A recent decision from the Second District California Court of Appeal highlights the importance of employers making timely payments of arbitration fees and offers a glimpse of one of the several potential outcomes of a case pending before the California Supreme Court involving the same issue.
In this decision, Sanders v. Superior Court (2025) 110 Cal.App.5th 1304, former employee Mone Yvette Sanders had filed a lawsuit against her former employer Edward Jones. Sanders’ complaint alleged class action claims and claims under California’s Private Attorneys General Act based on purported violations of the California Labor Code. At the trial court level, Edward Jones had successfully enforced an arbitration agreement signed by Sanders during her employment, thereby dismissing Sanders’ class action claims, moving Sanders’ individual claims into arbitration, and staying Sanders’ representative PAGA claims pending arbitration.
During the course of the arbitration of Sanders’ individual claims, the arbitration service provider (JAMS) issued an invoice for $54,000, indicating, “Payment is due upon receipt,” and noting “Please see California Code of Civil Procedure sections 1281.97 – 1281.99 regarding the payment of fees for this arbitration.”
California Code of Civil Procedure section 1281.98, which the JAMS invoice referenced, requires that in an employment arbitration, the party who drafted the arbitration agreement (typically the employer) must pay fees required to continue the arbitration within 30 days of their due date. Failure to pay invoices within 30 days of their due date waives an employer’s right to require an employee proceed with arbitration.
Thirty-five days after issuance of the invoice, JAMS emailed the parties that the $54,000 invoice remained unpaid. In response, Sanders’ counsel asserted that Edward Jones had violated section 1281.98 by failing to pay arbitration fees within 30 days of their due date. That same day, Edward Jones made payment of the invoice in full.
Sanders then filed a motion in the trial court to return proceedings to the trial court, pursuant to section 1281.98. The trial court denied Sanders’ motion, finding that the Federal Arbitration Act (FAA) preempted section 1281.98, because the provision discriminated against arbitration and imposed procedural requirements that interfered with its fundamental attributes. Sanders appealed.
The Court of Appeal disagreed with the trial court, reasoning that section 1281.98’s imposition of a 30-day time limit to pay arbitration fees does not hinder arbitration, but rather, promotes it as an expedited and cost-efficient way to resolve disputes. As such, the Court of Appeal concluded that section 1281.98 is not preempted by the FAA and Edward Jones had waived its right to require Sanders to pursue her individual claims in arbitration.
The California Supreme Court is presently weighing the same question, that is, whether section 1281.98 is preempted by the FAA, in another matter: Hohenshelt v. Superior Court (S284498). The facts in Hohenshelt are similar to those in Sanders. In Hohenshelt, a former employee sued his former employer for claims under the California Fair Employment and Housing Act and the California Labor Code. The employer successfully compelled arbitration, and arbitration commenced through JAMS. During the course of arbitration, the employer paid an arbitration invoice past section 1281.98’s 30-day deadline, and the employee moved to return the matter to court pursuant to section 1281.98. While the trial court denied the employee’s request to return the matter to court, the employee appealed the trial court’s ruling. On appeal, the employer argued that section 1281.98 is preempted by the FAA but, like the court in Sanders, the appellate court determined that section 1281.98 was not preempted because section 1281.98 furthers the goals of arbitration rather than frustrating them.
The Hohenshelt decision is currently under review by the California Supreme Court. The Court heard arguments in the Hohenshelt case on May 21 and 22, 2025, and a decision is expected in the coming weeks.
The Sanders and Hohenshelt case decisions underscore that it remains crucial for California employers to make timely payments of arbitration invoices in order to enjoy the benefits of arbitration agreements.