California employers should be extremely cautious about timely paying arbitration fees or could pay the price – waiving their right to arbitrate and having to proceed in court.
The California Legislature and courts have long been hostile to arbitration agreements. In 2019, the California Legislature amended the California Arbitration Act to include a provision that if the party that drafted an arbitration agreement (almost always the employer) fails to pay the fees or costs required to continue the arbitration proceeding “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” to proceed with arbitration. (Cal Code Civ. Proc. 1281.98(a)(1)). Under the Act, that means that when the employer “breaches the agreement” by failing to make payments on time, the employee may withdraw the claim from arbitration and proceed in court.
A recent California Appellate Court decision shows just how strictly courts may construe the requirement that fees be paid “within 30 days after the due date”. In Doe v. Superior Court of the City and County of San Francisco, (First App. Dist., Div. 3, 9/8/23), the court found that “paid” within 30 days after the due date meant “received by the arbitrator” within 30 days after the due date. (emphasis in original). In Doe, September 1, 2022, was the “due date”, so the fees had to be paid by October 3rd. The employer put a check for the fees in the mail on Friday, September 30th for the full amount due that Monday. However, the payment was not received until October 5th, two days after the 30-day period expired. The court reasoned that “the proverbial check in the mail” does not constitute payment, and the fees are not considered “paid” under the statute until they are received by the arbitrator.
Practically speaking, employers need to be prepared to pay arbitration fees immediately once arbitration is initiated because the Act also requires that arbitration providers issue invoices as “due upon receipt.” Thus, employers have 30 days from receipt of the invoice to pay and ensure actual receipt by the arbitrator, not 30 days measured from some later due date.
Given the uncertainty with delivery times with mailing a check, employers may want to use more immediate forms of payment, such as credit cards, electronic checks, or wire transfers, especially if they are cutting it close to the deadline. Even with those more immediate payment forms, employers should be cautious not to wait until the last minute, since it could take time for the arbitration provider to receive the transfer which may vary based on the financial institution involved.
