Escaping Forced Arbitration When Your Employer Forgets to Pay the Fees

Many California employers require employees to sign arbitration agreements at the start of employment — agreements that waive the employee's right to bring disputes in court. But a California employer can potentially lose its right to compel arbitration by failing to pay arbitration fees on time.

The general legal principle is straightforward: a party to an arbitration agreement can waive its rights through action or inaction. Failure to pay fees, failure to initiate the arbitration process, undue delay, or otherwise obstructing the process can all be viewed as conduct inconsistent with an intent to arbitrate — and can substantiate waiver.

The Statute: California Code of Civil Procedure Section 1281.98

Understanding the law here is critical. Under section 1281.98, when an employer fails to pay certain fees and costs within 30 days after the due date, the employer is in material breach of the arbitration agreement — if the agreement requires the employer to pay those fees.

The statute is clear: the employer is in default of the arbitration and waives its right to compel the employee to proceed.

Courts Enforce This Strictly

California courts have enforced this 30-day deadline with precision. In Doe v. Superior Court (2023), the Court of Appeal for the First Appellate District held that an employer lost its right to proceed in arbitration because its check arrived just two days after the 30-day grace period had run.

The employer had received an invoice "due upon receipt" and mailed a check, but it arrived at the arbitrator two days late. The court held that even this small delay was a material breach. The court reversed the trial court's denial of the employee's motion to vacate the order compelling arbitration.

What You Can Do After an Employer Breaches

Under section 1281.98(b), the employee has four options when the employer fails to pay:

Withdraw and go to court. The employee can pull the claim from arbitration and proceed in a court of appropriate jurisdiction — meaning the case goes before a jury.

Compel arbitration with fee-shifting. The employee can require the company to continue with arbitration but pay the employee's reasonable attorney's fees and costs related to the arbitration.

Petition for a court order. The employee can ask the court to order the company to pay all arbitration fees it's obligated to pay under the agreement.

Pay the fees and proceed. The employee can pay the company's fees and continue with the arbitration.

Additionally, under section 1281.99(a), the employee can seek attorney's fees and costs incurred as a result of the material breach, plus sanctions.

The Takeaway

Employees who are compelled to arbitrate should pay close attention to the language in their arbitration agreement and the timelines involved. The obligation for an employer to pay arbitration costs and fees arises from the language of the agreement itself, and the trigger date is usually the date of the initial invoice requesting payment.

If the employer fails to pay within 30 days of that date, the employee may be able to escape arbitration entirely and take the case to court — or extract significant concessions if arbitration continues.

If you've been forced into arbitration and believe your employer has failed to meet its obligations, call us at (415) 495-7800. We can evaluate whether you have grounds to move your case to court.