What Are Employer Obligations Under California’s Arbitration Law?

An adhesion contract is a legally binding agreement where the terms are drafted by one party, typically a stronger entity, leaving the other party (often a consumer or employee) with limited negotiating power. Code of Civil Procedure Section 1281.97 was enacted to level the playing field in arbitration by enforcing strict guidelines that the drafter of the contract must adhere to.

Employer Obligations Under Section 1281.97

Under Code of Civil Procedure Section 1281.97, employers who draft an arbitration agreement must pay their share of the arbitration fees within 30 days of receiving an invoice for payment. If the employer fails to pay arbitration fees within the 30-day time period, the employer waives the right to compel arbitration.

Case Example: Suarez v. Superior Court (2024)

In Suarez v. Superior Court (2024), Onecimo Suarez brought an action against his employer, Rudolph and Sletten, Inc. (R&S), for alleged wage and hour violations. R&S filed a motion to compel arbitration. Following the order for arbitration, Suarez initiated the process by filing his demand for arbitration.

On December 2, 2022, the arbitration provider invoiced both Suarez and R&S for their respective arbitration fees. R&S failed to meet the 30-day deadline to pay their portion, paying on January 4, 2023, instead of by the January 1, 2023 deadline.

Court’s Ruling on Payment Deadlines

R&S argued that an extension of time was warranted under Code of Civil Procedure Sections 12 and 1010.6, but the court upheld the provisions of Section 1281.97. It ruled that Section 1010.6, which allows extensions when a party is electronically served, did not apply because the employer had simply received an invoice, not a court-served document.

The court also rejected R&S’s claim that Suarez failed to initiate arbitration by not paying his portion of the fees, as Section 1281.97 governs the employer’s payment timeline, not the employee’s. The employee’s obligation is to file for arbitration to initiate the process, and there are no penalties on employees for late payments.

Federal Arbitration Act and Section 1281.97

The court ruled that the Federal Arbitration Act (FAA) does not preempt Section 1281.97, as the California law serves to promote a swift arbitration process, which aligns with the FAA’s goal of safeguarding arbitration.

Importance of the Suarez Decision

Suarez is significant because it upholds the strict enforcement of an employer’s timely payment of arbitration fees and rejects statutory extensions to those payment deadlines.

At TONG LAW, our experienced employment attorneys are here to help employees enforce their rights.