California Arbitration Fee Rules: Critical for Restaurant Employers

In the ever-evolving landscape of employment law, California continues to set stringent standards, particularly when it comes to arbitration agreements. A recent wave of court cases has highlighted the critical importance of timely payment of arbitrator and arbitration fees for restaurants, food service businesses, and other employers in the state.

Key Points:

1. California law requires employers to pay arbitration fees within 30 days of the due date.
2. Late payment, even by one day, can result in a waiver of the right to arbitrate.
3. Consequences of late payment can be severe, including class action lawsuits and financial penalties.

Understanding California Code of Civil Procedure Section 1281.98

This law sets forth strict requirements for the payment of arbitration fees:

• Fees must be paid within 30 days of the due date
• Arbitration providers must issue invoices stating the due date
• Often, fees are due on the date of the invoice

Consequences of Late Payment

1. Material Breach: Late payment constitutes a material breach of the arbitration agreement.
2. Waiver of Rights: Employers lose the right to proceed in arbitration.
3. Return to Court: Cases may be moved from arbitration back to court.
4. Class Action Risk: Individual arbitration cases could become class actions in court.

Recent Court Decisions

California courts have consistently upheld strict interpretations of Section 1281.98:

• Employers have lost arbitration rights for payments made just one day late
• Courts have ruled that even unintentional late payments result in waivers
• No grace period is allowed under current interpretations

However, a recent decision in Hernandez v. Sohnen Enters., Inc., No. B323303 (May 22, 2024) offers a potential exception when the Federal Arbitration Act applies.

Additional Penalties for Late Payment

1. Mandatory Sanctions: Employers must pay the employee’s costs and attorney fees for returning the case to court.
2. Discretionary Sanctions: Courts may impose additional penalties, including:
   • Prohibiting the employer from conducting discovery
   • Striking the employer’s answer
   • Granting a default judgment to the employee
   • Finding the employer in contempt of court

Implications for Restaurants and Food Service Businesses

1. Financial Planning: Budget for prompt payment of arbitration fees
2. Process Implementation: Develop systems to ensure timely payment
3. Legal Review: Carefully review arbitration agreements for applicable law
4. Risk Assessment: Weigh the benefits of arbitration against the potential risks of late payment

Best Practices for California Employers

1. Set up automatic payment systems for arbitration fees
2. Implement internal deadlines earlier than the 30-day limit
3. Regularly review and update arbitration agreements
4. Consult with legal counsel to ensure compliance with current laws

Conclusion

For restaurants and other employers in California, the message is clear: when it comes to arbitration fees, timely payment is non-negotiable. The consequences of even a slight delay can be severe, potentially transforming individual arbitration cases into costly class action lawsuits.

As the legal landscape continues to evolve, staying informed and implementing robust payment processes is crucial. By prioritizing prompt payment of arbitration fees, employers can protect their rights and avoid the significant risks associated with non-compliance.

Remember, in California’s arbitration arena, every day counts. Don’t let a simple delay jeopardize your legal position.