California Supreme Court Eases Employer Risks In Arbitration Fee Rule

The California Supreme Court's decision in Hohenshelt v. Superior Court may seem unfavorable to employers initially. After all, the Court refused to find Code of Civil Procedure section 1281.98 — California's "pay arbitration fees on time or lose arbitration" rule— preempted by the Federal Arbitration Act (FAA). However, a closer reading reveals a significant silver lining: the Court has softened the harsh interpretations that had been coming out of the Courts of Appeal.

Challenges for Employers Before Hohenshelt

When Section 1281.98 of the California Code of Civil Procedure was enacted, several appellate courts interpreted it as an inflexible deadline: if an employer (as the drafting party) missed payment of arbitration fees by even a day — regardless of the reason — it automatically forfeited its right to arbitrate, and the employee could march straight back to court. No inquiry into intent. No consideration of good faith mistakes. No exceptions for