By Megan Shaked
At the beginning of 2022, two sections were added to the California Arbitration Act specifying that a failure to timely pay arbitration fees constitutes a material breach of the arbitration agreement. In the event of a material breach, a party subject to arbitration can withdraw the claims from arbitration to proceed in court and seek other sanctions. Last month, the California Court of Appeal in De Leon v. Juanita’s Foods confirmed that the new law is a bright-line rule and that courts do not have discretion to deviate from a finding of material breach.
California Civil Procedure Code Sections 1281.97 and 1281.98 require employers seeking to compel an employee’s dispute into arbitration to timely pay the fees or costs to initiate and to continue arbitration proceedings. If the employer does not pay the fees/costs required within 30 days after the due date, the employer is in material breach of the arbitration agreement, is in default of the arbitration agreement, and waives its right to compel the employee to proceed with that arbitration.
At that point, the party being compelled into arbitration has a few options. Continue reading