision (a).” (Typed Op’n at 2.) It cannot be doubted that the question of the proper scope of review of arbitration awards involving the employer-employee relationship or unwaivable rights is a question of widespread importance. This court can observethat arbitration of employment disputes is widespread among employersjust from. its docket and that of the courts of appeal. But academic research bears this out, too. See Theodore Eisenberget al., Arbitration’s SummerSoldiers: An Empirical Study ofArbitration Clauses in Consumer and Nonconsumer Contracts, 41 U. Mich. J.L. Reform 871, 882-84 (2008) (surveying firms in the financial services and telecommunications industries and finding 93% of the companies’ employment agreements contained an arbitration provision). | Arbitration agreements are also widespread in consumer contracts. See id. (75% of customer contracts in surveyed companiesin the financial services and telecommunications industries contained an arbitration provision); Linda J. Demaine & Deborah R. Hensler, “Volunteering” to Arbitrate Through Predispute Arbitration Clauses: The Average Consumer's Experience, 67 L. & Contemp. Probs. 55, 62-64 n.30 (2004) (surveying a broad sampling of companies offering products to consumersandfinding that approximately 35% of all companies a consumer regularly does business with will require an arbitration provision). Moreover, even a partial list of rights found to be unwaivable shows that the question of the proper standard of review will arise in a wide variety of cases: e Fair Employment and Housing Act (Gov't. Code § 12900 et seq.). Pearson Dental, supra, 48 Cal.4th at 670. e Wage andovertime claims (Lab. Code §§ 510, 1194). | Gentry v. Superior Court (2007) 42 Cal.4th 443, 455 (“By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable.”); Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 167, 170 (“the rights to minimum wage and overtime compensation under Labor Code section 1194 are unwaivable.”). ° Wrongful termination in violation of public policy (Tameny claims). Little v. Auto Stiegler, Inc. (2008) 29 Cal.4th 1064, 1077 (‘A Tameny claim is almost by definition unwaivable.”). ° Employee’s right to reimbursementofjob expenses (Lab. Code §§ 2802, 2804). Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 951-52 (“Courts have interpreted Labor Code section 2804 to apply to Labor Code section 2802, making all contracts that waive an employee's right to indemnification null and void. ... Thus, indemnity rights are nonwaivable . .”). Andoutside the employment arena, certain statutory rights have also been found to be unwaivable, to which the Armendariz and Pearson Dental teachings could well be applied. Some examples: ° Consumer Legal Remedies Act (Civ. Code §§ 1750 et. seq.) and California Vehicle Leasing Act (Civ. Code §§ 2985.7 et seq.). Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 95 (‘In their complaint, plaintiffs rely on the CLRA and the VLA, consumerprotection statutes enacted for a public purpose and providingcertain unwaivable rights. Thus, plaintiffs are entitled to contest the arbitration clause on thebasis thatit is a private agreementin contravention of public rights—a separate, generally available contract defense not preempted by the FAA.”). ° Automobile Sales Finance Act (Civ. Code §§ 2981 et. seq.). Arguelles-Romero v. Superior Court (2010) 184 Cal.App.4th 825, 829 (determining the Automobile Sales Finance Actcontains unwaivable rights, and reversing order compelling arbitration and remanding for furtherfindings in view ofArmendariz and Gentry, supra). e Franchise Investment Law (Corp. Code, § 31000 et seq.); Cartwright Act (Bus. & Prof. Code, §§ 16700 et seq.); Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.); Unfair Competition Law (Bus. & Prof.-Code, §§ 17200 et seq.). Independent Ass’n ofMailbox Center Owners, Inc. v. Superior Court (2005) 133 Cal.App.4th 396, 416 (Stating with respect to the Franchise Investment Law, Cartwright Act, Uniform Trade Secrets Act, and Unfair Competition Law, “These statutory claims affect the public interest and appeartofall all or in part within the rules ofArmendariz....”). ° ‘Elder Abuse and Dependent Adult Civil Protection Act (Welf. & Inst. Code §§ 15600 et. seq.). Bickel v. Sunrise Assisted Living (2012) 206 Cal.App.4th 1, 12 (holding an arbitration provision requiring each side to bear its own attorney’s fees violated section 15657, an unwaivable right to attorneys’ fees. The court did not indicate its holding was broader, but presumably, given the public rights involved, the entire act would be deemed unwaivable). e California hate crimes laws (Civ. Code §§ 51.7, 52.1). D.C. v. Harvard-Westlake School (2009) 176 Cal.App.4th 836, 863 (holding the California hate crimes laws confer unwaivable statutory rights and stating, “We necessarily reject the School’s argument that Armendariz’s prohibition of inappropriate arbitral expensesis limited to mandatory employment agreements—those imposed as a condition of employment.” (Emphasisinoriginal).) e Education Code § 44929.21 (defining “permanent -employee” of a school district). Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 272 (holding Education Code §44929.21 conferred a public right that could not be contravened by agreement, and vacating arbitration award under Moncharsh v. Heily & Blase (1992) 3 Cal.4th1 based on legal error where the arbitrator enforced an agreement contrary to Education Code section 44929.21). e Ralph C. Dills Act (formerly knownasthe State Employer—-Employee Relations Act) (Gov. Code §§ 3512 et seq.). Department of Personnel Admin. v. California CorrectionalPeace Officers Ass’n (2007) 152 Cal.App.4th 1193, 1195 (after legislature had approved a memorandum of understanding with peaceofficer union pursuant to Government Code § 3524, the arbitrator reformed the agreement; the court held this violated an important public policy under Moncharsh and vacated the awardfor legal error). e Cal. Const., art. XVI, § 6 (prohibiting gift of public funds). Jordan v. Dept. ofMotor Vehicles (2002) 100 Cal.App.4th 431 (arbitrator issued attorneys fee award against the state in amount sreatly exceeding whatthe legislature had authorized and the amountat issue in the dispute; the court vacated the arbitration award under Moncharshas a gift of public funds in violation of public policy). Given the widespread nature of arbitration clauses and the ‘numberof rights considered unwaivable, this court should grant review to give guidance on the proper standard of review of arbitration awards between employer and employee involving unwaivablerights. 2. This court should also grant review of the second issue, namely, whether California should recognize the “honest belief’ defense. The leading case articulating this defense in cases dealing with the analogous federal regulation is Kariotis v. Navistar Intl. Transp. Corp. (7th Cir. 1997) 1381 F.3d 672.1 In Kariotis, plaintiff-employee injured her knee and took medical leave under the FMLA.As did Richey, the employee had her FMLA leave extended multiple times, prompting an investigation by the employer. The employer’s investigator “reported seeing [employee] walking, driving, sitting, bending, and shopping.” Jd. at 675. Solely on the basisof the investigator report, employer fired employee “because she dishonestly had claimed disability benefits .. ..” Id. The Seventh Circuit remarked that the investigation “left something to be desired”—the employer never 1 Rogers v. County of Los Angeles (2011) 198 Cal.App.4th 480, 487 (“Because the CFRA and the FMLA contain nearly identical provisions regarding family or medical leave (Gov. Code, § 12945.2, subd. (a); 29 U.S.C. § 2612(a)), California courts _ routinely rely on federal cases interpreting the FMLA when reviewing the CFRA.”). Not all circuits follow Kariotis. See Typed Op’n at 16. sought out the treating doctor or obtained a second medical opinion—butit had no trouble affirming summary judgment in favor of the employer on the basis of the honest-belief doctrine. Id. The court’s rationale is pertinent here becauseit held that the employer did not have to prove the employee misused her leave, but only that it had an honest suspicion she had doneso: “TEmployer] need not conclusively prove that [employee] had misused herleave; an honest suspicion will do.” Id. at 681. The court went on to explain that “the FMLA’s regulationsplainly state that an employee ... has ‘no greater right to reinstatement or to other benefits and conditions of employmentthan if the employee had been continuously employed during the FMLA leave period” and that “because [employer] lawfully could have © terminated [employee] after suspecting she committed fraud while on duty,” if the employer “had to prove more than an honest suspicion simply because [employee] was on leave, she would be betteroff (and enjoy ‘greater rights’) than similarly situated employees (suspected of fraud) who are not on leave.” Id. - at 681. Accord, Scruggs v. Carrier Corp. (7th Cir. 2012) 688 F.3d 821, 825-26 (following Kariotis). Kariotis has been cited with approval by McDaneld v. Eastern Mun. Water Dist. Bd. (2003) 109 Cal.App.4th 702. In McDaneld the plaintiff took CFRA leave to care for his father. While on leave, the employee played golf and worked on his lawn, and he took an extra day off work after his father had recovered. 10 When his employer discovered these facts, it fired him. Employee petitioned for a writ of mandate to obtain reinstatement (employer was a government entity) and lost. Both at trial and on appeal, he argued that the activities the employer witnessed “were not activities inconsistent with providing the necessary physical and psychological care to his father.” Id. at 707. In affirming, the court of appeal held that it did not matter whether employee’s activities were consistent with the reasons for his leave, provided the employer had a goodfaith belief the leave was being misused: “Thecritical issue is whether the [employer] maintained a good-faith, reasonable belief that [the discharged employee] had abused [his] FMLA leave.” Id. at 707- 08 (brackets in original). The court concluded,“the [employer’s] justifiable conclusion that he had misused leave . . . allowed the [employer] to terminate him anyway.” Id. at 708. In the case at bench, although acknowledging that “the facts in Kariotis are strikingly similar to those in the instant case,” (Typed Op’n at 15) thecourt of appeal refused to follow Kariotis. (Typed Op’n at 238.) The court of appeal distinguished — McDaneld on the theory that McDaneld “cited administrative findings that the employee had, in fact, engaged in activities incompatible with the intended purpose of his leave... .” (Typed Op’n at 23.) But the language in McDaneldis not so limited: “We affirm the judgment on the groundsthat the waterdistrict could properly terminate McDaneld whenit reasonably believed he was 11 misusinghis family leave and then was untruthful during the subsequent investigation.” Id. at 704 (emphasis added). So, this court should also grant review to consider the “good faith belief’? defense both because it is an important issue and because of the conflict in the case law. Statement of the Case Richey was an employee of an auto dealership. (Typed Op’n at 2-3.) While working fulltime, he suffered a back injuryat home and was granted leave under CFRA, with Richey’s physician certifying that Richey was unable to work. (Typed Op’n at 3.) While Richey was on leave AutoNation learned that he apparently was workingat a restaurant he owned. (Typed Op’n at 3.) Richey’s supervisor sent Richey a letter advising him of the companypolicy barring other employment, includingself- employment, while on leave. (Typed Op’n at 3.) Believing the letter did not apply to him because he ownedthe restaurant, Richey ignored the letter and did not communicate with his supervisor. (Typed Op’n at 3.) AutoNation employees and supervisors then observed Richey working at the restaurant and AutoNation terminated him while his leave wasstill in effect. (Typed Op’n at 4.) Following his termination, Richey sued AutoNation on a numberof theories, including racial discrimination, harassment, retaliation for taking approved leave under CFRA,andfailure to be reinstated following approved CFRA leave. (Typed Op’n at 4; 3CT 543.) The case was orderedto arbitration and Richey’s 12 claims weretried in an 11-day arbitration, featuring © 19 witnesses, all called by Richey. (8CT 537; 563.) The arbitrator issued a 19-page final award in favor of AutoNation on all of Richey’s claims, discussing the procedural history, the evidence, and the legal issues. (CT 537-55.) With respect to Richey’s failure to reinstate claim, the arbitrator stated - the legal issue as follows: “[W]hether the law provides a protective shell over Mr. Richey that bars his termination until he is cleared to return to work by his physician, or does the law allow an employer to let an employee go, while on approvedleave, for other non-discriminatory reasons?” (3CT 548 (emphasis in original; see Typed Op’n at 4-5.) The arbitrator found that Richey’s supervisor was concerned whether Richey was being honest with the dealership about his medical condition and whether he had another job in violation of AutoNation policy prohibiting other employment while on leave. (3CT 553.) In upholding Richey’s termination, the arbitrator wrote that “case law, as recited above, allows . [AutoNation] to terminate Mr. Richey if it has an ‘honest’ belief that he is abusing his medical leave and/oris nottelling the company the truth about his outside employment.” (8CT 553.) The arbitrator concluded that “Theweight of theevidence is overwhelming that Power Toyota fired Mr. Richey for non- discriminatory reasons. His CFRA/FMLA statusis not an absolute bar to termination. His medical leave status does not protect Mr. Richey from smart decisions, or bad ones, made by 13 [AutoNation], so long as the basis for the decisionis legally proper.” (8CT 554.) Richey sought to vacate the award on limited grounds. He did not challenge the arbitrator’s decision as to his racial discrimination claims, but argued only that the arbitrator committed legal error by invoking the honest belief defense to defeat Richey’s reinstatement claim. (2CT 274-282.) The trial court confirmed the award and Richey appealed. On appeal, the court of appeal reversed, holding that the arbitrator wrongly accepted the honest belief defense, made an error of law, and therefore had exceeded his powers. (Typed Op’n at 2.) This case therefore squarely presents for decision what should be the proper standard of review on an arbitrator's decision where an employee’s “unwaivable rights” are in issue and whether California should accept the honest belief defense. These issues are unquestionably important issues of law affecting the rights of millions of California workers and their employers, not to mention the court system which will be called upon to review these awards. Legal Discussion I This Court Should Limit Review of Arbitration Awards Involving “Unwaivable Rights”; Otherwise Plaintiff- Employees Will Have Broader Review than in Court Trials This court recognized in Cable Connection, Inc.v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 that “Inherent [in the 14 arbitrator’s] poweris the possibility the arbitrator may err in deciding someaspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error....44 Cal.4th at 1360. Justice Baxter’s dissent in Pearson Dental was prescient: “Given the vast numberof statutory schemes that can be claimed | to protect unwaivable rights, as well as the myriad ways in which legal error can be claimed to preclude or impair a hearing on the merits, the majority’s holding makes for an exception that will surely ‘swallow the rule of limited judicial review.” Pearson Dental, supra, 48 Cal.4th at 689 (Baxter, J., dissenting) (quoting Moncharsh, 3 Cal.4th at 28). This case proves Justice Baxter’s point. The court of appeal’s decision turns this well-settled rule of law on its head. While Pearson Dental’s expansion of this rule was limited to correcting errors of law on procedural issues that prevented a hearingon the merits, this opinion expands Pearson Dental to encompass substantive rulings that go to the merits of the case.” Underthe court of appeal’s decision, arbitrations involving 2 The opinion claims (Typed Op’n at 26-27) Richey was “effectively denied” a hearing on the merits, but that is not correct. This affirmative defense was not on a purely procedural issue, but was intertwined with the merits of Richey’s claims and depended onthe arbitrator’s assessment of the facts presented in the 11 days of evidentiary hearings. 15 unwaivable rights are not arbitrationsat all, but court trials in disguise. Thougheffectively court trials, under the regime predicted by Justice Baxter and fulfilled in the court of appeal’s opinion | provides fewer protections for a defendant. For starters, it is one way review. The defendant-employer would not be entitled to de novo review for legal error if a ruling is in favorof a plaintiff. See Pearson Dental, supra, 48 Cal.4th at 689 n.5 (Baxter,J., dissenting). Second, there is no statement of decision process in arbitrations. Armendariz requires only that the arbitration decision reveal, “howeverbriefly, the essential findings and conclusions on which the award is based.” 24 Cal.4th at 107. In court trials, the parties are entitled on request to a statement of decision. Code Civ. Proc. § 632; Cal. Rules of Court, Rule 3.1590. If a party does not request a statement of decision, a court of appeal will infer that the trial court made every necessary finding to support the judgment. Denham v. Superior Court (1970) 2 Cal.3d 557, 564. And if a statement of decision omits to resolve a controverted issue or contains an ambiguity, the same rule of implied findings applies unless the omission or ambiguity is brought to the attention of the trial court. Code Civ. Proc. § 634. See In re Marriage of Ditto (1988) 203 Cal.App.3d 643, 648 (presumption appliesto alleged errors of fact or law). If this case had been in thetrial court, AutoNation could have asked the court to make alternate findings, including ones 16 - that it not only had an honest belief that Richey violated companypolicy or that he had committed misconduct, but that he | actually had done so. Those findings would have been enough for the court of appeal to affirm based on its reading of McDaneld, supra. (Typed Op’n at 23.) And if there were nofindings on that issue, as the prevailing party, AutoNation would have been entitled to implied findings. But rather than implythe doctrine of implied findings to the arbitrator’s award, the court of appeal ignored it. Andbecausethereis no record in most arbitration proceedings—includingthis one, which was not reported—it is impossible to assess the prejudicial effect of the alleged error, which is normally required for reversal. Code Civ. Proc. § 475; Cal. Const., art. VI, § 13. Justice Baxter’s Pearson dissent explains better than this petition can why unlimited review of an arbitrator’s legal rulings is bad policy and contravenesthe arbitration statutes. One potential path would be to adapt the rule in federal courts and some states that an arbitrator’s decision maybe vacated for “manifest disregard” of the law. Such a test would ensure that even where an arbitrator is ordinarily permitted to base a decision on principles of justice and equity (Moncharsh, supra, 3 Cal.4th at 10-11), an award based on unwaivable rights would be required to be groundedin the arbitrator’s understandingof the law, but review would be more limited than the de novo review permitted by the court of appeal’s decision. See Pearson 17 Dental, supra, 48 Cal.4th at 677 n.3 (Baxter, J. dissenting); Collins v. D.R. Horton Inc. (9th Cir. 2007) 505 F.3d 874 879-80. See generally, AutoNation openingbrief at 20-22. Whatever path this court chooses, it should disavow a rule that an arbitrator’s decision on the merits may be reviewed de novo for alleged legal error. II This Court Should Adopt the Good Faith Belief Defense Both federal and state law makeit plain that an employee on leaveis not entitled to preferential treatment. That is to say, if grounds exist for terminating an employee, being on leave does not—in thearbitrator’s words—provide a “protective shield” over the employee. See 2 CCR § 7297.2(c) (stating that “[a]n employee has no greater right to reinstatement... than if the employee had been continuously employed during the CFRAleave period.”); 29 CFR § 825.216(a) (an employee has “no greater right to reinstatementor to other benefits and conditions of employment than if the employee had been continuously employed during the FMLA leave period.”). See Dudley v. Dept. of Transp. (2001) 90 Cal.App.4th 255, 261 (in provingretaliation in violation of CFRA,plaintiff must prove adverse employmentaction “because | of her exercise of her right to CFRA.”) (emphasis added). 18 The rationale underlying Kariotis is that—like that of California’—since “no federal rule requires just cause for discharges .. . [a] reason honestly described but poorly founded is not a pretext as that term is used in the law of discrimination.”. Kariotis, supra, 131 F.3d at 677 (quoting Pollard v. Rea Magnet Wire Co. (7th Cir. 1987) 824 F.2d 557, 558, 559). In short, unless the employee is being fired because of the leave, the employer has not violated the law. That is why the Kariotis court said that “arguing about the accuracy of the employer’s assessmentis a distraction because the question is not whether the employer’s reasonsfor its decision are right but whether the employer’s description of its reasons is honest.” (Typed Op’n at 14-15, quoting Kariotis, 131 F.3d at 677). Thecourt of appeal rested its decision in part on key cases that do not supportit. In particular, the Ninth Circuit cases on which the court of appeal opinion relies and the First District opinion on whichit also relies, deal with the question of the employer’s own duties, not the employee’s conduct. In Bachelder v. America West Airlines, Inc. (9th Cir. 2001) 259 F.3d 1112 (see Typed Op’n at 16-17), the employee was not terminated, as here, because the employer had an honest belief 3 Richey was an at-will employee. An at-will employee may be terminated at any time and for any lawful reason. Guz v. Bechtel Nat'l, Inc. (2000) 24 Cal.4th 317, 335-336, 358. See also Adamson v. Multi Community Diversified Services, Inc. (10th Cir. 2008) 514 F.3d 1186, 1153 (“Employers are free to terminateat- will employees for any other reason—however unfair, unwise or even erroneous—solongasit is not unlawful.”) 19 he was misusing his approved leave. Instead, in Bachelder, the company miscalculated the length of the employee’s leave and fired the employee while she was on the protected leave, based in part on her absences. 259 F.3d at 1125-26. Since her absences were protected, the company wasdiscriminating against the employee on the basisof leave; it fired her because of her lawful absences. A company’s ownobligation to properly calculate the leave period is not the equivalent of a good faith belief the employee is misusingtheleave. The sameis true of Liu v. Amway Corp. (9th Cir. 2003) . 847 F.3d 1125, 1135, which the court of appeal cites for the _ proposition that “fa]n employer’s good faith or lack of knowledge that its conduct violates FMLA doesnot protect it from liability.” Typed Op’n at 19.) In Liu, just like Bachelder, however, the employer breachedits own obligation—it misidentified FMLA leave as personal leave and then terminated the employee in part for taking what wasprotected leave. 347 F.3d at 1134-37. Again, this case did not involve the employer’s honest belief about the employee’s conduct while on leave; it involved a breach of the employer’s own duties underthe statutory scheme. The First District decision the opinion cites, Faust v. California Portland Cement Co. (2007) 150 Cal.App.4th 864 (Typed Op’n at 19-20), falls into the same category. There, the court reversed a summary judgment in the employer’s favor by focusing on the employer's breach of its own obligations under CFRA—afailure to provide the employee “his right under the 20 CFRA.” Id: at 881. The court said that the employer “never informed Faustof the availability of medical leave under CFRA ... and he did not know hecouldavail himself of those protections.” Id. at 871. He was terminated because “the paperwork [he] submitted . .. was insufficient to sustain an approved absencefrom work.” Id. at 872. So, once again, this case, like Bachelder and Liu, concerned the employer’s own statutory obligations, not whether it had an honest belief about the employee’s conduct whileon leave. See also Lonickiv. Sutter Health Central (2008) 43 Cal.4th 201 Gissue concerned whether leave improperly denied, not employee’s conduct while on leave). Kariotis got it right. Terminating an employee because of an employer's honest belief the employee is misusing leave does is not groundsforliability. The question of whether California ought to adopt the honest belief defense is an important question that ought to be addressed by this court. 21 Conclusion The petition for review should be granted. Dated: December 21, 2012 SNELL & WILMER L.L.P. Frank Cronin Richard A, Derevan Erin Denniston Christopher B. Pinzon Attorneys for Petitioners 22 Certificate ofWord Count The undersigned certifies that pursuant to the word count feature of the word processing program used to preparethis petition, it contains 4,993 words, exclusive of the matters that may be omitted underrule 8.504(d)(1). Dated: December 21, 2012 SNELL & WILMERL.L.P. Frank Cronin Richard A, Derevan Erin Denniston Christopee Christopher B. Pinzon Attorneys for Petitioners 16202458 23 CERTIFIEDFOR PUBLICATION IN THE COURT OF APPEAL OF THESTATE O F CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN | " AVERY RICHEY, . | -B234711 Plaintiff and Appellant, (Los An geles County Super. Ct. No. BC408319) ve. _ AUTONATION,INC. etal, : eTILe ID Defendants and Respondents. . NOV 1 3 2012 “JOSEPHA, LANE Clerk Deputy Clerk -Appeatfrom ajudgment ofthe SuperiorCourt ofL os Angeles-County, Malcolm H. Mackey,Judge. Reversed. ~ Scott O. Cummings for‘Plaintiff and Appellant Avery Richey. Snell & Wilmer, Richard A. Derevan and Christopher B. Pinzon, for Defendants and Respondents AutoNation, Inc., Webb Automot ive Group, Inc., Rudy Sandoval and Mr. Wheels,Inc.- ..... Avery Richey, a sales manager a t Power Toyota ofCerritos, wastermina tedfrom .. .... his job four weeks before the expiration o fhis approved medical leave under the Mo ore- Brown-Roberti Family Rights Act (C FRA) (Gov. Code, §§ 12945.1, 12945.2 )' because | his employer believedRichey was misusin g his leave by workingpart time in a restau rant . he owned. Richey sued Power Toyota’s p arent companies, AutoNation,Inc., Webb Automotive Group,Inc., Mr. Wheels, Inc., and his direct supervisor, Rudy Sa ndoval (collectively AutoNation),alleging his rig hts under CFRA had been violated.” Riche y’s claims were submitted to arbitration under theterms of a mandatory employment - arbitration agreement that provided, in pa rt, “frJesolution of the dispute shall be bas ed solely upon the law governing the claims and defensesset forth in the pleadings.” | _ The arbitrator denied Richey’sCFR A claim based on the so-called honest belief or honest suspicion defense. The trial court d enied Richey’s motion to-vacate the " arbitrator’s decision and granted AutoNat ion’s petition to confirm the award. | - The honest belief defense acceptedby th e arbitrator.is incompatible with California statutes, regulations and case law and deprived Richey ofhis unwaivable statutory right to reinstatement undersectio n 12945.2, subdivision (a). This clear legal error abridged Richey’s statutory rights und er CFRA—tights based on,and intended to further, an important public policy. Acc ordingly, under the principles set forth i n Armendariz v. FoundationHealth Psyc hcare Services, Ine. (2000) 24 Cal.4th 8 3 (Armendariz) and Pearson Dental Supplies , Inc. v. Superior Court (2010) 48 Cal.4th 6 65 ~ (Pearson Dental), the award must be vacat ed. FACTUALAND PROCEDURAL BACKGRO UND | 1. Richey’s Employmentat Power Toyo ta Richey was hired by Power Toyota in 2004 to sell cars. At the time he was hired, he signed, as a condition of his employment, an arbitration agreement covering claims SST eens ' Statutory references are to the Gover nment Codeunless otherwise indicated. Richeyalso alleged claims ofracial (he isAf rican American) and disability discrimination under other provisions of the Fair Employment and Housing Act (FEHA) (§ 12940et seq.). Those claimsare notat issue in this appeal. 2 -. 2.against PowerToyota,itsparent companies, employeesandagents. Heperformedwell2 and was promoted to a position of assistant sales manager approxi mately six months after he began working for Power Toyota.’ . | In October 2007, while still working full time for Power Toyota, Richey took steps. to start a family seafood restaurant. The restaurant opened in Fe bruary 2008. Although many employees-engaged in business ventures or had part -time jobs outside their employment with Power Toyota, Richey’s supervisors, concern ed the restaurant was distracting him from hisjob, met with him to discuss “performan ce” and “attendance” "issues. In response Richey filed a complaint alleging his supervisors were asking inappropriate and personal questions. : On March 10, 2008 Richey suffered a back injury while mov ing furniture at home. His physician certified he was unable to perform the duties ofh is job at Power Toyota, and Richeyfiled a claim for leave under CFRA. The leave was grante d and extended on several occasions. Richey’sphysician set a date ofMay 28, 2008 for his return to werk. On April 11, 2008 one ofRichey’s supervisors senta letter advisi nghim of the company’s policy barring other employment, including self-empl oyment, while on a leave ofabsence. Richey did not respondtotheletter because he believed the policy as stated in the employee handbook—“Youare not allowed to accep t employment with another company while you are on approved [CFRA] leave”— di d not apply to him because he was simply the owner of a restaurant. On April 18, 2008, responding to information Richey was workingat his restaurant while on leave, Richey’s supervisor directed another employee to drive by the restaurant. The empl oyee parked near the restaurant for a few minutes and observed Richey sweeping, bend ing over and using a hammerto hang a sign. Another ofRichey’s supervisors visited the restaurant for about . 3" Before Richey’s promotion, he accused a coworker ofusinga racial epithet. The coworkerwasinitially given a one-day suspension. In response toRichey ’s complaint the discipline was inadequate, the suspension was increased to one we ek without pay. The company’s responseto this episode, together with Richey’s failure to complain about further incidents ofracial epithets, were relied upon by the arbitrator t o deny Richey’s claimsofracial discrimination. - ~ 20-minutes-ona-different occasion.and believed he. saw Richeyworking thereat thetime. Several other coworkers observed Richey taking orders and acting as a cashier at th e | restaurant. Testifying at the arbitration h earing, Richey acknowledged he had tak en orders, handled payment and answeredth etelephone while at the restaurant but cl aimed he had only engagedin limited, light-du ty tasks authorized by his doctor. OnMay 1, 2008 Power Toyota term inated Richey for engaging in outside _ employment while on a leave of absence. . 2. The Lawsuit and Resulting Arbitration Award . After receiving a right-to-sue letter from t he Department of Fair Employment and Housing(DFE),Richey filed this lawsuit, all eging multiple claims under FEHA, including CFRA. AutoNation moved to c ompel arbitration under the agreement sig ned by Richey at the commencement ofhis em ployment with Power Toyota, which provi ded: “Resolution ofthe dispute shall be based s olely upon the law governing the claims an d defensesset forth inthe pleadings and the arbitrator may not invoke any basis (inclu ding, but not limited to notions of ‘just cause”) o ther than such controlling law.” The arbitration hearing was conducted ove r the course of 11 days. In a written orderthe arbitrator denied Richey’s cla ims ofracial discrimination and harassm ent, finding the conditions ofRichey’s employ ment did not constitute a hostile work environment.” With regard to Richey’s cla ims under CFRA andits federal corollary, t he Family and Medical Leave Act of 1993 (29 U.S.C.§§ 2601-2654 (FMLA)), the arbitrat or identified the issue under both statutes as “ whether the law provides a protective shell ‘ The parties agree California law governs Richey’s CFRA claim. 5 In denying Richey’sclaims of raci al discrimination, the arbitrator stated, “T he arbitrator readily acknowledgesthereality of car dealerships. ... If one mixes people | who comefrom different cultures, educati onal backgrounds andlife experiencesinto a work pool . . . human nature takes over a nd no one should be surprised that bawdy and off color conversationsare going to occur . [| No sensible personis going tobeli eve = =" that raspy jokes were nottold, the ‘n’ wor d wasriever used and everyone used proper table conversation in their daily contact wit h each other. Summarizing the witnesses, i t is clear that questionable African, Hispanic and Asian comments were being exchang ed at the dealership.” — over Mr. Richeythatbars histerminationuntilhe iscleared to return to work by his, | physician, or does the law allow an employer to let an employee go, while on approved leave, for other non-discriminatory reasons?” Despite the many factual disputes, the arbitrator decided Richey’s CFRA claim could be decided based on a single issue oflaw and fact: Relying on federal courtdecisions applying FMLA and one C alifornia decision affirming the discharge of an employee who played golf and worked o nhis lawn during the week he was supposedly caring for his injured father (see McDaneld v. Eastern Municipal Water Dist. (2003) 109 Cal.App.4th 702 (McDaneld)), the arbitrator . concluded, “faln employer who honestly believes thatit is discharging an employeefor - misusing FMLA[leave] is not liable even ifthe employer is mistaken.”® Applyingthis rule oflaw to Power Toyota’s decision to terminate Richey, the arbitrator “readily concede[d]” that the company’s policy barring “employ ment with another company” was poorly written and accepted Richey’s testimony he di d not believe he was violating company policyby managing his own restaurant. F urther, several | Power Toyota supervisors agreed-exceptionsto the rule had been made in the past | depending on the nature ofthe outside activity. The arbitrator also ackno wledged “rJeasonable minds” could differ as to whether Richey’s duties at the restau rant were SO “minimally physical” they conformed with the doctor’s certification ofRichey ’s bad 6 See, e.g., Medley v, Polk (10th Cir. 2001) 260 F.3d 1202, 1207 (“[t}he law, from a numberof authorities at both the federal appellate and district court level s, is, .. . that an employer who discharges an employee honestly believing that the empl oyee has abandonedherjob andis otherwise not using FMLAleaveforits here “inten ded purpose,’ to care for a parent, would not be in violation ofFMLA,even if its conclusion is mistaken, since this would not be a discriminatory firing,” fn. omitted ]; Kariotis v. Navistar Internat. Trans. Corp. (7th Cir. 1997) 131 F.3d.672, 680-68 1 [“Discrimination statutes allow employers to discharge employees for almost any reason wh atsoever (even _amistaken but honest belief) as long as the reasonis not illegal discriminat ion. Thus - “when ani ernployee is discharged becauseofanemployer’s honest mistake , federal-anti- discrimination laws offer no protection. ... [{] ... The problem for Kario tis [the employee] is that Navistar [the employer] has demonstrated that it honestly be lieved she was not on a legitimate FMLAleave. . . [or] was not using her leave forits ‘intended purpose’ of recovering from knee surgery.”). 5 meq - back.” Nonetheless,the arbitratorreasoned, the is sue. centered.on“what was.in [Richey’s. a supervisor’s] mind whenhedecided to let Mr. R ichey go,” and Power Toyota was - allowed to terminate Richeyifit had an “hones t belief” that he was abusing his medical leave or was not telling the company the truth about his outside. employment. Although the arbitrator acknowledged the investigatio n conducted by Power Toyota could be considered “superficial,” he concluded the super visor who fired Richey did so for a legally permissible, non-discriminatory reason. 3. The Trial Court’s DenialofRichey’s Motion T o Vacate-and Award ofCosts Richey promptly movedto vacate thearbitrator’s final award; arguing the _ arbitrator had made an egregious errorof law b y improperly allowing a good faith defense adopted by a minority of federal circuits but rejected by the Ninth Circuit and other more recent decisions, wrongly applying the McDonnell Douglas Corp. v. Green — (1973) 411 U.S. 792 [93S.Ct. 1817, 36 L.Ed.2d 6 68] burden-shifting analysis for discriminati‘on claims to his CFRA claim, andf ailing to follow the California Supreme Court’s decision in Lonicki v. Sutter Health Centra l (2008) 43 Cal.4th 201 (Lonicki),-in which the Court held a part-timejob does not cone lusively establish an employee is — ineligible for CFRA leave. As Richey emphasized, the arbitration agreement required the arbitrator to decidethe claims“solely upon the law governingthe claims and defensesset forth in the pleadings”andbarred the arbitrator fro m “invok[ing] any basis (including, butnot limited to notions of ‘just cause”) other tha n such controlling law.” Pointing to the Supreme Court’sinstruction in Armendariz, su pra, 24 Cal.4th at page 101that “an arbitration agreement cannotbe made to serve as a vehicle for the waiver of statutory rights created by the FEHA,” Richey arguedthe ar bitrator’s failure to make the necessary factual findings and his misapplication ofthe law required the court to vacate the award. ofthe spine that was evident in X-rays of his cocc yx. He approved Richey for medical leave through May 28, 2008 based on this injury. W hen Richey asked him ifhe could continue to manage his restaurant, Dr. Finkelstein told Richey he could goto his restaurantto oversee it as long as he did not do any thing to put stress on his back. 6 ' Richey’s physician,Stuart Finkelstein;testified R ichey had suffered a subluxation ©" "— _. Thetrial courtrejectedRichey’sinterpretationofLonicki, found AutoNationwas ‘ entitled to rely on its “good faith honest belief” defense and denied the motion. Accordingto the court, “(t]he critical issue is whether the employer maintained a good- faith, reasonablebelief that the dischargedemployee had abused hisCFRA/FMLAl eave and the employer’s suspicion offraud, even ifwrong, [was] enough to justify the employee’s discharge.” (Italics added.) In other words, Richey was termina ted for violating company policy by operating his restaurant and working there while on a leave of absence for medical leave:® “Richey was operating his own fish market businessa t the time he claimed he was disabled. There is no showing that he was unableto do his job as sales managerifhe could workat a fish market and there was no showing that he was severely disabled. It appears that he just had a backsprain fromiifting furniture and was being treated by a chiropractor.” Having denied Richey’s motion to vacate the arbitration award,the court granted: AutoNation’s petition to confirm the award and:awardedcosts in the amount of $1,400 as | requested by AutoNationin its proposed order. . DISCUSSION 1. Groundsfor Vacating an Arbitration Award and Standard ofReview Whenparties agree to private arbitration, the scope ofjudicial review isstrictly limited to give effect to the parties’ intent “to bypass the judicial system and thus avoid potential delaysat the trial and appellate levels ....” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 (Moncharsh).) Generally, a court may not review the meritsofthe | controversy between the parties, the validity of the arbitrator’ s reasoningor the sufficiency of the evidence supporting the arbitration award. (Ibid.) ““ (Tt i s wit hin the power. of the arbitrator to make a mistake either legally or factually. When parties opt for the forum ofarbitration they agree to be boundby the decision ofthat forum knowing that arbitrators,likejudges,arefallible.”” (Id.at p. 12;ssceiit Connection,Inc. v. 8 Thetrial court also noted Richey had “fraudulently represent{ed)” he was not working at the restaurant when he was. This factual inference, however,is not supported by the arbitrator’s decision. _. DIRECTV, Inc.-(2008).44.Cal.4th1334, 1340 (Cable Connec tion) [‘‘theCalifornia ve ctetape Legislature ‘adopt[ed] the position taken in case law... thatis,“that in the absence of somelimiting clause in the arbitration agreem ent, the merits of the award, either on questions offact or of law, may not be reviewed exceptas provided in the statute”’”].) Judicial review ofan arbitrationaward is limited to “circumstances involving serious problems with the award itself, or wit h the fairness ofthe arbitration process.” . (Moncharsh,supra,3 Cal.4th at p. 12.) The-only grounds on which a court may vacate an award are enumerated in Code of Civil Procedur e section 1286.2.? “[C]ourts are " authorized to vacate an awardif it was (1) procu red by corruption, fraud, or undue means; (2) issued by corrupt arbitrators, (3) affect ed by prejudicial misconduct on the _ part ofthe arbitrators; or (4).in excess ofthe arbitra tors’ powers.” (Cable Connection, supra, 44 Cal.4th at p. 1344.) “There is a presumptio n favoring the validity of the award, and [the party challengingthe award] bears the burden of establishing [a] claim of . invalidity.” (Betzv.Pankow (1993) 16 Cal.App.4th 919, 923.) Although a court generally may not review. anarbitra tor’s decision for errors of fact or law, anarbitrator exceedshis or her power within the meaning of CodeofCivil 9 “(T]he court shall vacate the award ifthe cou rt determines any ofthe following: [{] (1) The award was procured by corruption, fr aud or other undue means. [{] (2) Therewas corruption in any ofthe arbitrators. [{] (3) The rights ofthe party were - substantially prejudiced by misconduct of a neutr al arbitrator. [J] (4) The arbitrators exceeded their powers and the award cannot be co rrected without affecting the merits of the decision upon the controversy submitted. [{] (5) The rights ofthe party were substantially prejudiced by the refusal of the arbit rators to postpone the hearing upon sufficient cause being shown thereforor by the ref usal of the arbitrators to hear evidence material to the controversy or by other conduc tofthe arbitrators contrary to the provisionsofthistitle. [{] (6)An arbitrator mak ing the award either: (A)failed to disclose within the time required for disclosure a gr ound for disqualification ofwhich the arbitrator was then aware; or (B) was subjectto dis qualification upon grounds specified =) Section 1281.91but failed upon receiptofti mely deimand to disqualify himself or herself as required by that provision. However, th is subdivision does not apply to _ arbitration proceedings conducted under a colle ctive bargaining agreement between employers and employees or betweentheir respect ive representatives.” (CodeCiv. Proc., § 1286.2, subd.(a).) _ ..Procedure section 1286.2. and theaward is properly vacated wh enit violates anexplicit. legislative expression of public policy (see Moncharsh, supra, 3 Cal.4th at p. 32; Cotchett, Pitre & McCarthy v. Universal Paragon Corp. (2010) 187 Cal-App.4th 1405, 1416-1417), or when granting finality te the arbitration wo uld be inconsistent with a party’s unwaivable statutory rights. (Pearson Dental, supra, 48 Cal.Ath at p. 679; see Armendariz, supra, 24 Cal.Ath at p. 106; Moncharsh,at p. 32.) S pecifically addressing the issue in the context of “a mandatoryemploymentarbit ration: agreement,i.e., an adhesive arbitration agreementthat an employer imposes on the e mployee as a condition _of employment,” the Supreme Court has recognized ““that an arbitration agreement cannot be madeto serve as a vehicle for the waiver of st atutory rights created by the FEHA’[citation], because the enforcement ofsuch right s was for the public benefit and was-not waivable.” (Pearson Dental, at p. 677; see also Boar d ofEducation v. Round Valley Teachers (1996) 13 Cal.4th 269, 272-277 [judicial revi ew and vacatur of arbitration award_is proper when upholding arbitrator’s decision w ould be inconsistent with the protection-ofa party’s clear statutory rights].) To ensure full vindication of an employee’s statutory rights in an.arbitral forum, there must be bot h a written decision and judicial review“‘sufficient to ensure the arbitrators comply with the requirementsofthe statute.”” (Pearson Dental, at p. 677 [discussing Armendariz, at pp. 103-1 13]; accord, Cable Connection, supra, 44 Cal.4th at p. 1353, fn. 14; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.) As in Armendariz, the Court in Pearson Dental declined to opin e broadly as to the appropriate level ofjudicial review required in every case inv olving an employee’s unwaivable statutory rights. However, the Court emphasized the arbitrator’s written decision should not be viewed as “anidle act, but rather as a precondition to adequate | judicial review ofthe award so as to enable employees subject t o mandatory arbitration ... agreements to vindicate their.rights under FEHA.” (P earson.Dental,supra,48 Cal.4that. 2.0... p. 679.) Crafting only a rule sufficient to resolve the case befo reit, the Court concluded the arbitrator’s “clear legal error” in finding the employee’s FE HA claim to be time- barred, thus precluding anyhearing on the merits ofthe claim, an d the corresponding 9 --- failureto provide.a-written decision revealing “theessential findings.and.conclusions On.. . which the award [was] based,”” required th e award’s vacatur. (Ubid.) a Absent,conflicting extrinsic evidence ,the validity and enforceability of an arbitration clausei sa question ofJaw subjec t to de novo review. (Romanv. Superior | Court(2009) 172 Cal.App.Ath 1462, 1468; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174.) Similarly, wheth er the arbitrator exceeded his or her powers in grantingrelief, and thus whether the awar d should have been vacated en that basis,is reviewed on appeal de novo. (Reedv. Mutua l Service Corp. (2003) 106 Cal-App.4th 1359, 1365 (“whether the award was mad e in excess ofthe arbitrators’ contractual powers”is a question of law]; Kahn v. Chetc uti (2002).101 Cal.App.4th 61, 65 .) 9. The Arbitrator Committed Clear Legal Err or in Basing His Decision Solely on . Power Toyota’s Honest BeliefRichey Ha dAbused His Leave - a. Both CFRA andFMLA guarantee reinstatem entfollowing leave; the- burden ofproofis on the employer to justify an y refusalto reinstate the employee _CFRA, which was enacted in 1991as a state co unterpart to FMLA, “is intended to give employees an opportunity to take leave fr om work for certain personal orfamily -medical reasons without jeopardizing job secur ity.” (Nelson v. United Technologies (1999) 74 Cal.App.4th 597, 606; accord, Faust' v. California Portland CementCo. (2007) 150 Cal.App.4th 864, 878 (Faust).) CFRA make sit an unlawful employment practice for - an employerof 50 or more persons to refuse t o grant a request by an employee to take up to 12 weeks in any 12-month period for family care or medical leave. (§ 12945.2, subds. (a), (c)(2)(A); see Faust, at p. 878.) Grounds f or the leave are family needssuch as the birth or adoption of a child, serious illness of a family member, or when“an employee’s own serious health condition . . . makes the emp loyee unable to perform the functions of the position ofthat employee 2.” (§ 12945 .2, subd. (c)(3)(C),italics added.) The ~~ CFRA définés a “{sJerioushealthcondition ” as “an illness, injury; impairment, or = - - physical or mental condition that involves eit her ofthe following: [{] (A) Inpatient care in ahospital, ‘hospice, or residential health car e facility. [{] (B) Continuing treatment or continuing supervision by a health care provi der.” (§ 12945.2, subd. (c)(8).) 10 _ To establish an.employee’sentitlement to.medical leave under CFRA,the- employer may require the employee to submit a certification by the employee’s he alth care provider, which “shall be sufficientif it includes all ofthe following: [{]:(A) The date on which the serious health condition commenced. [{] (B) The probable duration ofthe condition. [{] (C) A statementthat, due to the serious health condition, th e employeeis unable to perform the functionofhis or her position.” (§ 12945.2, ‘subd,(k)(1).) An employer who“has reason to doubt the validity of” the employee’s health certification “may require, at the employer’s expense, that the employeeobtain th e opinion of a second health care provider, designated or approved by the employer, concerning any information certified ....” (§ 12945.2, subd. (k)(3)(A).) If there is a difference ofopiriion betweenthe two, “the employer may require, at the employer’s expense, that the employee obtain the opinion ofa third health care provider, designated or approvedjointly by the employerand the employee... .” (§ 12945.2, subd. (k)(3)(C), italics added.) The opinion_ofthe third provideris “binding on the employer and the employee.” (§ 12945.2, subd. (k)(3)(D); see generally Lonicki, supra, 43 Cal.4th at p. 208.)"° ; Leave under CFRA “shall not be deemed to have been granted unless the employer. provides the employee ...,a guarantee of employment in the same.or a comparable — “position upon the termination ofthe leave.” (§ 12945.2, subd.(a).) Regulations adopted by the DFEH further define this guarantee ofreinstatement: “Upon granting the C FRA leave, the employershall guarantee to reinstate the employeeto the same or a comparable position, subject to the defenses permitted by section 7297.2, subdivisions (c)(1) and (c)(2), and shall provide the guarantee in writing upon request ofthe employee. It.is a n unlawful employmentpracticefor an employer, after granting a requested CFRA l eave,to 10- -- Reviewing these provisions in Lonicki, supra; 43 Cal.4th 201; the Supreme Court . ~ concluded section 12945.2, subdivision (k)(3)’s use ofthe permissive “may”—rather t han the mandatory “shall’—means an employer doesnotforfeit its right to contest the legitimacy of an employee’s asserted serious health condition whenit fails to invoke the prescribed statutory procedure. (Lonicki, at pp. 210-212.) i refuse to honor its guarantee.ofreinstatem entto the same or a comparable position atthe0. endofthe leave, unless the refusal is justif ied by the defenses stated in section 7297.2, subdivisions (c)(1) and (c)(2).” (Cal. Code Regs.,tit. 2, § 7297.2, subd. (a).) Although an employeriispermitted to terminate an emp loyee and deny reinstatement when the ‘employee’s employment otherwise would have ceased, it bears the burden of establis hing the employee would not otherwise have be en employedat the time ofreinstatement.'! (Id., § 7297.2, subd. (c\(H:[An employeeh as no greater right to reinstatement orto ot her benefits and conditions of employmentthani fthe employee had been continuously employed during the CFRA leave period. A n employer has the burden ofproving, by a preponderance ofthe evidence, that an emp loyee would not otherwise have been employedat the time reinstatement is reque sted in order to deny reinstatement.”].) FMLA.was enacted in 1993 as “the culminat ion of several years ofnegotiations in Congress to achieve a balance that reflected the needs ofboth employees and their employers.” (Bachelder y. America.West Air lines, Inc. (9th Cir. 2001) 259 F.3d 1112, 1119.) Tothatend, “[tJhe FMLA creates tw o interrelated, substantive employeerights: first, the employeehas asight to use a certai n amount of leave for protected reasons, and -second, the employee has a right to return to his or her job or an equivalent job after using protected leave.” (id. at p. 1122,ci ting 29 U.S.C.§§ 2612(@), 2614(a); acc ord, Sandersv. City ofNewport (9th Cir. 201 1) 657 F.3d 772, 771 (Sanders).) Under title 29 United States Code sectio n 2612(a)\(1)). “an eligible employee shall be entitled to a total of 12 workweekso f leave during any 12-month period.. [because ofa serious health condition that m akes the employee unable to perform the functions ofthe position of such employee. » Tfthe employer doubts the validity ofthe certification of a serious health condition, “ the employer may require, at the expense of the employer,that the eligible employee ob tain the opinion of a secondhealth care ... provider designated or approved by the employer concerning any[such]informatio n.” nN The regulation’s only other enumera ted defenseto mandatory reinstatement of an employee granted CFRA leaverelates to k ey employees and is not implicated in this case. (See Cal. Code Regs., tit. 2, § 7297. 2, subd. (c)(2).) 12 ~-(29-U.S.C.§ 2613(c)(1).) Like CFRA, FMLAprovides theopinion ofathirdhealth care_ provider“shall be considered to be final.” (29U.S.C. § 2613(d)(2 ).) “[A]ny eligible employee whotakes leave undersection 2612 ofthis title for th e intended purpose of the leave shall be entitled, on return from such leave . . . to be restore d . . . to theposition . . . held by the employee when leave commenced ....” (29 U.S.C.§ 2614(a)(1(A),) “Tt shall be unlawful for any employerto interfere with, restrain, or deny the exercise of or the attempt toexercise” the substantive rights guaranteed by F MLA. (29 U.S.C. § 2615(a)(1).) A companion provision ofFMLA makesit “nnlawfu l for any employer to discharge or in any other manner discriminate against any indivi dual for opposing any practice made unlawfulbythis subchapter.” (29 U.S.C.§ 2615(aj (2).) ‘Also like CFRA,theright to reinstatement is not unlimited: -“No thing in this section shall be construed to entitle any restored employeeto .. . any right, benefit, or position of employmentother than .. . which the employee would havebeenentitled had the employee not taken the leave.” (29 U.S.C. § 2614(a)(3)@).) R egulations promulgated by the Department ofLabor (DOL) under FMLAconfirm theburden falls on the employerto demonstrate facts sufficient to deny reinstatement: “An employee has no greater right to reinstatementor to other benefits and conditions of employment than if the employee had been continuously employed during the FMLAlea ve period. An . employer must be able to show that an employee would not otherwise have been employed at the time reinstatement is requested in order to deny restoration to employment.” (29 C-F.R. § 825.216(a),italics added; see also id., § 825.312(d) {“[al n employer mustbe able to show, when an employeerequests resto ration, that the employee would not otherwise have been employed if leave had n ot been taken in order to deny restoration to employment”]ij? 12 “The [Fair Employment and Housing] Commission has incorp orated by reference the federal regulations interpreting the FMLA to the extent they are n ot inconsistent with [CFRA]orotherstate laws. (Cal. Code Regs., tit. 2, § 7297.10.)” (P ang v. Beverly Hospital, Inc. (2000) 79 Cal.App.4th 986, 993.) . 13 Lies nee p>-Thehonestbeliefdefense applied by the a rbitrator has.been rejectedby. ........... _ mostfederaljurisdictions; underfederaldecis ional law the employer bears the. burden ofproving the employee was not e ligiblefor reinstatement Notwithstanding the clarity ofthe CFRA/EMLAs tatutory scheme,the arbitrator in - this case made a single factual finding it concluded was deter minative ofRichey’s CFRA claim as a matter of law—thatis, Richey’s supe rvisor, after a “superficial investigation,” held an “honest belief” Richey had violated co mpany policy barring outside employment during his CFRA leave. In doing:so, the arbitr ator-improperly imposed the burden of proof on Richey rather than his employer. | | The honest belief rule was developed in a series of employment decisions from the Seventh Circuit applying the burden-shifting fram eworkset out in McDonnell Douglas. Corp. v. Green, supra, 411 US.at pages802 to. 8 03.!3 (Smith v. Chrysler Corp. (6th Cir. 1998) 155 F.3d 799, 806, discussing Kariotis v. N avistar Internat. Transportation Corp. (7thCir. 1997) 131 F.3d 672, 676 (Kariotis); se e also McCoyv. WGN Continerttal Broadcasting Co. (7th Cir.1992) 957 F.2d 368; 373 ; Pollard v. Rea Magnet Wire Co. (7th Cir]987)824 F.2d 557, 559-560.) As applied-b y the Seventh Circuit, the honest belief defense provides that“so long as the employerhon estly believed in: the proffered reason givenforits employment action, the employee c annotestablish pretext evenifthe employer’s reason is ultimately found to be mistaken, foolish, trivial, or baseless.” (Smith, at p. 806.) “The rationale behindthe ruleis t hat the focus of a discrimination suit is on the intent of the employer. Ifthe employer honestly, albeit mistakenly, believes in the non-discriminatory reasonit relied upon in ma kingits employment decision, then the employer arguably lacks the necessary discrimi natory intent. ‘In other words, arguing 3 Under the McDonnell Douglas framewo rk, the burden ofproof alternates between the parties. First, a plaintiff alleging employm ent discrimination must establish a prima facie case of discrimination. Once the plainti ff does so, the burden shifts to the employer "toofferalegitimate, non-discrimiiniatory reason for th e adverseemploymentaction at issue. (Texas Dept. ofCommunity Affairs v. Bur dine(1981) 450 USS.248, 253 [101 S.Ct. 1089, 67 L.Ed.2d 207],citing McDonnell Dougl as, supra, 411 U.S.at p. 802.) Ifthe employer meets this burden, then the burden of production shifts back to the plaintiff to demonstrate that the proffered reasonisfalse. (bid.) 14 about theaccuracy of the employer's assessmentis.adistracti on becausethequestionis not whether the employer’s reasons for a decision are “rig ht but whether the employer’s description of its reasons is honest.””” (Smith, at p. 80 6, quoting Kariotis, at p. 677.) The Kariotis rule “apparently does not require an employer to demonstrate that its belief was reasonably grounded onparticularized facts that were befo reit at the time ofthe . employment action . . . [3] for the rule to apply,the employer need only provide an honest reason forfiring the employee, even. ifthat reason had no f actual support.” (Smith, at p. 806.)* Kariotis, like Smith, was not decided primarily as an F MLAcase; and the court assumed, without analysis,’ that the “now routine” McD onnell Douglas burden-shifting framework applied not only to claims brought undertitle VI I ofthe Civil Rights Act of 1964 (42 U.S.C. § 2000¢et seq.) but also to the claimsoft he plaintiffunder‘other employmentrights statutes, including FMLA.’° (Kariotis, su pra, 131 F.3dat pp. 676, | 680-681.) Nonethetess, the facts in Kariotisare strikingly sim ilar to thosein the instant case: Kariotis, the employee, was discharged when the employ er concluded she had abused her-medical leave for knee replacement surgery. Base d.on a limited private ‘investigation that “left something to be desired” (Kariotis, supra, 131 F.3d at p. 675), Kariotis’s employer discharged her based on a videotape th at showed her shopping, walking and bending; the employer failed to speak with Kari otis’s physician or obtain a second opinion by having its own doctor examine her. ([bi d.) Although “no other 4s The SixthCircuit ultimately rejected the Seventh Cir cuit’s version ofthe good faith honest belief and directed that an employer’s adverse employmentdecision be “reasonably based on particularized facts.” (Smith v. Chrys ler Corp., supra, 155 F.3d at p- 807.) 15 “The district court approached this case under the McDonne ll Douglas framework, and the parties appear to agree thatthis is the approach we s hould use.” (Kariotis, supra, 131 F.3d at p. 676.)= 16 Theotherstatutes included the Americans with Disa bilities Act of 1990 (42 U.S.C. § 12101 et seq.), the Age Discrimination in Emplo yment Act of 1967 (29 U.S.C.§ 621 et seq.) and the Employee Retirement Incom e Security Act of 1974 (29 U.S.C. § 1001 et seq.). , 15 - evidence [came] close to-proving- Kariotis to-b e-a-fraud”(id. at p. 680), the court... - concludedthe employer’srightto fire her while on the job if she had been suspected of fraud also permittedit to fire her for a suspicion o f fraudulent conduct while she was on leave (id. at p. 681). As the courtreasoned,“IfN avistar had to prove more than an honest suspicion simply because Kariotis was on leave, she would bebetter off (and enjoy ‘greater rights”) than similarly situated empl oyees (suspected of fraud) whoare not on leave.” ([bid.) Although Kariotis is still followed inthe Seventh C ircuit(see, e.g., Scruggsv. Carrier Corp. (7th Cir. 2012).688 F.3d 821, 825-82 6),it has little persuasive value in view ofthe many subsequent decisions that have re fused to adopt the honest belief defense or to employ the McDonnell Douglas f ramework placing the burden on the employee to disprove the employer’s subjective inten t whena claim alleges interference with substantive FMLA rights. In Bachelder v. Am erica WestAirlines, Inc. (9th Cir. 2001) 259 F.3d 1112,for example, the Ninth Circuit expressly rejected application ofthe McDonnell Douglas burden-shifting framework whe n an employer.interferes with an employee’s FMLA rights: “[TJhe issue is one ofint erference with the exercise.ofFMLA rights under [section] 2615(a)(1), notretaliation or discrimination.» (Bachelder,at p. 1124; see also Diaz v. Fort Wayne Foundry Corp.( 7th Cir. 1997) 131F.3d 711, N2 [The question in a discrimination case is whetherth e employer treated one employee Worse than another on‘account of something (r ace, religion, sex, age, etc.) that a statute makesirrelevant. A firm may treat all employees eq ually poorly without discriminating. A statute such as the FMLA, however, creates s ubstantive rights. A firm must honor . statutory entitlements ... .”].) Recognizing the co nfusion among the circuits, the" Bachelder court observed,“This semantic confusio n hasled many courts to apply anti- discrimination lawto interference cases, instead ofr estricting the applicationof such ‘principles [to retaliation:claims-under United States Code section 2615(a)(2)].”. (Bachelder, at p. 1124,fn. 10.) . Instead, Bachelder applied what it called a “n egative factor”test: Under DOL regulationsit is unlawful for an employer to “use th e taking ofFMLAleaveas a negative 16 .. factorin.employmentactions, such.as hiring, promotionsor dis ciplinary. actions.” (Bachelder, supra, 259 F.3d at p. 1122, quoting 29 C.F.R. § 825.220(¢).)'” Asthe court concluded, this regulation “plainly prohibits the use ofFMLA-p rotected leave as a negative factor in an employment decision. In order to prevail o n her claim, therefore, [the plaintiff] need only prove by a preponderance ofthe ev idence that her taking of FMLA-protected leave constituted a negative factor in the decisi on to terminate her. She _can prove this claim, as one might anyordinary statutory claim, by using either direct or circumstantial evidence, or both. [Citations.] No schemeshift ing the burden of _production back andforth is required.” (Bachelder; at p. 1125, italics added, fn. omitted.) . Other courts have similarly placed the burden ofproof on th e employer defending a claim it inferfered with an employee’s substantive FMLArights. I n Smith v. Diffee Ford-Lincoln-Mercury, Inc. (10th Cir. 2002) 298 F.3d 955, for in stance, the Tenth Circuit held theDOL’simplementing regulation (29 CER. § 825.216fa )) “validly shifts to the employer the burden ofprovingthat an employee,laid off durin g FMLAleave, would have beendismissed regardless ofthe employee’s request for, or ta king of, FMLAleave.” (Smith, at p. 963.) In fact, as the Ninth Circuit observed in c omparing cases on this point, “the plain language of the pertinent DOL regulations provides tha tthe burdenis on the . employerto show that he had a legitimate reason to deny an em ployee reinstatement.’ (Sanders, supra, 657 F.3d at p. 780; see also Clay v. United Par cel Service, Inc. "omCir. 2007) 501F.3d 695, 714 [“the burdenis on the employer‘to establish its reasonable reliance on the particularized facts that were before it at the ti me the decision was made’”].)" 17 __ Section 825.220(c),title 29, ofthe Code ofFederal Reg ulations provides ~_ “[E}mployers«cannotuse the taking ofFMLAleaveas a negati ve factor in employment "actions, suchas hiring; promotions or disciplinary actions; nor can FMLA leavebe) counted under‘no fault’ attendance policies.” 8 “The majorityofthe circuits [other than the Seventh Circu it] . . . agree with this textual reading. The Eighth, Tenth and Eleventh Circuits, relyin gon the plain text of 29 C.F.R. § 825.216(a), haveall held ‘that the regulation validl y shifts to the employer 17 _..... -. Havinggrappled.with theseprinciples for more thana dec ade, mostfederalcourts now recognize two distinct theories for recovery on FMLA claims,that is, (1) t he “entitlement or interference’” theory under title 29 United States Code section 2615(a)(1) and(2) the “retaliation or discri mination” theory under section 2615(a)(2). (Sanders, supra, 657 F.3d at p. 777 [discussi ng cases].) To prevail on an entitlement or interference claim, an employee must prove that: (1) he or she was an eligible employee; (2) the defendant was an employer as d efined under FMLA;(3)-the employee was entitled to leave under FMLA;(4)the em ployee gave the employer notice ofhis or her intention to take leave; and (5) the employer denied the employee FMLAbenefits to which the employee wasentitled. (Sande rs, at p. 778.) Critically, the right to reinstatement remains “the linchpin ofthe entitlement theory,” because “‘FMLA doesnot provide leave for leave’s sake, but instead provides leave with anexpectation that an employee will return to work after the leave ends.” (Sanders, ‘supra, 657 F.3d at p. 778; accord, E dgar v. JAC Products., Inc. (6th Cir: 2006) 443 F.3d 501, 507; Throneberry v. McGehee Desha County Hosp.(8thCir. 2005)-403 F.3d 972, 978.) When an employer defends against an interference claim alleging a - failure to reinstate an employee, the employer mustdemonstrate “alegitimatereason to . deny [the] employee reinstatement.” (Sande rs, at pp. 779-780 [reversing because jury instruction improperly placed burden on emplo yee to disprove emnployer’s stated reason for discharge]; see alsoEdgar, at p. 508 [ “[bJoth the statute and the DOL regulation ~ likewise establish that interference with an employee’s FMLArights does not constitute a violation if the employer hasa legitimate reas on unrelated to the exercise ofFMLArights for engaging in the challenged conduct”}.) “I f an employer interferes with the FMLA- created right to medical leave or to reinstatem ent following the leave, a deprivation of the burden ofproving that an employee... wo uld have been dismissed regardless of the “employee's request fot, drtakingof,FMLA’leav e.’ [Citations.] That approach isalso’ consistent with the [United States] Supreme Court’s admonition that the burden of proof should ‘conform with a party’s superior acces s to the proof.” (Sanders, supra, 657 F.3d at p. 780, fn. omitted; see Hurlbert v. St. Mary ’s Health Care System (11th Cir. 2006) 439 F.3d 1286, 1293-1294.) 7: 18 .- this right is a violation regardless of the employer’sintent.” (Smit h v. Diffee Ford... Lincoln Mercury, Inc., supra, 298 F.3d at p. 960; accord, Sanders, a t p. 778; Colburn v. Parker Hamnifin/Nichols Portland Div. (1st Cir. 2005) 429 F .3d 325, 332.) In short, “an employer’s good faith or lack of knowledgethat its conduct violat es FMLA does not protectit from liability.” (Liu v. Amway Corp. (9thCir. 2003) 347 E.3d 1125, 1135; _ Bachelder, supra, 259 F.3d at p. 1130.) c. Californiacourts have similarly interpreted CFRA California courts have applied these sameprinciples to CFRA claims . (See,e.g., | Rogers v. County ofLos Angeles (2011) 198 Cal.App.4th 480, 487-4 88 [“[v]iolations of the CFRA generally fall into two types of claims: (1) ‘interference,> c laims in which an © - employee alleges that an employer denied or interfered with her substantive rights to protected medical leave, [fn. omitted] and (2)‘retaliation’ claimsin whic han employee alleges that she suffered an adverse employmentaction for exercising herr ightto CFRA leave”}.) . | . Followingthe reasoning ofBachelder, supra, 259 F.3d 1112, Presi ding Justice Klein, writing for Division Three ofthis court in Faust, supra, 150 Cal .App.4th 864, stated: “An interference claim under the FMLA(andthus the CFR A) does mot involve the burden-shifting analysis articulated by the United State Supreme Court -in McDonnell Douglas, supra, 411 U.S. 792. As stated in Bachelder ‘there is no room for a McDonnell -Douglas typeofpretext analysis when evaluating an “interference” cl aim under this statute.’ A violation of the FMLA ‘simply requires that the emp loyer deny the | employee’s entitlement to FMLA leave.” (Faust, at p. 879, quoting Li u v. Amway Corp., — _ supra, 347 F.3d at p. 1135.) . , | In Faust, supra, 150 Cal.App.4th 864 an employee hadbeen initially c ertified for leave based on a psychiatric condition induced by thereaction ofhi s supervisor and -. fellow workers.to his report.of.workplace violations. .Whenthatleav e expired,the. . employee submitted an additional certification form from his chiroprac tor stating he was ~ suffering from a subluxation ofthe spine. (Id. at p. 870.) The employe r discharged him, apparently believing in goodfaith the chiropractor’s certification wasinsu fficient. (Jd. at 19 --p. 872:) The court-reversed summary judgment entered in favorofthe employer onthe employee’s interference claim after concludin g the employer hadfailed to adequately ‘communicate with the employee and had impro perly rejected the employee’s certification _ of his serious.medical condition because it had been prepared by a chiropractor rather than a physician. (Id. at pp. 881-884.) The cour talso found the employer had not carried its burden of establishinga legitimate, nonretali atory reason for the employee’s discharge on the employee’s retaliation claim. (Id. at p. 88 5; see also Dudley v. Dept. of Thransportation (2001)-90 Cal.App.4th 255, 261. ) — | Citing Faust, Division Five ofthis court has obse rved a rule allowing an employer to rely on a good faith but erroneous belief about the legitimacy ofits actions toward an employee “would be inconsistent with.the ant idiscrimination provisions of CFRA,and would encourage employers to have their manager s remain ignorant ¢ofboth the law and the facts relating to CFRA leave.” (Avila v. Contin entalAirlines, Inc. (2008) 165 Cal.App.4th 1237, 1259.) Considering a questi on of the employer’s obligation under CFRA to implementleave absent a clear employe e request, the court cautioned,“a. | principle allocatingto an employee-plaintiffthe bu rden ofproving that a manager subjectively knew thatan employee’s conduct wa s legally protectedwould, in effect, require a plaintiff to negate an employer’s good fait h as part ofthe employee’s prima - facie case. There is no authority to support such a p rinciple. Under CFRA andits implementing regulations, the employer bears the b urden to determine whetheran employee’s leave is protected—thatis, to‘inquir e further ofthe employeeifit is necessary to have more information aboutwhether CFRA leave is being sought .. .” (Cal. | Code Regs.,tit. 2, § 7297.4, subd. (a)(1)), and ultimately “to: designate leave, paid or unpaid, as CFRA or CFRA/FMLA. qualifying... ” (Cal. Code Regs., tit. 2, § 7297.4, subd..(a)(1)(A).) Once an employeehas submitted a request for leave under CFRA, the employer-is charged with knowledge that the empl oyee’s absencespursuanttotheleave request are protected, and may not thereafter take ad verse employmentaction againstthe 20 ~ employee.based.upon——that. is, “because of’—thoseprot ected absences.” (Avila, at... p-1260, fn. omitted.y? Against this backdrop, the Supreme Court in Lonicki, sup ra, 43 Cal.4th 201, held an employer may not terminate an employee-taking CFR A leave based solely on the fact the employeeis working part time in another comparable job. Lonicki, a hospital worker, had obtainedcertification from her physician author izing a one-month medical leave for . work-induced stress. Her employer required Lonicki t o-consult a second physician who concluded she was able to return to work withoutrestrict ions. At her own expense -Lonicki consulted a psychiatrist who agreed she was su ffering from work-related depression and indicated her leave should be extended fo r an additional three weeks. Meanwhile, however, thé hospital terminated her because ofher absence. (Lonicki, -at pp. 206-208.) Lonicki sued the hospital, alleging it had violated her CFR A rights by questioning | the validity of her medical condition without following the p rocedure outlined in section 12945.2, subdivision (k)(3). In response, the hospital s uccessfully moved for summary — judgment on the ground Lonicki had not been entitled to CFR A medical leave because, during her absence, she had worked parttime performing si milar functionsat another hospital. (Lonicki, supra, 43 Cal.Ath at p.. 207.) Althoug h the Supreme Court agreed with the lower courts the hospital wasnot precluded from challengingher medical condition even though it had failed to pursue the statutory p rocedure, the Court concluded summary judgmenthad been improperly granted because L onicki’s part-time job did not 9 The omitted footnote acknowledges, without de ciding, the issue “whether an employer’s mistaken good faith beliefthatits conduct was legal is a defense to a CFRA retaliation claim. (Compare Bachelder v. America Wes t Airlines, Inc.[, supra,| 259 F.3d [at p.] 1130, fn. 19 [‘employer’s good-faith mistake as to w hether its action violates the _lawis not a defensetoliability’ under FMLA] with Medley v. Polk Co. (10th Cir. 2001) “960 F.3d1202;1207-1208 [‘anietnployer who discharges -anemployee honestly believing .-------- that the employee has abandoned herjob andis otherwise n ot using FMLAleaveforits . “intended purpose”. . . would not be in violation ofFMLA,evenifits conclusion is mistaken’ (fn. omitted)]) That issue is not before us.” (Av ila, supra, 165 Cal.App.4th at p. 1260, fn. 12.) 21 _-conchusively establish hermedical con dition was insufficiently serious to warr antleave under CFRA from herfull-time job. Th e “relevant inquiry,” according to the Co urt, “is whether a serious health condition ma de her unable to do her job at defenda nt’s hospital, not herability to do her essential job fun ctions ‘generally. ...”” (Lonicki, at p. 21 4, quotingChin etal., Cal. Practice Guide: Em ploymentLitigation (The Rutter Group 2006) { 12.266,p. 12-28 [A showing that an employee is unable to work in the | employee’s current jobdue to.a serious health condition is enough to demonstrat e incapacity. Thefactthat an employeeis w orking for a second employer does notme an _ he or she is not incapacitatedfrom workin g in his or her currentjob.”], and at pp. 214 - 215, quoting Stekloffv. St. John 's Mercy H ealth Systems(8th Cir. 2000) 218 F.3d 858 , 861, 862 [“a demonstration that an employe eis unable to work in his orher current jo b due to a serious healthcondition is enough to show that the employeeis incapacitated , evenifthat job is the only one that the empl oyee is unable to perform”; “the inquiry int o whether an employeeis unable to perform t he essential functions ofher job should focu s - on herability to perform those functions i n her current environment”; see also Hurlb ert v. St. Mary’s Health. Care System, sup ra, 439 F.3d at pp. 1295-1296 [“[u]po n . ‘consideration ofthe declared‘purposes of the FMLAandits legislative history, we h old - that a demonstration that an employee is u nable to work in his or her currentjob due t oa serious health condition is enough to show that the employeeis incapacitated, even if that "job is the only one the employee is una ble to perform”).y° 20 In Lonicki the defendant hospital wa s a trauma center that had undergonelayoff s _ and restructuring that increased the stress associated with the plaintiff's job. Distinguishing the demands ofthe plaintif f's full-time job atthe trauma center from her part-time job, Justice Kennard, writing for the Court, stated: “When a serious health condition prevents an employee from doin g the tasks of an assignedposition, this does not necessarily indicatethat the employe e isincap: employer. By wayofillustration: A job in the em ergency room of a hospitalthat — commonlytreats a high volume oflife-threa tening injuries may be far more stressful than similar work in the emergency room of a ho spital that seesrelatively few such injuries. Also, the circumstance that one job is full ti me whereas the other is part time may be significant: Some physical or mental illness es may prevent an employee fromhaving a 22 ble of doing a similar job for another _ Thus, despite thefactLonicki wasdecidedin the contextofsummary judgment,it necessarily stands for the proposition that an employer may not, in terminating orfailing to reinstate an employee who has been granted CFRA leave, defend a lawsuit from that employee based on its honest belief the employee was abusing his orher lea ve. Instead, the employer must demonstrate evidentiary facts sufficient to carry the burden ofproof imposed by CFRAand FMLA. | | In fact, no California case supports the arbitrator’s conclusion an employer m ay rely solely on its subjective, albeit honest, belief an employeehas eng agediin misconduct: to justify its denial of an employee’s CFRA rights. AutoNation argues, and the arbitrator agreed, that Richey’s termination was justified by the decision in McDaneld, supra, 109 Cal-App.4th 702, in which Division Twoofthe Fourth Appellate Distri ct upheld an- employer’s motion for summaryjudgmentagainst an employee accused ofmisusing CFRA leave based in part on the decisionsin Kariotis, supra, 131 F.3d 672 and Medley v. | Polk Co., supra, 260 F.3d 1202. To the contrary, the McDaneldcourt expressly cited administrative findings that the employeehad,in fact, engagediin activities incompatible with the intended purposefor his leave (caring for his injured father) and h ad then lied about his actions. (McDaneld, at p. 706.) The decision, therefore, does not violate the CFRA requirement an employer bear the burden of proving a misuse ofC FRA leave, notwithstandingits partial reliance on the now-suspect analysis in Kariotis and Medley. | In sum, we reject AutoNation’s contention an employer may simply rely on an imprecisely worded andinconsistently applied companypolicy to terminate an employee on CFRA leave without adequately investigating and developing sufficient facts to | establish the employee had actually engaged in misconduct warranting dismis sal. Whetherthe arbitrator’s ruling resulted from his improper acceptance ofthe h onestbelief . full-time job, yet not render the employee incapable ofworking only part time.” (Lonicki, supra, 43 Cal.4th at p. 215.) 23 ~ 22 _. defense or-the employer’s reliance on.a p olicy thatviolated Richey’s substantiverig ht to reinstatementneither comports with the substantive requirements of CFRA. 3. The Arbitration Awardin this Case Inv olving Unwaivable Statutory Rights - Must Be Vacated Based on the Arbitrator ’s Clear Legal Error and Failure To Provide Meaningful Findings ofFacts an d Conclusions ofLaw ‘Notwithstandingthe general rule of limit ed judicial review ofarbitration - decisions, the Supreme Court has expressl y recognized “public policy exceptions” warranting greater judicial scrutiny: “For example, when unwaivable statutory right s are at stake, this court has repeatedly held that review mustbe “‘sufficient to ensure that arbitrators comply with the requirements o f the statute.”’” (Cable Connection, supra, 44 Cal.4th at p. 1353, fn.14, quoting Armendariz, sup ra, 24 Cal.Ath at p. 106; accord, Pearson Dental, supra, 48-Cal.4th at-p .679.) In PearsonDental, which, as th e case at bar, involved “arbitration awards arising f rom mandatory arbitration employment ‘ agreements that arbitrate claims assertin g the employee’s unwaivable statutory rig hts” (Pearson Dental, at p. 679), the Court hel d the trial court did not err in vacating an-a ward based on legalerrorthat effectively preclu ded a hearing on the merits of the employee’ s FEHA claims. (id. at p. 680.) It did net de cide, because it wasunnecessary to tesalv e the case before it, whetherall legal errors are reviewable in this context. (Id. at p. 67 9 [“Nor need we decide whether the rule su ggested by plaintiff and amicus curiae California Employment Lawyers Associati onis correct thatall legal errors are review able in this context . __. We address only the c ase before us, anda narrowerrule is suffic ient for its resolution.”}.) 22 _As wediscuss below, the arbitrator nev er addressed Richey’s contention Powe r Toyota’s policy barring secondary emplo yment while on medicalor family leave, b ut not during regular employment, violated CF RA. 21 {a arguing‘the arbitrator’s legal error in applying the honestbelief defense isnot subject to judicial review, AutoNation dis ingenuously asserts the Supreme Court in Pearson Dental“refused to adopt the mlet hat‘all legal errors are reviewable in thi s context.” It is difficult for us to accept th is as simply an innocent misreading of the - Court’s reservation ofthe question for a nother day. . 24 _ We also-need not.decide.whetherit is proper to vacate an arbitrationawardbas ed... on any legal error in connection with mandatory arbitration of an e mployee’s unwaivable statutory rights. Here, where the parties have agreed the arbitrator will reso lve any claim “solely upon the law” andthepurported legal error goes to both expr ess, unwaivable statutory rights (the guarantee ofreinstatement) and the proper allocation of the burden of _ proof,judicial review is essential to ensure the arbitrator has complied w ith the requirements of CFRA. In this instance, and on thesefacts, “‘grantingfinalit y to [the] arbitrator’s decision wouldbe inconsistent with the protection of [Richey’s] s tatutory rights.’” (Pearson Dental, supra, 48 Cal.4th at p. 680, quoting Moncharsh, s upra, 3 Cal.4th at p. 32.) | a. The arbitrator was required to resolve Richey’s claims according to governing law | “Tn casesinvolving private arbitration, ‘[t]he scope ofarbitration is . . . a matter of | agreement between the parties’ [citation], and ‘“[tJhe powers of an arbitrator are li mited and circumscribed by the agreementorstipulation of submission.””” (Moncharsh , supra, | 3 Cal.4th at p. 8.) Ordinarily, “‘[a]rbitrators, unless specifically required to act i n conformity with rules of law, may basetheir decision upon broadprinciples ofjust ice and. equity, and in doing so may expressly or impliedly reject a claim that a party might — successfully have asserted in a judicial action.” (Id. at pp. 10-11; accor d, Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1182 [“[albsent an express and unam biguous ‘limitation in the contract or the submission to arbitration, an arbitrator has the aut hority to find the facts, interpret the contract, and award anyreliefrationally rel ated to his or her factual findings and contractual interpretation”].) - Here, the arbitration agreement, drafted and imposed by defendants onall employees as a condition of employment (see, e.g., Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 796 [discussing«elements ofunconscionability inherentiin a dhesive — employmentarbitration agreements]), required the arbitrator to resolve the dispute “based solely upon the law governing the claims and defensesset forth in the pleadings” and specifically to avoid i mposing any quasi-legal principles “(including, but not limit ed to 25 - notions of‘just cause’).”.. While.this provision does not autho rize judicialreviewasa matter of course, “contractual limitations on the arbitrators’ powers can alter the usual scope of review.” (Cable Connection, supra, 44 Cal.4th at pp. 1355-1356; accord, Gravillis-v. Coldwell Banker Residential Brokerage Co. (2010) 18 2 Cal.App.4th503, 515.) ‘In lightofthis employer-mandatedprovision, the arbitrato r’s failure to addressall ofRichey’s statutory CFRA claims andhis reliance on a legally unf ounded equitable defenseto vitiate those claims warrant closer scrutiny of the award th an might otherwise be appropriate.”’ . | b. The arbitrator’s legal error effectively denied Richey a hearing o n the merits ofhis CFRA claims a In limiting its-decision expanding judicial review to the circumstance s beforeit, the Supreme Court in Pearson Dental, supra, 48 Cal.4th 665, emphasi zed the arbitrator’s legal error in that case—an improper application ofthetolling provisio n in the governing statute of limitations—“misconstrued the procedural framework under which the parties . agreed the arbitration was to be conducted rather than misinterpreting the law governing the claim itself” andresulted in the employee being deprived ofa hear ing on the metits of his claim. (Id. at pp. 679-680.) The Court held, “TWthen,as here, an employee subject to a mandatory employmentarbitration agreement is unable to obtain a hearing on the merits ofhis FEHA claims,or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.” (Id. at p. 680.) | | The arbitrator’s acceptance of the honest belief defense in this case h ad a similarly preclusive effect on Richey’sability to have his nonwaivable CFR A claims heard on the merits. To be sure, recognition ofthis purported equitable defense appears more ” substantive than the procedural determination the claims were time -barred in Pearson 23 As Justice Baxter observed in the opening paragraph ofhis di ssenting opinion in _ Pearson Dental, supra, 48 Cal.4th at page 683, the parties to the mandator y employment arbitration agreementin that case, unlike here, “did not agree to arbit ral conformity with rules oflaw.” 26 _.- Dental.. But, as discussedabove,the honest belief defenserelievesthe employer ofan y . obligation to.establish its employee was,in fact, misusing authorized family leave an d thus subverts the express statutory guarantee ofthe right to reinstatement, as we ll as the allocation ofthe burden ofproofin an interference case. (See § 7297.2, subd . (c)(1) [employer has burden to prove employee‘would not otherwise have been employedat th e time reinstatementis denied] .) Accordingly,-as in Pearson Dental, and particularly in light ofthe parties’ agreement for claims to be decided “solely upen the law,” thearbitrator exceeded his powers within the meaning of Code of Civil Procedure section 1286.2, subdivision (a)(4) , _ by committing legal errorthat effectively deniedRichey a hearing onthe merits of his CFRA claims.” | | c. The arbitratorfailed to makefindings offact and conclusions oflaw sufficient to ensure he complied with the requirements ofthe statute As described above, the arbitrator, while making multiple observations tending to support Richey’sposition, ultimately failed to make relevantfindings of fact and conclusions of law related to his substantive CFRA claims. These issues include, but a re not limited to, whether Richey was.given adequate notice ofPower Toyota’s policies regarding CFRA leave(see Faust supra, 150 Cal.App.4th at p. 880; Avila, supra, 165 Cal.App.4th at pp. 1256-1257 & fn. 10); whether Power Toyota’s policy barring 24 WerejectAutoNation’s suggestion judicial review in the circumstancesofthis case, if any, should be boundedbythe “manifest disregard ofthe lawstandard” followed by federal courts—thatis, that legal error by the arbitratoris insufficient to justify vacatur ofthe award unless theerror is so egregious.as to betantamountto an intentional . disregard of the law. (See Shearson/American Express, Inc. v. McMahon (1987) - 482 U.S. 220, 232 [107 S.Ct. 2332, 96 L.Ed.2d 185]; Collins v. D.R. Horton, In c. (9th Cir. 2007) 505 F.3d 874, 879-880.) As the Court explained in Pearson Dental , when interpreting Code of Civil Procedure section 1286.2, “we need not and do not move in lockstep with the federal courts in matters ofjudicial review ofarbitration awards.” “ (Péarson Dental, supra, 48 Cal:4th at-pp. 677-679, fn. 3.) ‘Indeed, Califo rnia courts - - generally apply “a strict review. standard precluding vacatur for legal error that does not include a ‘manifest disregard’ exception,” but the Supreme Court has expressly left o pen “the possibility of greater judicial review . . . in the case ofrulings inconsistent with the protection ofstatutory rights.” (Jbid.) 27 : secondary employment during an employee’s CFRA. leave differe d from the policy. pertaining to secondary employment held by employees who were not o n CFRA leave; _ whether, as a result, the policy itself.violated CFRA; whether Richey’s act ivities at the restaurant exceeded the limitations imposed by his physician, thus rising to a level of activity that could be found to constitute abuse ofhis leave; and whether Po wer Toyota carried its burden ofproofon these issues. (See Lonicki, supra, 43 Cal. 4th at pp. 214- 215.). . In addition, the arbitrator failed to consider Richey’sretaliation clai ms under — - CFRA, that is, whether Power Toyota applied its CFRA policies consi stently to different — employees and whetherit terminated Richey because he took CFRA leave. ( See, e.g.,_ Avila, supra, 165 Cal.App.4th at pp. 1258-1259.) For all these reasons, we reverse the judgment confirming.the arbitration awar d - and direct the superior court on remand to grantthe petition to vacate the award p ursuant to Code of Civil Procedure section 1286.2, subdivision (a)(4) [“[t]hearbitr ators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon thecontroversy submitted”].) Code of Civil Procedure section 1 287 © provides, if the arbitration awardis vacated, tlie court mayordera rehearing bef ore a new arbitratoror,ifvacated becausethe arbitrator exceeded his or her powers, a reh earing before the original arbitrator with theconsentofthe parties to the court p roceeding. 28 DISPOSITION | The judgment confirmingthe arbitration awardis reversed, and th e matter remanded with directions to denythe petition to confirm the arbit ration award, grant the petition to vacate the award and to conduct further proceedings n ot inconsistent with this opinion,including, if appropriate, an order requiring bindingarbit ration-before either a new orthe original arbitrator. Richey is to recoverhis costs on appeal. PERLUSS,P. J. Weconcur: JACKSON,J. SEGAL,J.” . Judge ofthe Los Angeles County Superior Court, assigned by the C hief Justice pursuantto article VI, section 6 ofthe California Constitution. 29 Richard A. Derevan Snell & Wilmer 600 Anton Bivd., Suite 1400 Costa Mesa, CA 92626-7689 Division 7 AVERYRICHEY, Plaintiff and Appellant, Vv. . AUTONATION,INC.etal., Defendants and Respondents. B234711 Filed 12/12/12 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN AVERYRICHEY, B234711 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC408319) V. ORDER MODIFYING OPINION AUTONATION,INC.et al., AND DENYING REHEARING (NO CHANGEIN JUDGMENT) Defendants and Respondents. THE COURT: © It is ordered that the opinion filed herein on November 13, 2012 be modified as follows: 1. The second sentencein the first paragraph of the opinion, which nowreads, Richey sued Power Toyota’s parent companies, AutoNation, Inc., Webb Automotive Group, Inc., Mr. Wheels, Inc., and his direct supervisor, Rudy Sandoval(collectively AutoNation), alleging. ... is modified to read, Richey sued Power Toyota’s parent companies, AutoNation, Inc., and Webb Automotive Group, Inc., Mr. Wheels, Inc., and his direct supervisor, Rudy Sandoval(collectively AutoNation), alleging... . 2. The current text of footnote 22 on page 24 is deleted and replaced with the following language, In arguingthearbitrator’s legal error in applying the honest belief defenseis not subject to judicial review, AutoNation asserts the Supreme Court in . Pearson Dental “refused to adoptthe rule that ‘all legal errors are reviewable in this context.”” AutoNation has clearly misread the Court's reservation of that question for another day. Thereis no change in the judgment. Respondents’petition for rehearing is denied. PERLUSS,P.J. JACKSON,J. SEGAL,J.” Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuantto | article VI, section 6 of the California Constitution. 2 Proof of Service I am employedin the County of Orange, State of California. I am over the age of 18 and not a party to the within action; my business address is 600 Anton Boulevard, Suite 1400, Costa Mesa, California 92626-7689. On December 21, 2012, I served, in the mannerindicated below, the foregoing document described as Petition for Review on the interested parties in this action by placing true copies thereof, enclosed in sealed envelopes, at Costa Mesa, addressed as follows: Please see attached Service List BY REGULAR MAIL: I caused such envelopes to be deposited in the United States mail at Costa Mesa, California, with postage thereon fully prepaid. I am readily familiar with the firm’s practice of collection and processing correspondencefor mailing. It is deposited with the United States Postal Service each day and that practice was followed in the ordinary course of business for the service herein attested to (C.C.P. § 1013(a)), as indicated on the service list. O BY FACSIMILE:(C.C.P. § 1013(e)(f)). 0 BY FEDERAL EXPRESS:I caused such envelopes to be delivered by air courier, with next day service, to the offices of the addressees. (C.C.P. § 1013(c)(d)). O BY PERSONAL SERVICE: I caused such envelopes to be delivered by handto the offices of the addressees. (C.C.P. § 1011(a)(b)), as indicated on the servicelist. I declare under penalty of perjury under the laws of the State of California that the above is true andcorrect. Executed on December 21, 2012, at Costa Mesa, California a | 7a | a, ot lyia Armiefita 16336600.1 Service List Scott O. Cummings, Esq. Law Offices of Scott Cummings 333 W. Broadway, Suite 216 Long Beach, CA 90802 Attorneys for Appellant Avery Richey Tel: (562) 436-0000 Fax: (562) 432-7794 Email: socummings@hotmail.com Hon. Malcom H. Mackey Los Angeles Superior Court, Dept. 17 111 North Hill Street -| Los Angeles, CA 90012-3117 Clerk Court of Appeal, Second Appellate District, Division Seven Ronald Reagan State Building 300 S. Spring Street 2nd Floor, North Tower Los Angeles, CA 90013 * 163366001