In 2019, the California legislature amended the California Arbitration Act (“CAA”) to require the party drafting an arbitration agreement—most often the employer—to pay all arbitration fees within thirty days of receiving the invoice, unless the agreement specifies a different deadline. A company’s failure to pay on time is considered a material breach, allowing the employee or consumer to withdraw from arbitration and pursue claims in court. California appellate courts have strictly enforced this rule with harsh results, even in cases where payment was only a few days late due to mailing delays or natural disasters.
On August 11, 2025, the California Supreme Court issued a significant decision in Hohenshelt v. Superior Court. The Court held that California’s timely payment requirement is not preempted by the Federal Arbitration Act, emphasizing that prompt payment ensures efficient resolution of disputes in arbitration. At the same time, the Court rejected the rigid “any delay equals forfeiture” approach adopted by lower courts. Instead, it recognized that employers may be excused from forfeiture when late payment was impossible, impracticable, or illegal; when the delay was not willful or grossly negligent and the employee was made whole; or when the delay stemmed from mistake, inadvertence, or excusable neglect.
The Hohenshelt decision provides welcome relief for California employers. While timely payment of arbitration fees remains essential, minor or excusable lapses will not automatically strip employers of their right to arbitrate. Employers should continue to prioritize prompt payment, review arbitration agreements to ensure adequate deadlines, strengthen internal invoice-tracking procedures, and document reasons for any delays. This ruling creates a more balanced framework while still protecting employees’ rights to efficient dispute resolution.
If your business needs guidance on arbitration agreements, compliance, or dispute resolution strategies, please contact us at info@mnklawyers.com.
