California Code of Civil Procedure section 1281.98 establishes that employers who draft and maintain arbitration agreements are responsible for paying fees and costs to an arbitrator, and must do so “within 30 days after the due date,” which is the date of the receipt of the invoice. See Cal. Code. Civ. Proc. § 1281.98, subds. (a)(1-2). Failure to pay any invoice in a timely manner leads to a waiver of the right to compel the employee to proceed with that arbitration, allowing the employee to pursue their claim in court. See Cal. Code. Civ. Proc. § 1281.98, subds. (b)(1-2).
In Hohenshelt v. Superior Court, 2025 WL 2302229 (Aug. 11, 2025), the California Supreme Court examined this statute and arguments as to whether or not it was preempted by the Federal Arbitration Act (“FAA”). In Hohenshelt, an employee, a former sanitation employee of Golden State Foods Corporation, filed suit against his former employer, alleging various Labor Code violations and other retaliation claims. Golden State moved to compel arbitration, which was granted, and arbitration was commenced through JAMS. Id. Golden State failed to pay two invoices, one on July 29, 2022 and another on August 29, 2022, and plaintiff filed a motion electing to pursue his claims in court due to Golden States’ “default of the arbitration.” Id. While the trial court denied this motion, the Court of Appeals reversed, holding that the invoices were due upon receipt, Golden State had materially breached the arbitration agreement and that the FAA did not preempt section 1291.98, thus reversing the Trial Court’s order and sending the case back to the court system.
On review, the California Supreme Court agreed with the Court of Appeals and held that the FAA did not preempt section 1281.98. While the Court noted that section 1281.98 had been interpreted in a strict manner by multiple courts, it held that longstanding statutes, such as Civil Code section 3275, allowed courts to prevent unjust forfeitures of contractual rights in situations where the failure to comply with the contract was not grossly negligent, willful, or fraudulent. Id. The Court did not believe that section 1281.98 was meant to limit the operation of Civil Code section 3275 or other similar statutes which provided relief in similar situations.
