Appeal from a judgment of the Superior Court of Los Angeles County, Malcolm H. Mackey, Judge. (Los Angeles County Super. Ct. No. BC408319)
The opinion of the court was delivered by: Perluss, P. J.
CERTIFIED FOR PUBLICATION
Avery Richey, a sales manager at Power Toyota of Cerritos, was terminated from his job four weeks before the expiration of his approved medical leave under the Moore-Brown-Roberti Family Rights Act (CFRA) (Gov. Code, §§ 12945.1, 12945.2)*fn1 because his employer believed Richey was misusing his leave by working part time in a restaurant he owned. 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 his rights under CFRA had been violated.*fn2 Richey's claims were submitted to arbitration under the terms of a mandatory employment arbitration agreement that provided, in part, "[r]esolution of the dispute shall be based solely upon the law governing the claims and defenses set forth in the pleadings."
The arbitrator denied Richey's CFRA claim based on the so-called honest belief or honest suspicion defense. The trial court denied Richey's motion to vacate the arbitrator's decision and granted AutoNation's petition to confirm the award.
The honest belief defense accepted by the arbitrator is incompatible with California statutes, regulations and case law and deprived Richey of his unwaivable statutory right to reinstatement under section 12945.2, subdivision (a). This clear legal error abridged Richey's statutory rights under CFRA--rights based on, and intended to further, an important public policy. Accordingly, under the principles set forth in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz) and Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 (Pearson Dental), the award must be vacated.
factual and procedural background 1. Richey's Employment at Power Toyota
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 against Power Toyota, its parent companies, employees and agents. He performed well and was promoted to a position of assistant sales manager approximately six months after he began working for Power Toyota.*fn3
In October 2007, while still working full time for Power Toyota, Richey took steps to start a family seafood restaurant. The restaurant opened in February 2008. Although many employees engaged in business ventures or had part-time jobs outside their employment with Power Toyota, Richey's supervisors, concerned the restaurant was distracting him from his job, met with him to discuss "performance" 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 moving furniture at home. His physician certified he was unable to perform the duties of his job at Power Toyota, and Richey filed a claim for leave under CFRA. The leave was granted and extended on several occasions. Richey's physician set a date of May 28, 2008 for his return to work.
On April 11, 2008 one of Richey's supervisors sent a letter advising him of the company's policy barring other employment, including self-employment, while on a leave of absence. Richey did not respond to the letter because he believed the policy as stated in the employee handbook--"You are not allowed to accept employment with another company while you are on approved [CFRA] leave"-- did not apply to him because he was simply the owner of a restaurant. On April 18, 2008, responding to information Richey was working at his restaurant while on leave, Richey's supervisor directed another employee to drive by the restaurant. The employee parked near the restaurant for a few minutes and observed Richey sweeping, bending over and using a hammer to hang a sign. Another of Richey's supervisors visited the restaurant for about 20 minutes on a different occasion and believed he saw Richey working there at the time. Several other co-workers observed Richey taking orders and acting as a cashier at the restaurant. Testifying at the arbitration hearing, Richey acknowledged he had taken orders, handled payment and answered the telephone while at the restaurant but claimed he had only engaged in limited, light-duty tasks authorized by his doctor.
On May 1, 2008 Power Toyota terminated 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 the Department of Fair Employment and Housing (DFEH), Richey filed this lawsuit, alleging multiple claims under FEHA, including CFRA. AutoNation moved to compel arbitration under the agreement signed by Richey at the commencement of his employment with Power Toyota, which provided: "Resolution of the dispute shall be based solely upon the law governing the claims and defenses set forth in the pleadings and the arbitrator may not invoke any basis (including, but not limited to notions of 'just cause') other than such controlling law."*fn4
The arbitration hearing was conducted over the course of 11 days. In a written order the arbitrator denied Richey's claims of racial discrimination and harassment, finding the conditions of Richey's employment did not constitute a hostile work environment.*fn5 With regard to Richey's claims under CFRA and its federal corollary, the Family and Medical Leave Act of 1993 (29 U.S.C. §§ 2601-2654 (FMLA)), the arbitrator identified the issue under both statutes as "whether 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 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 of law and fact: Relying on federal court decisions applying FMLA and one California decision affirming the discharge of an employee who played golf and worked on his 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, "[a]n employer who honestly believes that it is discharging an employee for misusing FMLA [leave] is not liable even if the employer is mistaken."*fn6
Applying this rule of law to Power Toyota's decision to terminate Richey, the arbitrator "readily concede[d]" that the company's policy barring "employment with another company" was poorly written and accepted Richey's testimony he did not believe he was violating company policy by managing his own restaurant. Further, several Power Toyota supervisors agreed exceptions to the rule had been made in the past depending on the nature of the outside activity. The arbitrator also acknowledged "[r]easonable minds" could differ as to whether Richey's duties at the restaurant were so "minimally physical" they conformed with the doctor's certification of Richey's bad back.*fn7 Nonetheless, the arbitrator reasoned, the issue centered on "what was in [Richey's supervisor's] mind when he decided to let Mr. Richey go," and Power Toyota was allowed to terminate Richey if it had an "honest 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 investigation conducted by Power Toyota could be considered "superficial," he concluded the supervisor who fired Richey did so for a legally permissible, non-discriminatory reason.
3. The Trial Court's Denial of Richey's Motion To Vacate and Award of Costs
Richey promptly moved to vacate the arbitrator's final award, arguing the arbitrator had made an egregious error of law by 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 DouglasCorp. v. Green (1973) 411 U.S. 792 [93 S.Ct. 1817, 36 L.Ed.2d 668] burden-shifting analysis for discrimination claims to his CFRA claim, and failing to follow the California Supreme Court's decision in Lonicki v. Sutter Health Central (2008) 43 Cal.4th 201 (Lonicki), in which the Court held a part-time job does not conclusively establish an employee is ineligible for CFRA leave. As Richey emphasized, the arbitration agreement required the arbitrator to decide the claims "solely upon the law governing the claims and defenses set forth in the pleadings" and barred the arbitrator from "invok[ing] any basis (including, but not limited to notions of 'just cause') other than such controlling law." Pointing to the Supreme Court's instruction in Armendariz, supra, 24 Cal.4th at page 101 that "an arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA," Richey argued the arbitrator's failure to make the necessary factual findings and his misapplication of the law required the court to vacate the award.
The trial court rejected Richey's interpretation of Lonicki, found AutoNation was entitled to rely on its "good faith honest belief" defense and denied the motion. According to the court, "[t]he critical issue is whether the employer maintained a good-faith, reasonable belief that the discharged employee had abused his CFRA/FMLA leave and the employer's suspicion of fraud, even if wrong, [was] enough to justify the employee's discharge." (Italics added.) In other words, Richey was terminated for violating company policy by operating his restaurant and working there while on a leave of absence for medical leave:*fn8 "Richey was operating his own fish market business at the time he claimed he was disabled. There is no showing that he was unable to do his job as sales manager if he could work at a fish market and there was no showing that he was severely disabled. It appears that he just had a back sprain from lifting 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 awarded costs in the amount of $1,400 as ...