Dana Hohenshelt sued his employer, Golden State Foods Corporation, in Los Angeles County Superior Court in November 2020. Hohenshelt alleged discriminatory retaliation, failure to prevent harassment, and Labor Code violations stemming from his reports of workplace sexual harassment and subsequent termination in April 2020.

Hohenshelt had signed a pre-dispute arbitration agreement governed by the Federal Arbitration Act (FAA), requiring binding arbitration for employment claims. Golden State was responsible for paying arbitration fees and costs.

The trial court compelled arbitration in August 2021 via JAMS. Arbitration proceeded for about a year. In July and August 2022, the arbitrator issued invoices totaling over $44,000 to Golden State, due upon receipt. Golden State paid late (after 30 days), citing inadvertence due to the arbitrator’s unavailability notice and counsel’s paternity leave.

Hohenshelt moved to withdraw from arbitration and lift the court stay under California Code of Civil Procedure § 1281.98 (part of the California Arbitration Act, or CAA), claiming Golden State’s late payment constituted a material breach. The trial court denied the motion, interpreting the statute to allow payment within 30 days of a later deadline set by the arbitrator.

The Court of Appeal (Second District, Division Eight) reversed, holding the payment was untimely and § 1281.98 was not preempted by the Federal Arbitration Act. It directed the trial court to lift the stay..

The California Supreme Court reversed the Court of Appeal decision in the published case of Hohenshelt v. Superior Court -S284498 (August 2025).

Under California law, employer must pay arbitration fees “within 30 days after the due date” (invoices are due upon receipt unless parties agree otherwise). Late payment constitutes a “material breach,” default, and waiver of the right to compel arbitration. The employee may withdraw or continue arbitration (if the provider agrees). The breaching party must pay the other’s reasonable expenses (mandatory); courts may impose additional sanctions unless justified.

The Legislature enacted section 1281.98 in 2019 (Senate Bill 707) to deter employers/companies from strategically delaying arbitrations by withholding fees, affirming federal cases like Brown v. Dillard’s, Inc. (9th Cir. 2005) and Sink v. Aden Enterprises, Inc. (9th Cir. 2003), which treated willful nonpayment as material breach.

The FAA requires arbitration agreements to be enforced like other contracts (no special rules disfavoring arbitration). Section 1281.98’s default 30-day rule (modifiable by parties) promotes arbitration’s goals of speed and efficiency without deviating from general contract law (e.g., time can be “of the essence” in urgent contexts; willful breaches discharge duties).

The Supreme Court rejected prior appellate interpretations treating section 1281.98 as a “bright-line” rule automatically forfeiting arbitration rights for any late payment (e.g., regardless of inadvertence). For example Gallo v. Wood Ranch USA, Inc. (2022) interpreting section 1281.98 rigidly.

Instead, it harmonized the statute with longstanding contract law principles (Civ. Code §§ 3275, 1511; Code Civ. Proc. § 473(b)), which allow relief from forfeiture for non-willful, non-fraudulent, or non-grossly negligent breaches if the breaching party compensates the other. The Legislature aimed to deter strategic nonpayment (per legislative history and cases like Brown and Sink), not penalize good-faith errors. This avoids preemption concerns by aligning with general contract defenses.

The Supreme Court reversed the Court of Appeal’s directive to lift the stay and remanded for the trial court to assess if Golden State’s delay was excusable (e.g., good faith mistake) and if Hohenshelt suffered compensable harm.