A late arbitration fee no longer automatically ends arbitration
In Hohenshelt v. Superior Court, the California Supreme Court held that only a willful, grossly negligent, or fraudulent late payment forfeits the right to arbitrate an employment or consumer dispute.
Reviewed by Laurence S. Bezinover · Published
What changed
In employment and consumer arbitrations, the business that drafted the arbitration agreement must pay the arbitration fees within 30 days after they are due. If it does not, it is in material breach, and the employee or consumer may take the case to court instead (Code Civ. Proc. § 1281.98). Several Courts of Appeal had applied that deadline strictly, even to a payment one day late.
The Supreme Court held that the Federal Arbitration Act does not preempt the statute, but read it alongside California's general rules against forfeiture. A late payment now forfeits arbitration only if it was willful, grossly negligent, or fraudulent. A good-faith mistake, inadvertence, or excusable neglect can be excused, and the business must prove it. Even then, the court can order the business to pay the other side's reasonable expenses caused by the delay (Code Civ. Proc. § 1281.99).
Who it affects
Businesses that use arbitration agreements with employees or consumers, and the employees and consumers on the other side.
Questions to raise with counsel
- Businesses: who receives our arbitration invoices, how are due dates tracked, and do we keep a record of why any payment was late?
- Employees and consumers: if the business paid late, is it worth raising, given that the business has to show the delay was excusable?
This briefing is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.