California Supreme Court Eases Arbitration Fee Rules for Employers

What's Happening?

The California Supreme Court has issued a ruling that provides relief to employers regarding the timely payment of arbitration fees. Previously, under the California Arbitration Act, employers were required to pay arbitration fees within thirty days of receiving an invoice, with failure to do so resulting in forfeiture of the right to arbitration. The recent decision in Hohenshelt v. Superior Court modifies this strict interpretation, allowing for exceptions in cases where late payment is due to factors such as extreme difficulty, inadvertence, or excusable neglect. This ruling aligns with the Federal Arbitration Act, which prohibits state laws that disfavor arbitration agreements, and aims to encourage the speedy resolution of arbitration matters.

Why It's Important?

This decision is significant for employers in California as it mitigates the harsh consequences of missing arbitration fee deadlines. By allowing for exceptions, the ruling provides a more balanced approach, ensuring that minor or unintentional delays do not automatically result in the loss of arbitration rights. This change is expected to benefit employers by reducing the risk of litigation and promoting the use of arbitration as a viable dispute resolution method. Employers can now focus on improving their internal processes to ensure timely payments while having a safety net for unforeseen delays.

What's Next?

Employers are advised to review and possibly revise their arbitration agreements to accommodate the new ruling. Implementing robust procedures for handling arbitration invoices and training staff to manage deadlines effectively will be crucial. Additionally, documenting reasons for any payment delays will be important, as courts will consider these factors in determining whether a delay is excusable. Multistate employers may also need to consider California-specific arbitration agreements to comply with the state's unique requirements.

Beyond the Headlines

The ruling may influence broader discussions on arbitration practices and employer responsibilities, potentially leading to similar adjustments in other states. It highlights the balance between enforcing contractual obligations and recognizing genuine challenges faced by employers, which could impact future legislative or judicial decisions in the realm of employment law.