Failure to Pay Arbitration Invoice Can Lead to Trial, Penalties

In a recent article for the Daily Journal, Glaser Weil Partner Kerry Garvis Wright and Associate Emma Samyan discuss how the failure to pay arbitration invoices in California can lead to court trial and significant penalties.

Effective Jan. 1, 2020, Code of Civil Procedure Sections 1281.97 and 1281.98 declared that employers who neglect to timely pay arbitration invoices will be in material breach of the arbitration agreement and that the employee—at her election—may withdraw her claims from arbitration and file them in court. Further, the employer will have to pay the employee’s attorneys’ fees and costs incurred in connection with the abandoned arbitration and may even be subjected to other, non-monetary sanctions.

Garvis Wright and Samyan examine California law and explain that employers who are late in paying arbitration invoices may no longer avoid harsh penalties, including the right to arbitrate employees’ claims, by quickly curing the default and arguing substantial compliance with the statute. The 2nd District Court of Appeal in Espinoza v. Superior Ct. of Los Angeles Cnty., 83 Cal. App. 5th 761 (2022), makes clear that the statute is unforgiving—failure to timely pay arbitration invoices results in material default of the arbitration agreement, even if the failure is inadvertent, due to clerical error, or causes no prejudice to the employee.

Garvis Wright and Samyan also offer advice employers should consider until the California Legislature amends the statute:

• Ensuring that the invoice is correct and addressed to the appropriate individual/entity, if possible, before it is issued, to avoid possible delays in having the invoice re-issued.
• Setting calendar reminders of the due date.
• Requesting an estimate of future fees in case reserves need to be set or other financing arrangements need to be made to pay future invoices.
• Pre-paying fees/maintaining a (refundable) balance with the arbitration service.

Access the full article here.