After HOHENSHELT v. SUPERIOR COURT: What is the Status of the "30-Day Forfeiture" Rule in Arbitration: Jack Schaedel, Stephen Benardo, and Anthony Khoury

Advertisers in this issue:
Fox Law Corporation
Krycler Ervin Taubman & Kaminsky
Law Offices of Lawrence C. Noble
Lawyers' Mutual
Lewitt Hackman
One Legal
Scheideman Design
Valley Community Legal Foundation
 

Download this issue of Valley Lawyer.

By Alternative Resolution Centers Employment Neutrals Jack Schaedel, Stephen Benardo, and Anthony Khoury

California Code of Civil Procedure (“CCP”) § 1281.98(a)(1) provides that in an employment or consumer arbitration, where the party that drafted the agreement is legally required to “pay certain fees and costs during the pendency of an arbitration proceeding,” failure to pay those fees and costs within 30 days of the due date renders the drafting party in “material breach” of the agreement to arbitrate and waives the party’s “right to compel the employee or consumer to proceed with that arbitration.”

Dana Hohenshelt, a sanitation employee at Golden State Foods Corporation (“Golden State”), signed an arbitration agreement at the start of his employment that was governed by the Federal Arbitration Act (“FAA”). After Hohenshelt reported the sexual harassment of a co-worker to management in late 2019, Hohenshelt alleged that his former employer retaliated and ultimately terminated his employment in April 2020. Hohenshelt sued Golden State in Los Angeles County Superior Court. Golden State then moved to compel arbitration and stay all court proceedings, which Hohenshelt did not oppose. The trial court granted the motion, and in August 2021, arbitration was initiated through JAMS. The arbitration proceeded for approximately one year, at which point the arbitrator issued two final invoices to Golden State. After the employer failed to timely pay those final arbitration fees, Hohenshelt moved in the trial court to lift the stay under § 1281.98. The trial court denied that motion, and the Court of Appeal granted Hohenshelt’s writ petition challenging that order. In doing so, the Court of Appeal rejected Golden State’s argument that § 1281.98 is preempted by the FAA. The California Supreme Court granted the employer’s petition for review.

On August 11th of this year, in Hohenshelt v. Superior Court (2025) 18 Cal.5th 310 (“Hohenshelt”), the California Supreme Court affirmed the validity of the law—i.e. CCP § 1281.98, the “30-day pay arbitration invoices or forfeit” statute—but rejected the strict, automatic-forfeiture reading almost all courts had embraced.

What remains intact is the statute’s default framework. In employment and consumer matters, providers issue invoices during the pendency of an arbitration that are “due upon receipt,” and the drafting party must pay within 30 days of that due date unless the arbitration agreement sets a different timeline or the parties mutually agree to extend it[1]— even after a dispute arises. The Court reaffirmed that if payment is late, the employer or non-consumer party is in material breach of the arbitration agreement and has waived the right to arbitrate, and the employee or consumer may withdraw to court and seek sanctions or, with the arbitrator’s consent, continue in arbitration.

What changed is the pro-employee/consumer approach under which courts have required strict compliance with this statute. Reading § 1281.98 against longstanding, generally applicable contract principles, the Court held that a late payment does not automatically extinguish arbitral rights where the nonpayment was not willful, grossly negligent, or fraudulent, or where equitable relief is otherwise appropriate. The opinion identified familiar paths for relief— where timely payment was “impossible, illegal, or impracticable” because of extreme and unreasonable difficulty, expense, injury, or loss involved (Civil Code § 1511); the late payment was not “willful, fraudulent, or grossly negligent” and the employer fully compensates the employee for any losses resulting from the delay (Civil Code § 3275); or the late payment was the result of “mistake, inadvertence, surprise, or excusable neglect” (CCP § 473(b)). Accordingly, the Court directed the Court of Appeal to remand the case to the trial court to decide whether any delay in the case before it was excusable and whether it caused compensable harm.

Doctrinally, this construction undercuts arguments that § 1281.98 “disfavors” arbitration. As interpreted by the California Supreme Court, the statute’s purpose is to keep arbitrations moving by ensuring timely payment of fees, and its safety valves mirror neutral contract doctrines. That harmony with generally applicable state law defeated the FAA preemption challenge.

The Court also disapproved several decisions to the extent that they treated forfeiture as mandatory upon any late payment, explicitly naming Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621 (lack of blame or lack of prejudice is not a defense), Espinoza v. Superior Court (2022) 83 Cal.App.5th 761 (substantial compliance, unintentional nonpayment, or absence of prejudice is not a defense), De Leon v. Juanita’s Foods (2022) 85 Cal.App.5th 740 (lack of delay or lack of prejudice is not a defense), Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054, Doe v. Superior Court (2023) 95 Cal.App.5th 346 (the check was in the mail before 30 days is not a defense), Suarez v. Superior Court (2024) 99 Cal.App.5th 32 (CCP § 1010.6 does not apply, so two extra court days are not added to the 30 days when the invoice is sent via email), Hernandez v. Sohnen Enterprises, Inc. (2024) 102 Cal.App.5th 222, Keeton v. Tesla, Inc. (2024) 103 Cal.App.5th 26, Trujillo v. J-M Manufacturing Co., Inc. (2024) 107 Cal.App.5th 56, Colon-Perez v. Security Industry Specialists, Inc. (2025) 108 Cal.App.5th 403 (CCP § 473 is not grounds for relief), and Sanders v. Superior Court (2025) 110 Cal.App.5th 1304. Going forward, the inquiry will be fact-intensive: Was the delay willful or strategic? How long was it? What notice and follow-up occurred? Did the non-drafting party incur costs or suffer prejudice? Can those harms be fully compensated?

Wilson v. TAP Worldwide, LLC

The impact of Hohenshelt has already been felt at the California Court of Appeal. In Wilson v. TAP Worldwide, LLC (Sept. 22, 2025, certified for publication and modified, Oct. 2, 2025) (“Wilson”), the arbitration provider received the employer’s payment of arbitration fees three days after expiration of the 30-day deadline in § 1281.98. On the employee’s motion, the trial court vacated its order compelling arbitration and awarded the employee attorney’s fees and costs. The Second District appellate panel expressly followed Hohenshelt and reversed, holding that the employer’s failure to timely pay the fees was not “willful, grossly negligent, or fraudulent,” where the employer had initiated a virtual card payment by the 30-day deadline, but the payment was not received until three days later because of a processing delay.

Practical implications for California employment and consumer practitioners

--Deadlines still matter. Employers and non-consumer parties who do not pay invoices within the 30-day window still risk default and waiver of the right to arbitrate.

--Relief from forfeiture requires a good reason. Defense counsel should document good faith efforts to make timely payment, any barriers to timely payment, and any grounds for “mistake, inadvertence, surprise, or excusable neglect.”

--Opposing relief requires a record. Plaintiff’s counsel should document notice, reminders, schedule impacts, and any prejudice as a result of delay. Repeated or lengthy delays might help defeat equitable relief and encourage a court to enforce the statutes strictly, as written.

--Arbitration agreements can be revised to extend the deadline for paying arbitration invoices during the pendency of an arbitration.

Bottom line: Wilson shows that as courts follow Hohenshelt, the “strict liability” approach to CCP § 1281.98 will be replaced by a full-context review, but the statute will remain a strong deterrent to untimely payment of arbitration fees.

Anthony S. Khoury, Esq., LL.M.
Anthony Khoury is a former Kern County Superior Court Commissioner, and is a member of the SFVBA's ADR Section Committee. He is a full-time neutral with both Alternative Resolution Centers (ARC), and the American Arbitration Association (AAA). He also serves on the Mediation Center of Los Angeles (MCLA) mediation panel. Anthony teaches Arbitration law at USC Gould School of Law, and Employment disputes at the Straus Institute of Dispute Resolution at Pepperdine University Caruso School of Law.

Jack Schaedel, Esq.
Jack Schaedel represented employers and employees in California employment law disputes from 1995 to 2023.  Since then, he has mediated employment disputes through Alternative Resolution Centers (ARC) and arbitrated them through the American Arbitration Association (AAA).

Stephen M. Benardo, Esq.
Stephen M. Benardo is a panel mediator and arbitrator for Alternative Resolution Centers (ARC). He is also a panel arbitrator and mediator for the American Arbitration Association (AAA). After more than thirty years of practice in employment law, Steve’s mediation and arbitration practice focuses on civil rights cases, employee mobility/unfair competition cases, and wage and hour cases, including class actions and PAGA cases.