What Happens in California When Your Employer Fails to Pay Arbitration Fees on Time?
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It depends on why the payment was late — and the California Supreme Court's answer to that question in Hohenshelt v. Superior Court now governs one of the most important employee protections in California arbitration law. The ruling preserves the right of employees to exit arbitration when employers willfully or grossly negligently fail to pay required fees on time, while narrowing the circumstances under which a genuinely inadvertent delay triggers that same consequence.
Case: Hohenshelt v. Superior Court of Los Angeles County (Golden State Foods Corp., Real Party in Interest)
Court: Supreme Court of California
Case No.: S284498
Get to Know the Plaintiff: Hohenshelt v. Superior Court
Dana Hohenshelt was a former employee of Golden State Foods Corp. who sued his employer for discriminatory retaliation, failure to prevent discrimination, and related employment claims under California law. Like many California employees, Hohenshelt was subject to a mandatory arbitration agreement as a condition of his employment, and the dispute was compelled to private arbitration before JAMS (the Judicial Arbitration and Mediation Service). For more than a year, the parties arbitrated the case: conducting discovery, taking depositions, submitting dispositive motions, and preparing for a hearing. As the hearing date approached, JAMS issued invoices to Golden State Foods for arbitration fees. Those fees were not paid within the 30-day window California law requires.
Get to Know the Defendant: Hohenshelt v. Superior Court
Golden State Foods Corp. is a food service distribution company. As the employer and the drafter of the arbitration agreement, it bore the legal obligation under California Code of Civil Procedure Section 1281.98 to pay arbitration fees within 30 days of the invoice due date. When Golden State failed to meet that deadline — even by a short window — Hohenshelt argued the company had materially breached the arbitration agreement and that he was entitled to withdraw from arbitration and pursue his claims in court instead.
What Are the Allegations in the Complaint?
Hohenshelt's underlying employment claims allege discriminatory retaliation and related violations of California law during his employment with Golden State Foods. The case reached the California Supreme Court not on those underlying merits, but on the critical procedural question of what happens when an employer fails to timely pay arbitration fees under California law. According to the case record:
● JAMS issued invoices to Golden State Foods in July and August 2022 for arbitration fees
● On September 30, 2022, JAMS notified the parties that all fees had to be paid by October 28, 2022, or the scheduled hearing might be cancelled
● Hohenshelt immediately filed a letter with JAMS stating he was withdrawing from arbitration under Section 1281.98, citing Golden State's failure to pay within 30 days of the original invoice date
● Golden State Foods paid all outstanding fees by October 5, 2022; before the October 28 JAMS deadline, but after the 30-day window measured from the original invoice dates
● The trial court found the payment timely because it fell within the arbitrator's extended deadline; the Court of Appeal reversed, finding any late payment triggers Section 1281.98 automatically; the California Supreme Court took up the case to clarify the law
What Was the Main Question in the Case?
Two central legal questions were resolved. First: is California Code of Civil Procedure Section 1281.98; which requires employers to pay arbitration fees within 30 days or face forfeiture of the right to arbitrate — preempted by the Federal Arbitration Act? The Supreme Court said no: the statute is not preempted and remains valid California law. Second: does any late payment by the employer automatically constitute a "material breach" triggering the employee's right to exit arbitration? The Supreme Court said no to this as well — rejecting what it called the "rigid construction" that many courts had applied and replacing it with a more nuanced standard. A late payment triggers forfeiture of arbitration rights only when it was willful, grossly negligent, or fraudulent. A genuinely inadvertent or mistaken delay may be excused. The case was remanded for fact-finding on whether Golden State's late payment met that standard.
Why Does the Case Matter to California Employees?
This ruling is directly relevant to every California employee who is currently subject to a mandatory arbitration agreement — which encompasses millions of workers across the state.
● California law gives employees a meaningful protection when employers drag their feet on paying arbitration fees: if the employer's failure to pay was willful or grossly negligent, the employee can exit arbitration and take their case to court
● The Supreme Court's ruling confirms that this protection survives federal preemption challenges — employers cannot use the Federal Arbitration Act to strip employees of this right
● For employees in active arbitration, this case is a reminder to track arbitration fee invoices and payment deadlines carefully — if your employer misses a payment deadline, you may have the right to move to court, but acting promptly and getting legal advice before taking that step is essential
● The ruling also serves as a warning to employers: intentional or grossly negligent non-payment of arbitration fees is a serious violation with significant consequences, including the complete loss of the right to arbitrate
A Brief Overview of the Case
● November 2020: Dana Hohenshelt files suit against Golden State Foods Corp. in Los Angeles County Superior Court for discriminatory retaliation and related claims
● Compelled to arbitration: The trial court sends the case to JAMS arbitration pursuant to the parties' arbitration agreement
● Over one year: The parties conduct discovery, depositions, and briefing in anticipation of the arbitration hearing
● July–August 2022: JAMS issues arbitration fee invoices to Golden State Foods; the fees are not paid within 30 days of the invoice date
● September 30, 2022: JAMS notifies parties all fees must be paid by October 28, 2022
● Shortly after: Hohenshelt files a letter withdrawing from arbitration under Section 1281.98; Golden State pays all fees by October 5 — before the JAMS deadline but after the 30-day statutory window from the original invoices
● Trial court: Finds payment timely under the arbitrator's extended deadline; denies Hohenshelt's motion to exit arbitration
● Court of Appeal: Reverses — holds Section 1281.98 is not preempted by the FAA; any late payment triggers forfeiture; Hohenshelt may exit arbitration
● August 11, 2025: California Supreme Court (Case No. S284498) issues its decision: confirms Section 1281.98 is not preempted by the FAA; rejects rigid automatic forfeiture rule; holds forfeiture applies only to willful, grossly negligent, or fraudulent non-payment; case remanded for further fact-finding
FAQs: Hohenshelt v. Superior Court
Q: What is California Code of Civil Procedure Section 1281.98 and what does it require?
A: Section 1281.98 requires the party that drafted an employment or consumer arbitration agreement — typically the employer — to pay any required arbitration fees within 30 days of the invoice due date. If that deadline is missed, the drafting party is deemed to have materially breached the agreement, and the employee may elect to withdraw from arbitration and pursue their claims in court.
Q: What happens if an employer misses the 30-day arbitration fee deadline?
A: Under the Supreme Court's ruling in Hohenshelt, the employee may be able to exit arbitration and proceed in court — but only if the employer's failure to pay was willful, grossly negligent, or fraudulent. A genuinely inadvertent or mistaken late payment may be excused by the court.
Q: What should I do if my employer misses an arbitration fee payment deadline?
A: Act promptly and speak with an employment attorney before taking any steps. The right to exit arbitration under Section 1281.98 is an election that must be made carefully, and your attorney can evaluate whether the circumstances of the late payment support a motion to withdraw.
Q: Does the Federal Arbitration Act override California's arbitration fee payment rules?
A: No. The California Supreme Court held in Hohenshelt that Section 1281.98 is not preempted by the FAA. California's arbitration fee payment protections remain valid and enforceable.
Q: If I am compelled to arbitration, how do I track whether my employer is paying fees on time?
A: Once arbitration begins, request confirmation from the arbitration service provider (such as JAMS or AAA) when invoices are sent and when payments are received. Keep copies of all invoices and payment confirmations. If you receive notice that fees have not been paid, get legal advice immediately.
Q: Can an employer agree to an extended payment deadline with the arbitration provider to avoid the 30-day rule?
A: The JAMS rules and similar provider rules may allow for administrative extensions, but under California law, the 30-day statutory clock generally runs from the original invoice due date regardless of any administrative extension the arbitration provider sets. Whether a mutually agreed extension would be recognized by a California court is a fact-specific question an employment attorney can help evaluate.
Have Questions About Your Rights Under an Arbitration Agreement?
Hohenshelt v. Superior Court is a landmark ruling that preserves an important employee protection while clarifying when and how it applies. If you are in arbitration with your employer, have concerns about how your arbitration agreement operates, or want to understand your rights if fees go unpaid, contact Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Knowledgeable employment law attorneys are ready to assist you in law firm offices located in Riverside, San Francisco, Sacramento, San Diego, Los Angeles, and Chicago.
