One-week delay in payment derails arbitration agreement

The California legislature has just placed a new procedural obligation on employers that take their employees to arbitration, requiring them to pay arbitration fees on time. The California Court of Appeal recently underscored that the rule is to be taken seriously and literally.

Facts

Rosa M. Quincoza Espinoza filed discrimination and retaliation claims against her former employer, Centinela Skilled Nursing & Wellness Centre West, LLC, which asked the court to compel arbitration under an agreement Espinoza signed when she began her employment. In April 2021, the trial court granted the employer’s request and delayed further litigation pending the arbitration. Arbitration was commenced.

On May 24, 2021, the arbitration provider sent the parties an initial invoice for an administrative fee and telephonic arbitration management conference, with a due date of May 31, 2021. On July 1, 2021, the arbitration provider confirmed to Espinoza’s counsel that it had yet to receive payment from Centinela.

A new law on the books effective January 1, 2022, addresses this precise situation. It provides that if the fees or costs to initiate an arbitration proceeding aren’t paid within 30 days after the due date, the party insisting on arbitration is in material breach of the arbitration agreement, is in default of the arbitration, waives its right to compel arbitration, and can be sanctioned for delaying the arbitration proceedings and forcing the matter to court.