©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 95 “We need not decide whether the FAA applies or whether it preempts Broughton-Cruz because, even if Broughton-Cruz is still viable, it would not bar the arbitration of any portion of Clifford’s UCL claim … Clifford’s requests for injunctive relief under the UCL are … limited to him as an individual. … The only express beneficiary of Clifford’s requested injunctive relief is Clifford, and the only potential beneficiaries would be Quest’s current employees, not the public at large.”130 The injunction sought was thus private and not public and so the parties’ arbitration agreement still applied to that claim for relief.131 California’s refusal to apply CBA arbitration clauses to statutory claims. The California Supreme Court has rejected an employer’s argument that security guards must arbitrate, under their collective bargaining agreement, a claim for penalties owed because of untimely final pay. The high court reasoned that because this claim invoked a right arising under state law, not the CBA, the security guards could proceed in court even though the CBA was relevant to their claim and would be “consulted” in determining it.132 The employer argued that the claim was preempted by Section 301 of the Labor Management Relations Act because the claim required “interpretation and application” of the CBA. The high court concluded that not every claim requiring resort to CBA language is necessarily preempted, particularly when the meaning of the CBA is not in dispute. “It is up to state courts, not an arbitrator, to interpret state labor law standards applicable to all workers.”133 5.2.7 Peculiar standards for judicial review of arbitration awards Hostility to federal “manifest disregard of law” standard. Although the FAA authorizes judicial review of arbitral awards in only very limited situations—generally involving a misbehaving arbitrator134—federal courts have vacated awards where the arbitrator has exhibited a “manifest disregard” for controlling law. They have done so even after the U.S. Supreme Court, in 2008, held that parties cannot contract to supplement the grounds for vacating or modifying the award provided by the FAA.135 California courts, however, have refused to recognize this “manifest disregard” standard of review. For example, a California employer was denied meaningful judicial review of a wrongful termination arbitral award that granted $225,000 in emotional distress damages without evidence of severe mental injury and that imposed $1,000,000 in punitive damages without citing evidence to support the award. The Court of Appeal refused to review these legal outrages, because California law, unlike federal law, does not permit vacating an arbitration award merely because the arbitrator manifestly disregarded the law.136 (The result in California might differ, of course, if the arbitration agreement itself provides for broadened judicial review. See below.) By contrast, if an arbitrator legally errs in favor of an employer, that could be grounds for vacating the award. The California Supreme Court ruled in 2010 that an arbitrator makes “a clear error of law,” giving grounds to vacate the award, if the arbitrator made a procedural error that deprived an employee of a hearing on the merits of a statutory employment claim.137 Overturning awards not sufficiently protective of employee interests. Although arbitration awards can be upheld even when they get the law wrong, a 2020 Court of Appeal decision refused to confirm an arbitration award that prevented a former employee from competing with his former employer, a statistical arbitrage firm. The Court of Appeal held that the arbitrator exceeded his power in issuing an award enforcing contractual provisions that restricted the employee’s right to work, given the public policy against any contract that restrains anyone “from engaging in a lawful profession, trade, or business of any kind.” Despite the facial invalidity of the provisions, the arbitration award let them stand as a perpetual restriction on the employee’s right to compete. Because the award was inconsistent with the protection of employee rights to compete with a former employer, the trial court erred in entering judgment on the award.138 Negotiated review of arbitral awards. Employers have sought to hedge against run-away arbitral awards by bargaining for judicial review of arbitration awards for “clear error of law” and for “lack of substantial evidence” to
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