The California Court of Appeal recently held that an employer loses the right to proceed in arbitration by failing to timely pay arbitration fees. Employers that want to avoid cases being litigated before a jury need to ensure that all arbitrator fees are paid timely.
In Doe v. Superior Court (Case No. A167105), the employer mailed their arbitration payment via U.S. Mail and it arrived two days after the deadline. The arbitrator allowed for payment through check, credit card, e-Check, and wire transfer, but the employer chose to mail the check. Their decision to mail the check resulted in the arbitrator receiving payment two days after the 30-day grace period’s expiration. The California Court of Appeals held it did not matter that the payment had been mailed within the 30-day period, but that only the arbitrator’s receipt of the payment within the 30-day grace period would constitute timely payment.
California Code of Civil Procedure section 1281.98 provides the guidelines for the 30-day payment grace period: “In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, that the drafting party pay certain fees and costs during the pendency of an arbitration proceeding, if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.”
Simply put, if an employer, with a pre-existing arbitration agreement with its employees, does not pay arbitration fees within 30-days after the arbitration payment deadline, then the employer forfeits the right to arbitration. As reflected in the Doe case “substantial compliance” is insufficient, meaning, mailing a check before the deadline that is received after the deadline results in a waiver of the right to proceed in arbitration.
Given the emerging movement by the courts in the direction away from enforcing employment-related arbitration agreements, employers must ensure prompt payment and strict compliance with fee-related arbitration deadlines. Employers must be vigilant to ensure that payment is received by the arbitrator prior to or within the statutory 30-day grace period. If an employer elects to send a check, it should be sent in a manner that is traceable and ensures timely delivery. Failing to do so will result in significant ramifications, including losing the ability to proceed in arbitration.