“Within 30 days after the due date.” That’s how long Code of Civil Procedure section 1281.98 gives an employer that drafted an arbitration agreement to pay the arbitrator’s invoice. Several Courts of Appeal read it so strictly that a payment days late cost the employer its right to arbitrate, whatever the reason. In Hohenshelt v. Superior Court, the Supreme Court of California held that forfeiture follows only willful, grossly negligent, or fraudulent nonpayment. The deadline still matters, and the employer’s payment records decide its defense.
What did the Supreme Court decide in Hohenshelt?
The court decided Hohenshelt v. Superior Court (2025) 18 Cal.5th 310 on August 11, 2025. The question was whether the Federal Arbitration Act preempts section 1281.98. The majority opinion by Justice Liu answered: “We hold that section 1281.98, properly construed, is not preempted by the FAA.”
How the court construed the statute is what matters to employers. The court rejected the “inflexible and sometimes harsh rule” some Courts of Appeal had applied and concluded that the statute “does not abrogate the longstanding principle, established by statute and common law, that one party’s nonperformance of an obligation automatically extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent.” The court found “no indication that it intended to strip companies and employers of their contractual right to arbitration where nonpayment of fees results from a good faith mistake, inadvertence, or other excusable neglect.”
The facts were ordinary. According to the opinion, the employer, Golden State Foods, had been in a JAMS arbitration with a former sanitation employee for about a year when the arbitrator issued invoices for $32,300 on July 29, 2022, and $11,760 on August 29, 2022. On September 30, the employee moved in court to withdraw from arbitration. The employer paid shortly after and said its counsel hadn’t known about the invoices because the arbitrator had announced she would be unavailable and counsel was preparing for paternity leave. The employee disputed that account. The Supreme Court didn’t decide who was right. It directed that the case go back to the trial court “for consideration of whether Golden State may be excused for its failure to timely pay arbitration fees.”
The vote was 5 to 2. Justice Groban wrote a concurrence, joined by Justice Evans, and Justice Corrigan dissented, joined by Justice Jenkins, on the ground that the statute is preempted even as the majority read it. The majority also disapproved eleven Court of Appeal decisions, including Gallo v. Wood Ranch USA, Inc. and Espinoza v. Superior Court, “to the extent they are inconsistent with this opinion.”
What do sections 1281.97 and 1281.98 require of employers?
Two statutes set the deadlines, and both apply in “an employment or consumer arbitration” where the drafting party, usually the employer, has to pay fees. Section 1281.97 covers the fees to start the arbitration. Section 1281.98 covers fees during the arbitration. Under both, if the fees “are not paid within 30 days after the due date,” the drafting party is in material breach and in default.
The due date is usually the day the invoice arrives. Section 1281.98(a)(2) says that “absent an express provision in the arbitration agreement stating the number of days in which the parties to the arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to the parties as due upon receipt.” The same subdivision adds: “Any extension of time for the due date shall be agreed upon by all parties.”
If the employer defaults, the employee chooses the next step. Under section 1281.98(b), the employee may withdraw the claim and proceed in court, continue the arbitration if the provider agrees, ask the court to compel payment, or pay the employer’s share and recover it in the award. Section 1281.99(a) then requires the court to order the employer to pay “the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach,” and subdivision (b) allows evidence, terminating, or contempt sanctions “unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”
Does a late payment still cost the employer anything after Hohenshelt?
Yes. Two things survive. First, the expense award. The court read section 1281.99(a) as requiring the drafting party to pay the employee’s reasonable expenses caused by the late payment, “in essence, to make the other party whole,” and to do so “whether the nonpayment was willful or not.” Second, the burden. The employer has to show the delay was excusable under one of the background statutes the court identified: Code of Civil Procedure section 473(b), Civil Code section 3275, or Civil Code section 1511. The opinion says that “if the drafting party acted in good faith, it may seek relief under the above statutes, and its claim should be evaluated under the usual principles in law and equity governing relief from forfeiture or default, including whether the other party has been prejudiced.”
Since then, a published Court of Appeal decision has applied the rule. In Wilson v. TAP Worldwide, LLC (Second District, Division One, certified for publication October 2, 2025, B334533), the employer’s counsel authorized an electronic payment on the last day of the 30-day period, a Friday, and the provider received it the following Monday. The trial court had vacated the order sending the case to arbitration and later awarded the employee attorney fees for the abandoned arbitration. After Hohenshelt, the Court of Appeal reversed the fee award, concluding that “this delay in payment of one business day was not willful, grossly negligent, or fraudulent as Hohenshelt used those terms to avoid preemption of section 1281.98.” The order returning the case to court was already final, so the case stayed in court, and a $1,750 sanction under section 1281.99 for the employee’s motion wasn’t appealed and stayed in place.
I’d read Hohenshelt as a safety net, not a payment plan. It protects an employer that tried to pay and slipped. It won’t help one that let invoices sit, and the employer will still be litigating the reason for the delay while the case is stalled.
Does Hohenshelt apply to initial fees under section 1281.97?
The opinion construed section 1281.98, the statute for fees during an arbitration. Its reasoning rests on general contract statutes that aren’t specific to either section. The dissent described section 1281.97 as stricter, and unlike section 1281.98, its text has no sentence allowing the parties to agree to extend the due date. The majority did disapprove Gallo v. Wood Ranch USA, Inc., which it described as giving section 1281.97 a “similarly strict reading,” to the extent Gallo is inconsistent with Hohenshelt. But it didn’t say how its reasoning applies to initial fees, and no published decision has squarely resolved it yet. Until one does, I’d treat the initial-fee deadline as unforgiving.
Can the arbitration agreement change the payment rules?
Partly. The 30-day grace period comes from the statute, but the due date can come from the agreement. The majority explained that “parties are free to contract for any due date they want” by putting a provision in the arbitration agreement that states the number of days to pay. It added that the parties may agree to an extension even after a dispute arises.
Justice Groban’s concurrence raised a separate question the majority left open: whether the parties agreed that the California Arbitration Act’s procedural rules govern at all. In his view, “Absent an express indication to the contrary, a California arbitration agreement generally should be interpreted as incorporating the CAA’s procedural rules.” That’s a concurrence, not a holding, but it’s a reason to look at what an agreement says about governing procedure before assuming the fee statutes can be avoided.
How should an employer handle arbitration fees once a claim is filed?
Fee deadlines run alongside every other deadline in the case. A practical routine:
- Keep every invoice, payment confirmation, and the provider’s payment receipt (section 1281.98(a)(2) requires the provider to send one once an invoice is paid), along with emails showing when each invoice arrived and who received it.
- Calendar each invoice’s due date and the 30-day mark, check whether the arbitration agreement sets its own payment period, and give notice of the claim under any employment practices liability (EPLI) policy.
- Name one person at the company and one at outside counsel responsible for arbitration invoices, and make sure nobody treats the fee dispute as a reason to take action against the employee.
- If the employee moves to withdraw from arbitration, pull the documents that show why any payment was late, because under Hohenshelt the reason for the delay decides whether the right to arbitrate survives.
- Talk to a lawyer before responding to a withdrawal motion, agreeing to an extension, or offering anything to settle.
The firm’s page for employment defense attorneys in California explains how it evaluates arbitration agreements once an employee files a claim.
Arbitration fee questions from employers
Can the arbitrator extend the payment deadline?
Not alone. Section 1281.98(a)(2) says “Any extension of time for the due date shall be agreed upon by all parties.” In Hohenshelt, the trial court had treated a later JAMS deadline as a new due date, and the Court of Appeal disagreed for that reason. The Supreme Court reversed on other grounds. An extension the employee’s lawyer agrees to, in writing, is the safe course.
Is paying a few days late still a material breach?
The statute calls it a material breach, and the employee can still recover reasonable expenses caused by the late payment. What Hohenshelt changed is the consequence for the right to arbitrate. If the employer acted in good faith and the delay was excusable, a court can relieve it from forfeiture. If the nonpayment was willful, grossly negligent, or fraudulent, it can’t.
Should we change our arbitration agreement?
It’s worth reviewing. An agreement that states a specific number of days to pay invoices replaces the “due upon receipt” default, and section 1281.97 has the same rule for initial fees. That gives the payment team a clearer deadline, though the 30-day statutory period still runs from whatever due date applies.
If an employee has asked to take the case out of arbitration
If an employee has moved to withdraw from arbitration over a late fee payment, the payment records and the reason for the delay usually decide whether the arbitration survives. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving disputes over arbitration agreements. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The decision is Hohenshelt v. Superior Court (2025) 18 Cal.5th 310 (S284498). The Court of Appeal decision is Wilson v. TAP Worldwide, LLC (B334533, certified for publication Oct. 2, 2025). The statutes are Code of Civil Procedure section 1281.97, section 1281.98, and section 1281.99.
This post is general information about California and federal employment law as of November 5, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.