California Supreme Court Eases Rules on Arbitration Fee Delays for Employers

What's Happening?

The California Supreme Court has issued a decision in the case of Hohenshelt v. Superior Court, providing relief to employers regarding the strict enforcement of arbitration fee payment deadlines. Previously, under the California Arbitration Act, employers were required to pay arbitration fees within thirty days of receiving an invoice, or risk forfeiting the right to arbitration. This rule was strictly enforced, leading to harsh consequences for employers who missed the deadline, even by a small margin. The recent decision acknowledges that the requirement for timely payment is not preempted by the Federal Arbitration Act, which generally prohibits state laws that disfavor arbitration agreements. However, the court has now allowed for exceptions in cases where delays are due to circumstances such as extreme difficulty, inadvertence, or excusable neglect.

Why It's Important?

This decision is significant as it provides a more balanced approach to arbitration fee payment deadlines, offering employers some leeway in cases of unintentional delays. The ruling mitigates the risk of automatic forfeiture of arbitration rights due to minor or excusable payment delays, which can be crucial for businesses relying on arbitration to resolve disputes. Employers can now avoid the severe consequences of missing payment deadlines due to unforeseen circumstances, thereby preserving their ability to arbitrate claims. This change could impact how businesses manage their arbitration agreements and payment processes, potentially leading to revisions in their legal and administrative procedures.

What's Next?

Employers in California are advised to continue paying arbitration fees promptly to avoid complications. They may consider revising arbitration agreements to extend payment deadlines and implementing procedures to ensure timely payments. Legal and administrative staff should be trained to handle invoices efficiently and track due dates closely. In cases of late payment, documenting the reasons for the delay will be important, as courts will now consider whether the delay was excusable. Multistate employers might also consider adopting California-specific arbitration agreements to align with the new legal landscape.