A Court May Vacate Employment Arbitration Award If Arbitrator’s Error Of Law Prevents Hearing On The Merits
A mandatory binding arbitration clause is a common component of California employment agreements. While California courts will enforce such clauses, they have been unwilling to grant complete deference to the arbitrator. A recent California Supreme Court decision, Dental Supplies, Inc. v. Superior Court, further develops the law on this topic.
Pearson Dental arose from an employee’s wrongful termination claim alleging violation of the California Fair Employment and Housing Act. The employment agreement required that such claims be submitted to binding arbitration and be brought within one year. The arbitrator determined that the employee’s claim was not brought in time and entered an award for the employer without hearing the merits of the case.
The Pearson Dental court first determined that the arbitrator’s calculation of the time period was wrong as a matter of law. The court then turned to the issue of whether that error was sufficient to permit a court to vacate the arbitrator’s award. The court noted that the merits of an arbitrator’s award are generally not reviewable except on the limited grounds specified in the California Arbitration Act.
After examining past California Supreme Court decisions regarding review of arbitration awards and regarding the intersection of arbitration and employee protection statutes, the Pearson Dental court held that if the arbitrator’s error of law prevents a hearing on the merits, a court may vacate the award. The court was careful to limit its ruling to claims seeking to enforce nonwaivable statutory rights. However, the Pearson Dental decision clearly contemplates that the parameters of judicial review of arbitrator’s legal errors will continue to be developed in future cases.