California Supreme Court Issues Big Decision in Employment Arbitration Case

Arbitration is a big issue in employment law in California. There are a lot of questions about when an employee can (and cannot) be compelled to arbitrate a dispute. Recently, the California Supreme Court issued an important decision on the matter in the case of Hohenshelt v. Superior Court.  Here, our Riverside County employment attorney for employers provides a more comprehensive overview of the decision.

Case Review: Hohenshelt v. Superior Court

Background and Facts 

Dana Hohenshelt, a former employee of Golden State Foods, signed a pre-dispute arbitration agreement requiring all employment-related claims to be resolved via arbitration under the Federal Arbitration Act (FAA). Notably, federal courts are strongly in favor of upholding mutually agreed upon arbitration agreements under the FAA. The agreement made Golden State responsible for paying all reasonable arbitration fees and arbitrator costs.

After reporting workplace harassment, Mr. Hohenshelt claimed that the employer retaliated against and terminated him. Later, he filed a lawsuit in superior court alleging retaliation, harassment, and other Labor Code violations. Golden State successfully moved to compel arbitration. However, when an arbitrator issued fee invoices, Golden State missed the statutory 30‑day deadline to pay under California Code of Civil Procedure § 1281.98. Based on that, Mr. Hohenshelt sought to withdraw from arbitration and return to court. 

The Key Legal Issue 

Here is the big issue that was at stake in this case: Did the employer (Golden State Foods) lose its ability to force arbitration? Courts were tasked with determining whether California’s § 1281.98 (a statute that mandates that drafting parties must pay arbitration fees within 30 days after invoice) counts a missed payment as a material breach that waives the right to compel arbitration. 

Decision of the Court 

In a 5–2 decision, the California Supreme Court held that § 1281.98 is not preempted by the FAA. However, in doing so, the Court rejected prior inflexible interpretations that enforced automatic forfeiture of arbitration rights even for minor or inadvertent delays. Instead, the Court construed § 1281.98 in harmony with well‑established California contract law. It emphasizes that a party’s nonperformance only extinguishes the other party’s obligations when the breach is willful, grossly negligent, or fraudulent. Good‑faith mistakes may excuse a late payment. 

Implications for Employers 

Employers now have breathing room when minor, non‑deliberate arbitration payment delays occur. If the employers demonstrate reasonable excuse or excusable neglect, they can avoid forfeiture of arbitration rights. Still, it is important for employers that wish to pursue binding arbitration in an employment law dispute to take a proactive approach. You do not want to end up stuck in litigation.

Contact Our California Employment Lawyer for Employers Today

At Sloat Law Group, APC, our California employment attorney for employers has the experience that you can trust. If you have any questions or concerns about employment arbitration, please do not hesitate to contact us today for a confidential consultation. Our firm represents employers in Riverside County and statewide in California.

Source:

 courts.ca.gov/opinions/documents/S284498.PDF