CALIFORNIA STATEWIDE LAW ENFORCEMENT ASSOCIATION v. CALIFORNIA DEPARTMENT OF PERSONNEL ADMINISTRATION









Filed 1/26/11





CERTIFIED FOR PUBLICATION



IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
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CALIFORNIA STATEWIDE LAW ENFORCEMENT ASSOCIATION, Plaintiff and Respondent, v. CALIFORNIA DEPARTMENT OF PERSONNEL ADMINISTRATION, Defendant and Appellant.

C061102 (Super. Ct. No. 3420080002231CUPAGDS)

STORY CONTINUE FROM PART I….



DISCUSSION
I
The scope of judicial review of arbitration awards is extremely narrow. Courts may not review the merits of the controversy, the sufficiency of the evidence supporting the award, or the validity of the arbitrator’s reasoning. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11; Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431, 443.) Indeed, with limited exceptions, “an arbitrator’s decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties.” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at pp. 6, 11; Jordan v. Department of Motor Vehicles, supra, 100 Cal.App.4th at p. 443.)
A court’s ability to vacate an arbitration award is limited to the reasons set forth in Code of Civil Procedure section 1286.2, subdivision (a) which, as pertinent to the present appeal, states “the court shall vacate the award if the court determines any of the following: [¶] . . . [¶] (4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”
In determining whether arbitrators have exceeded their powers, a court must give “substantial deference to the arbitrators’ own assessments of their contractual authority . . . .” (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 373.) However, except where “the parties ‘have conferred upon the arbiter the unusual power of determining his own jurisdiction’ [citation], the courts retain the ultimate authority to overturn awards as beyond the arbitrator’s powers, whether for an unauthorized remedy or decision on an unsubmitted issue.” (Id. at p. 375.)
“An arbitrator exceeds his or her powers if the arbitration award violates a statutory right or otherwise violates a well-defined public policy.” (Department of Personnel Admin. v. California Correctional Peace Officers Assn. (2007) 152 Cal.App.4th 1193, 1195; Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 272, 276-277; Jordan v. Department of Motor Vehicles, supra, 100 Cal.App.4th 431, 443; City of Palo Alto v. Service Employees Internat. Union (1999) 77 Cal.App.4th 327, 330, 338-340.) And, while an arbitrator may address issues of statutory interpretation in the first instance, appellate courts are typically the final interpreters of statutory law. (California Correctional Peace Officers Assn. v. State of California (2006) 142 Cal.App.4th 198, 210.)
We review de novo the superior court’s decision confirming or vacating an arbitration award, while the arbitrator’s award is entitled to deferential review. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 376, fn. 9; Jordan v. Department of Motor Vehicles, supra, 100 Cal.App.4th at pp. 443-444.)
II
In its challenge to the arbitration award, DPA does not claim that the arbitrator exceeded her authority in finding DPA and CSLEA agreed to retroactive application of the safety member retirement benefit. Rather, it asserts “[t]he crux of this case lies in the fact that the Legislature never unequivocally approved the Agreement.”
DPA contends that, because the retroactive aspect of the agreement was not disclosed to and approved by the Legislature, the arbitrator’s award violates established public policy requiring full disclosure to the Legislature of all the terms of collective bargaining agreements reached under the Dills Act.
Under the Dill’s Act, DPA is the Governor’s representative for purposes of collective bargaining with representatives of recognized employee organizations concerning wages, hours, and other terms and conditions of employment. (§§ 3517, 19815.4, subd. (g).) Section 3517.5 states: “If agreement is reached between the Governor and the recognized employee organization, they shall jointly prepare a written memorandum of such understanding which shall be presented, when appropriate, to the Legislature for determination.” Section 3517.6, subdivision (b) provides in part: “If any provision of the memorandum of understanding requires the expenditure of funds, those provisions of the memorandum of understanding may not become effective unless approved by the Legislature in the annual Budget Act. If any provision of the memorandum of understanding requires legislative action to permit its implementation by amendment of any section not cited above, those provisions of the memorandum of understanding may not become effective unless approved by the Legislature.” Sections 19816.21 and 20405.1, concerning safety member retirement benefits, are not code sections “cited above” in section 3517.6.^[1]
DPA points out that the retroactive aspect of the DPA/CSLEA agreement--which was an addendum to the MOU--could not be implemented without legislative approval because it would require the significant expenditure of funds, and the conferral of safety member retirement benefits on Unit 7 employees required the enactment and/or amendment of statutes not “cited above” within the meaning of section 3517.6.
DPA asserts that SB 183 did not confer the requisite approval; it simply gave Unit 7 employees safety member retirement benefits effective July 1, 2004, and did not expressly or implicitly approve of DPA’s and CSLEA’s unwritten agreement to make the benefits retroactive. Thus, DPA argues, the arbitrator exceeded her powers because the arbitration award violates a statutory right or otherwise violates a well-defined public policy.
DPA premises its argument in part on this court’s decision in Department of Personnel Admin. v. California Correctional Peace Officers Assn., supra, 152 Cal.App.4th 1193 (hereafter DPA v. CCPOA).
In DPA v. CCPOA, an arbitrator found the parties had agreed to eliminate an hourly cap on a particular type of leave. However, the parties had eliminated the cap in only one portion of their MOU, neglecting to eliminate it in another portion. CCPOA alleged that the failure to eliminate the provision from both parts of the MOU was a scrivener’s error. The arbitrator agreed and, even though the MOU had been ratified by the Legislature, the arbitrator reformed the written MOU to comport with the agreement reached during the parties’ negotiations. Thus, the arbitrator altered the MOU provisions that had been approved by the Legislature. (DPA v. CCPOA, supra, 152 Cal.App.4th at pp. 1196-1199.)
This court held the arbitrator exceeded her powers by reforming the terms of the MOU in a manner that explicitly altered provisions ratified and approved by the Legislature, which violated the well-defined policy set forth in the Dills Act. (DPA v. CCPOA, supra, 152 Cal.App.4th at pp. 1195, 1200-1203.) A provision in the MOU that prevented alteration of the agreement by the arbitrator did not solely protect the rights of the parties to the MOU; “it also assure[d] the Legislature that the MOU it approve[d] [was] the parties’ actual contract, that there [were] no off-the-record agreements to which it [was] not privy, and that the MOU [would] not be altered subsequently.” (Id. at p. 1202; see also Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524 [a written contract may not be reformed based on mutual mistake if doing so prejudices the rights of a third party to the contract].)
Here, DPA’s and CSLEA’s MOU states, “The arbitrator shall not have the power to add to, subtract from or modify this Contract. . . .” According to the arbitrator, the safety member agreement was an addendum to the MOU, which means she could not modify the terms of the safety member retirement agreement because it became part of the MOU. The arbitrator relied on extrinsic evidence to determine that both DPA and CSLEA intended the agreement to apply retroactively to prior service credit at the time the agreement was negotiated. We must defer to this determination and accept that the arbitrator did not alter the parties’ understanding of the agreement. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 373.)
However, nothing in SB 183 or section 19816.21 indicates the Legislature approved conferring the safety member retirement status retroactively to cover prior miscellaneous member retirement service credit. Such approval is necessary under the Dills Act. (§§ 3517, 3517.5, 3517.61.) Consequently, to the extent that the arbitrator’s award mandates the agreement be enforced without unequivocal legislative approval, it violates public policy for the same reasons as in DPA v. CCPOA, supra, 152 Cal.App.4th 1193.
CSLEA believes that this is “a flawed and over-expansive interpretation” of DPA v. CCPOA because the parties in that case neglected to eliminate a contract provision due to a scrivener’s error and, thus, the Legislature approved a contract that included a provision the arbitrator later deleted to conform to the intent of the contracting parties. Here, in contrast, the agreement “is silent on the point” whether the safety member retirement benefit will be retroactive. But that is the point.
The Legislature enacted SB 183 to effectuate an MOU that did not contain the parties’ entire agreement. The arbitrator rectified this after the fact by construing the MOU as bestowing retroactive safety member retirement service credit for prior miscellaneous member service credit. That DPA v. CCPOA involved a deletion from the express written terms of the MOU, whereas this case involves an addition to the express written terms of the MOU, is a distinction without a difference.
Section 19816.21 was enacted to enable Unit 7 to qualify for safety member retirement benefits in accordance with the parties’ MOU. Absent language in the written MOU stating the benefit would be retroactive, we cannot say that section 19816.21 was intended to do anything more than give Unit 7 members safety retirement benefits effective July 1, 2004. Stated another way, we cannot say that the Legislature approved the unwritten agreement to bestow the safety member benefits retroactively. Indeed, the arbitrator found “the enabling bill, which echoed the March 11 Agreement, was . . . silent on whether the benefit was intended to apply ‘retroactively’ to cover an employee’s previous service in a classification that was being reclassified from Miscellaneous to State Safety.”
CSLEA and the superior court appear to believe that it is sufficient the Legislature was aware the benefit could be conferred retroactively in light of certain statutes and enrolled bill reports.^[2] For example, an enrolled bill report by the Department of Finance, prepared in early June 2002 before the Legislature’s final vote on SB 183,^[3] notes the retirement benefits proposed in SB 183 would cost an additional $17.1 million each year beginning in fiscal year 2005-06, and the “total present value cost of the bill would be at least $174.3 million” plus “potentially significant administrative costs to implement the provisions of the bill.” According to the bill report, these fiscal estimates were based on an assumption “that the transfer from the State miscellaneous retirement category to the State safety retirement would apply prospectively. This bill would allow DPA to determine if prior service in the State miscellaneous retirement category would be credited to the State safety retirement category. If DPA would allow State miscellaneous service credit to be transferred to State safety service credit, the cost of this bill would increase significantly.” (Italics added.)
However, the mere fact the Legislature was aware that DPA might determine to credit the miscellaneous service as safety service does not mean that the Legislature was aware the parties’ negotiated MOU actually included an unwritten agreement for retroactivity. In fact, the quoted bill report language intimates the matter had not yet been decided.
As for the statement that the bill would allow DPA to determine whether to credit prior miscellaneous member service to the safety member service, this presumably is a reference to DPA’s statutory authority under sections 20068, subdivision (g) and 20405.1, subdivision (b). Section 20068, subdivision (g) provides: “‘State safety service,’ with respect to a member who becomes a state safety member pursuant to subdivision (b) of Section 20405.1, shall also include service rendered in an employment in which persons have since become state safety members, as determined by the Department of Personnel Administration pursuant to that section.”^[4] Section 20405.1, subdivision (b) states: “The department shall notify the board as new classes or positions become eligible for state safety membership, . . . , and specify how service prior to the effective date shall be credited.”
No one disputes that sections 20068 and 20405.1 delegate to DPA the authority to negotiate the safety member retirement benefit and how to treat prior miscellaneous member service as part of the collective bargaining process. But this delegation of authority cannot be construed to negate the Dills Act requirement that a collective bargaining agreement involving the expenditure of money must be submitted to the Legislature for its approval or disapproval. (California Assn. of Professional Scientists v. Schwarzenegger (2006) 137 Cal.App.4th 371, 383-384 [Legislature’s sovereign power governs all contracts subject to its jurisdiction and remains intact unless surrendered in unmistakable terms].) This requirement necessarily includes the obligation to present the Legislature with a fiscal analysis of the cost of the agreement. (See § 7507, subd. (b)(1) [“before authorizing changes in public retirement plan benefits or other postemployment benefits,” the Legislature shall have a “statement of [their] actuarial impact upon future annual costs, including normal cost and any additional accrued liability”].)
Furthermore, CSLEA points to no evidence or rules of statutory construction demonstrating that any portion of SB 183 permits DPA to determine the retroactivity of service credit without complying with the Dills Act once a determination is made.^[5]
CSLEA asserts that the Legislature necessarily approved the retroactive provision of the agreement because the Legislature was “aware of its own prior history (testified to by many witnesses at arbitration) of almost always crediting prior service when retirement categories are upgraded or wholesale classification changes are made.” But those witnesses were not members of the Legislature and did not discuss anything pertaining to the Legislature’s awareness of its own prior history. The witnesses, representatives of CSLEA and DPA, simply discussed their assumption that the benefits would be retroactive, and the fact that, during negotiations, no one ever mentioned that the benefits would be prospective. The matter was not discussed one way or the other. In any event, that such benefits are “almost always” transferred retroactively does not mean it is necessarily so in all cases, including this one.
Simply stated, it is not sufficient that the Legislature was aware DPA could agree with CSLEA to make the safety member retirement credit retroactive. The Legislature had to (1) be informed explicitly that DPA and CSLEA did enter into such an agreement, (2) be provided with a fiscal analysis of the cost of retroactive application of the agreement, and (3) with said knowledge, vote to approve or disapprove the agreement and expenditure.

Because SB 183 and the materials provided to the Legislature regarding the bill did not state that the reclassification would be applied retroactively and did not contain a fiscal analysis of the cost of the retroactive application of safety member status for all employees in Unit 7,^[6] we must vacate that portion of the arbitration award as violating the public policy embodied in the Dills Act.
DISPOSITION
The judgment confirming the arbitration award is reversed to the extent that it mandates the State to reclassify all previous miscellaneous service credit by members employed in Unit 7 as of July 1, 2004, to safety member status without first obtaining Legislative approval of this portion of the parties’ agreement. In all other respects, the judgment is affirmed. The parties






shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)



SCOTLAND , J.*



We concur:



NICHOLSON , Acting P. J.



BUTZ , J.





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* Retired Presiding Justice of the Court of Appeal, Third Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

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