Opinion
NOT TO BE PUBLISHED
Sup. Ct. No. 135447
MORRISON, Acting P.J.
This case concerns the standard of review for the arbitration of grievances under the Memorandum of Understanding (MOU) between the City of Oroville (the City) and the Oroville Police Officers Association (OPOA). After the City decided to terminate for cause the employment of Jerry Roberson, a member of OPOA, OPOA appealed the decision through the grievance procedure of the MO U.Step four of that procedure calls for binding arbitration. The parties disagreed on the issue the arbitrator was to decide and the City filed a complaint for declaratory relief. The trial court ruled in favor of OPOA, declaring the arbitrator should conduct a trial de novo and determine independently if there was cause for discharge and confirm the discharge or determine other appropriate discipline.
The City appeals, contending the arbitrator is limited to reviewing the City’s decision to terminate Roberson for an abuse of discretion, deciding only whether the decision was reached honestly and for reasons not arbitrary or pretextual. Given the language of the MOU, the prior course of conduct of the parties, and the provisions of the Public Safety Officers Procedural Bill of Rights Act (Gov. Code, § 3300 et seq.), we find Roberson is entitled to an independent reexamination of the decision to terminate him. We affirm.
BACKGROUND
The City is a chartered city (Gov. Code, § 34101); its charter was approved by the California legislature in 1933. The charter provides the City “may make and enforce all laws, ordinances and regulations necessary, convenient or incidental to the exercise of all rights and powers in respect to its affairs, officers and employees . . . .”
The City’s Municipal Code provides that the city administrator shall suspend or remove city employees subject to personnel rules and regulations adopted by the council. (City of Oroville Municipal Code, ch. 2, art. III, § 2-37(a).) These rules provide the grounds for disciplinary action of an employee and provide that appeals of disciplinary action shall be in accordance with the respective memorandum of understanding. (City of Oroville Personnel Rules & Regulations, rules 11.3 and 11.6.)
The City and OPOA entered into a series of memoranda of understanding concerning wages, hours and other terms and conditions of employment. The MOU pertinent here was adopted September 7, 2004, and became effective July 1, 2004. Under section 4 of the MOU the City retained certain rights over its personnel, including the right “[t]o manage and direct its business and personnel;” “[t]o hire, transfer, promote and maintain the discipline and efficiency of its employees;” and “[t]o adopt rules of conduct and penalties for violation thereof[.]”
Section 28 of the MOU addresses discipline. It provides in part: “The City may discharge, demote or suspend any employee, who has completed the specified probationary period for cause . . . In the event an employee feels the discharge or suspension is not for cause, the OPOA shall have the right to appeal the case through the Grievance Procedure.” A permanent employee “may appeal a disciplinary action by filing a grievance at Step 3 of the Grievance Procedure within ten (10) days of receiving the Notice of Disciplinary Action.”
Section 29 of the MOU sets forth the grievance procedure. It is a four step-process. The first two steps are submission of the grievance to the immediate supervisor, followed by a meeting with the department head. Under step three of the procedure, the OPOA representative may request a meeting with the city administrator to review, discuss and attempt to resolve the grievance. The fourth step is referral to arbitration. The MOU sets forth the process for selecting the arbitrator and provides that costs shall be borne equally. As to the arbitration, it provides: “The arbitrator shall hold such hearings and shall conduct such evidence as the arbitrator appears [sic] necessary and proper. The first hearing shall be held as soon as is practicable for the City and the OPOA. The decision of the arbitrator shall be final and binding on the City and the OPOA and the aggrieved employee, if any, provided that such decision does not in any way add to, disregard, or modify any of the provisions of this Memorandum.”
In October 2004, the City Administrator notified Roberson of the final decision to terminate his employment as a police officer for misconduct. OPOA filed an appeal and the appeal proceeded to arbitration. The parties agreed to submit the grievance to arbitrator Gerald McKay.
The City proposed a statement of the issues to be decided: “‘The Arbitrator shall decide the following issue: was the factual basis on which the City’s Administrator concluded a dischargeable act had been committed by Roberson reached honestly, after an appropriate investigation and for reasons that are not arbitrary or pretextual.’” OPOA objected and framed the issue for the arbitrator as: “‘Was Roberson discharged for cause? If not, what remedy?’”
The parties were unable to reach agreement on the issues before the arbitrator. The City filed a complaint for declaratory relief, asking the court to declare that the arbitrator’s authority is limited to an examination of the decisionmaking process of the city administrator and whether such process was an abuse of discretion.
OPOA demurred to the complaint and the demurrer was overruled.
Following briefing and argument, the trial court ruled. It found the City had initial exclusive jurisdiction to determine whether there was cause to discharge an employee. The pretermination procedure in the MOU met the minimum due process requirements as set forth in Skelly v. State Personnel Bd. (1975) 15 Cal.3d 194, 215. Under the Public Safety Officers Procedural Bill of Rights, a public safety officer was entitled to an administrative appeal of any punitive action. (Gov. Code, § 3304, subd. (b).) This administrative appeal required a de novo independent factfinding with the burden of proof on the City. The court found the MOU did not specify the appeal process and indeed appeared to be in conflict as one provision gave the City sole authority over discipline and another provided for binding arbitration. The court harmonized these provisions by finding the city administrator had initial exclusive jurisdiction subject to reconsideration through binding arbitration. As Roberson had not had a fair hearing, with the right to confront and cross-examine his accuser, the arbitration must be a trial de novo and the arbitrator could not be limited to an abuse of discretion review. The court declared the arbitrator would conduct a trial de novo and independently determine if there was cause for discharge and, depending on that determination, either confirm the discipline or determine the appropriate discipline.
The MOU provides: “Except in cases of an emergency, at least five (5) calendar days prior to the effective date of any disciplinary action against permanent employees, the Department Head shall give the employee written notice of the proposed disciplinary action, reasons for such action, a copy of the charges and material upon which the action is based, and the right to respond either orally or in writing, or both, to the [d]epartment [h]ead proposing disciplinary action prior to the effective date of such disciplinary action.” The record does not indicate the pretermination procedure applied to Roberson differed to any degree from that set forth in the MOU. Accordingly, the City’s continued characterization of this procedure as “an independent re-examination of the City Administrator’s decision by an outside, neutral party” is disingenuous.
The City appealed.
DISCUSSION
Responding to the trial court’s ruling, the City contends the trial court erred in finding Roberson was denied his right to confront and cross-examine his accusers, erred in finding the arbitrator was not to apply an abuse of discretion standard of review, and the court unlawfully delegated the City’s vested authority in employee discipline. We frame the issues on appeal somewhat differently.
The issue on appeal is the proper interpretation of the MO U.Specifically, we must determine the proper standard of review upon the referral to arbitration as set forth in step four of the grievance procedure. The issue is whether the arbitrator is to determine de novo if there is cause for discharge or whether the arbitrator is to review only the decisionmaking process of the city administrator for an abuse of discretion. If the former, we must consider whether the referral to arbitration is an unlawful delegation of the City’s authority.
“It is a judicial function to interpret a contract or written document unless the interpretation turns upon the credibility of extrinsic evidence. [Citation.]” (City of El Cajon v. El Cajon Police Officers’ Assn. (1996) 49 Cal.App.4th 64, 71.) Where, as here, there is no conflict in extrinsic evidence to resolve, we are not bound by the trial court’s interpretation but independently interpret the MOU. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.)
“We are guided by the well-settled rules of interpretation of a contract, endeavoring to effectuate the mutual intent of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful. [Citations.]” (City of El Cajon v. El Cajon Police Officers’ Assn., supra, at p. 71.) “‘As a rule, the language of an instrument must govern its interpretation if the language is clear and explicit. [Citations.] A court must view the language in light of the instrument as a whole and not use a “disjointed, single-paragraph, strict construction approach” [citation]. If possible, the court should give effect to every provision. [Citations.] An interpretation which renders part of the instrument to be surplusage should be avoided. [Citations.]’” (Ibid.)
“Ordinarily all applicable laws in existence when an agreement is made, necessarily enter into the contract and form a part of it, without any stipulation to that effect, as if they were expressly referred to and incorporated. [Citation.] The rule is derived from the premise that, ‘The parties are presumed to have had existing law in mind when they executed their agreement . . . .’ [Citation.]” (California Assn. of Highway Patrolmen v. Department of Personnel Admin. (1986) 185 Cal.App.3d 352, 364.)
Turning first to the language, the MOU identifies the grievance that is referred to arbitration as “[i]n the event an employee feels the discharge or suspension is not for cause[.]” Thus, it is the determination that there was cause for discharge that is the subject of arbitration. Nothing in the MOU indicates it is the decisionmaking process, rather than the decision, that is to be arbitrated. The MOU, however, is silent as to the standard of review the arbitrator is to employ in determining whether there was cause for discharge. Generally, a court should defer to the arbitrator in resolving any ambiguities of the arbitration agreement, such as the scope of the issues to be arbitrated. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 372.) It is the arbitrator’s construction of the MOU that the parties bargained for. (Safeway Stores, Inc. v. Brotherhood of Teamsters (1978) 83 Cal.App.3d 430, 438 [arbitrator did not exceed powers in determining no just cause for discharge].)
The City seizes upon the use of the term “appeal” in the MOU and argues the arbitration serves an appellate function similar to writ review under Code of Civil Procedure section 1094.5. In such writ review, the inquiry is whether there was an abuse of discretion. (Code Civ. Proc., § 1094.5, subd. (b).) The use of the term “appeal” tracks the language of the Public Safety Officers Procedural Bill of Rights (the PSOPBR), which guarantees a permanent public safety officer an administrative appeal of any punitive action. (Gov. Code, § 3304, subd. (b).)
In negotiating the terms of the MOU, the City and OPOA were not writing on a blank slate. In fashioning rules and procedures for the termination of permanent employees, they were constrained by the substantial law in this area. “Mindful ‘[a]pplicable law becomes part of the contract as fully as if incorporated by reference’ [citations],” (City of El Cajon v. El Cajon Police Officers’ Assn., supra, 49 Cal.App.4th 64, 71), we turn now to the law.
A member of OPOA who can be discharged only for cause has a fundamental, vested right in his permanent employment; thus, he is entitled to the protection of the due process clauses of the federal and state Constitutions. (Skelly v. State Personnel Bd., supra, 15 Cal.3d 194, 207.) A tenured public employee is “entitled to a very limited hearing prior to his termination, to be followed by a more comprehensive post-termination hearing.” (Gilbert v. Homar (1997) 520 U.S. 924, 929 [138 L.Ed.2d 120, 126].) “[A] permanent or tenured public employee facing a termination for cause has a due process right to challenge the factual basis for the termination in a full evidentiary hearing at some point in the termination process. Furthermore, the governmental employer bears the burden of proof in the evidentiary hearing, as ‘[i]t is axiomatic, in disciplinary administrative proceedings, that the burden of proving the charges rests upon the party making the charges. [Citations.]’ [Citations.]” (Townsel v. San Diego Metropolitan Transit Development Bd. (1998) 65 Cal.App.4th 940, 949.)
As a public safety officer, Roberson is also entitled to the protections of the PSOPBR. (Gov. Code, § 3301.) The PSOPBR “sets forth a list of basic rights and protections which must be afforded all peace officers [citation] by the public entities which employ them.” (Baggett v. Gates (1982) 32 Cal.3d 128, 135.) Government Code section 3304, subdivision (b) provides: “No punitive action, nor denial of promotion on grounds other than merit, shall be undertaken by any public agency against any public safety officer who has successfully completed the probationary period that may be required by his or her employing agency without providing the public safety officer with an opportunity for administrative appeal.” A punitive action is “any action that may lead to dismissal, demotion, suspension, reduction in salary, written reprimand, or transfer for purposes of punishment.” (Gov. Code, § 3303.)
The PSOPBR, including its requirement of an administrative appeal, applies to charter cities and does not violate the home rule provision of the California Constitution. (Baggett v. Gates, supra, 32 Cal.3d 128, 135-140.) The PSOPBR was not intended to interfere with a charter city’s right to regulate peace officers’ qualifications for employment or the causes for which they may be removed, but it does impinge upon the right to determine the manner in which employees may be removed. (Id. at p. 138.) “The limited purpose of an administrative appeal under section 3304 is to give the peace officer subjected to punitive action an opportunity ‘to establish a formal record of the circumstance surrounding his termination’ [citation] and ‘to attempt to convince the employing agency to reverse its decision, either by demonstrating the falsity of charges which led to punitive action, or through proof of mitigating circumstances.’ [Citation.]” (Binkley v. City of Long Beach (1993) 16 Cal.App.4th 1795, 1806.)
Government Code section 3304 does not specify how the appeal process of the administrative review is to be implemented. (Binkley v. City Of Long Beach, supra, 16 Cal.App.4th at p. 1806.) Although the details of the administrative appeal are left to the local agency, the minimum requirements of the administrative appeal were set out in Caloca v. County of San Diego (2002) 102 Cal.App.4th 433, 443-444. The administrative appeal requires an independent reexamination of the decision conducted by someone not involved in the initial determination. (Ibid.) This independent examiner “cannot simply rely on the determination of the individual or agency that has initiated punitive action against a peace officer. Rather, the independent fact finding implicit in the concept of an administrative appeal requires at a minimum that the hearing be treated as a de novo proceeding at which no facts are taken as established and the proponent of any given fact bears the burden of establishing it.” (Id. at p. 444.)
These requirements for an administrative appeal are not consistent with limiting the arbitrator to an abuse of discretion standard. The arbitrator must determine facts, not simply rely on those found by the city administrator. The City has the burden of proving the facts essential to support discharge. (See Parker v. City of Fountain Valley (1981) 127 Cal.App.3d 99, 113 [city bore burden of proof at administrative hearing on discharge of police officer].) This burden is not borne by simply showing the decisionmaking process was fair.
The City argues these due process cases are inapposite because there is no dispute about Roberson’s due process rights. The City claims it has already afforded him an independent reexamination of the city administrator’s decision by operation of the prediscipline or Skelly process and he would be entitled to a full evidentiary hearing at arbitration. The trial court found the prediscipline proceedings met the requirements of Skelly v. State Personnel Bd., supra, 15 Cal.3d 194, but since Roberson had no opportunity to confront and cross-examine his accusers, it did not meet the constitutional requirements of a full evidentiary hearing (Townsel v. San Diego Metropolitan Transit Development Bd., supra, 65 Cal.App.4th 940, 949) or “a more comprehensive post-termination hearing.” (Gilbert v. Homar, supra, 520 U.S. 924, 929 [138 L.Ed.2d 120, 126].) As explained above, the arbitration will not provide the required full evidentiary hearing if the arbitrator is limited to reviewing the fairness of the decisionmaking process rather than independently finding facts with the burden on the City to prove them.
The City contends an abuse of discretion standard of review is appropriate for public employment arbitrations and relies on California Faculty Assn. v. Superior Court (1998) 63 Cal.App.4th 935 (California Faculty Association.). That case is readily distinguishable. In California Faculty Assn., an arbitrator overturned a university president’s decision to deny tenure to a probationary faculty member. In submitting the case to arbitration, the parties stipulated the issue to be decided was whether the president engaged in reasoned judgment in denying tenure. (Id. at p. 942.) In finding the arbitrator exceeded his authority, the appellate court noted the agreement did not contain a standard arbitration clause, agreeing to submit all disputes to arbitration. (Id. at p. 945.) Rather, a decision on tenure was not submitted to arbitration in the first instance; the arbitrator had only a reviewing power and his limited task was to review the decisionmaking process. (Id. at pp. 945-946.) Here, by contrast, the MOU does not so limit the arbitrator and the issue to be arbitrated is whether there is cause for discharge. Further, since the arbitration concerned a probationary employee in California Faculty Assn., the due process considerations at issue here were not present. Finally, the limited scope of the arbitral review in California Faculty Assn. served the important public policy interest of preserving academic freedom. (Id. at pp. 946-947.) That policy is not implicated here.
The City contends the arbitrator cannot have the power to change the discipline imposed by the city administrator on an employee. The MOU reserves the power to discipline employees to the City, so if the arbitration award changed the discipline, it would modify the MOU. The MOU states the decision of the arbitrator is binding, “provided that such decision does not in any way add to, disregard, or modify any of the provisions of this Memorandum.”
Our overriding goal in interpreting a contract is to effectuate the intent of the parties. (Civ. Code, § 1636.) The terms of a contract may be explained or supplemented by course of dealing or course of performance. (Code Civ. Proc., § 1856, subd. (c).) OPOA offered evidence of the prior course of dealing between the parties. Under prior MOUs, with language identical to the current one, grievances were submitted to arbitration in which the arbitrator was to decide if there was cause of termination and, if not, what the proper remedy was. In response to a request for admissions, the City admitted it had not asserted the arbitrator was limited to an abuse of discretion appellate review in prior arbitrations.
OPOA offered this evidence to show the action was barred by laches, waiver and estoppel. The trial court rejected this argument.
This evidence of prior course of dealing supports the view that the parties intended the arbitrator to decide whether there was cause for discharge and, if not, the proper remedy. The City contends that allowing the arbitrator to determine if there is cause for discipline and what discipline is appropriate unlawfully delegates the City’s authority. The City’s charter gives it the power to make laws, ordinances and regulations with respect to its employees. The Municipal Code provides it is the duty of the city administrator to remove city employees. The City contends giving this power to the arbitrator would be an unlawful delegation of municipal authority.
The California Supreme Court addressed a similar issue in Taylor v. Crane (1979) 24 Cal.3d 442, in which a city refused to honor an arbitration award that reinstated a discharged police officer. The city charter gave the city administrator the power and duty to appoint, discipline and remove city employees, subject to the civil service provisions of the charter. (Id. at p. 447.) These provisions granted disciplined employees the right to appeal to a personnel board. (Ibid.) The high court found the police had been granted an alternative method of reviewing the city manager’s disciplinary decisions: the MOU provided for referral to arbitration. (Id. at pp. 448-449.)
The city contended the arbitration, both the MOU and the submission agreement, conflicted with the city charter. (Taylor v. Crane, supra, 24 Cal.3d at p. 449.) The court disagreed. (Id. at p. 453.) The city could agree to arbitrate any matter that could be the subject of a civil suit and discipline of an employee was such a matter. “Thus, unless the charter expressly prohibits the city from agreeing to arbitrate whether Crane’s conduct was sufficient cause for his discharge, the city retains power to do so.” (Id. at p. 451.) There was no such prohibition in the city charter, so the court harmonized the charter and the arbitration agreements as giving the city manager initial discretion to determine the proper sanction for violation of city rules. The arbitration agreements did not remove that initial discretion, but subjected it to binding review by an impartial arbitrator. (Ibid.) “Such a grant of initial control to one officer may not be read to limit his authority to agree to subject his disciplinary decisions to review by an arbitrator.” (Id. at p. 452.)
The court found its conclusion was reinforced by the public policy favoring arbitration to resolve disputes. (Taylor v. Crane, supra, 24 Cal.3d at p. 452.) “[W]here a city charter or ordinance may be construed to authorize grievance arbitration of broad scope, that construction is preferred.” (Ibid.) The court found no unlawful delegation of municipal power because the city manager retained the significant power to impose initial discipline and grievance arbitration did not involve the making of general public policy. “Instead, the arbitrator’s role is confined to interpreting and applying terms which the employer itself has created or agreed to and which it is capable of making more or less precise. [Citation.]” (Id. at p. 453; see also Service Employees Internat. Union v. City of Los Angeles (1996) 42 Cal.App.4th 1546, 1553-1555 [arbitration of pay dispute per MOU did not improperly delegate city council’s authority over economic matters].)
The City contends Taylor is factually distinguishable because the city manager negotiated and approved both the MOU and the submission agreement. The submission agreement framed the issue as whether Crane was properly discharged, and if not, what the proper remedy should be. (Taylor v. Crane, supra, 24 Cal.3d at p. 445.) The City contends Taylor “stands for the principle that municipal charter authority in the area of employee discipline may be properly delegated to final and binding arbitration. The decision further holds, however, that such delegation must be reflected in the arbitration agreement itself or the parties’ submission agreement.”
We find such delegation in the MOU with its provision for binding arbitration as the last step of the grievance procedure. The MOU allows an employee to dispute whether the discharge or suspension is for cause. The prior course of dealing between the parties indicates arbitrators determined if there was cause for discharge and, if not, the proper remedy. The PSOPBR grants public safety officers the right of an administrative appeal in the form of a de novo review before an independent examiner with the burden of proof on the City. By agreeing to the MOU, the City agreed to submit the city administrator’s initial disciplinary power to binding review by an impartial arbitrator.
DISPOSITION
The judgment is affirmed.
We concur: ROBIE , J., CANTIL-SAKAUYE , J.