Unrelated California Laws Did Not Extend Employer’s Deadline for Paying Arbitration Fees

Takeaway: A provision of California law that went into effect in 2021 obligates a company that drafts an arbitration agreement to pay its share of arbitration fees by no later than 30 days after the date they are due. Two other unrelated California laws did not extend this deadline.

An employer that paid its arbitration fees three days late could not compel an employee to arbitrate his wage and hour claims, a California appeals court ruled. A provision of California’s Code of Civil Procedure that went into effect in 2021 obligates a company that drafts an arbitration agreement to pay its share of arbitration fees by no later than 30 days after the date they are due, and two other unrelated California laws did not act to extend this deadline, the court said.

The employee sued his employer for alleged wage and hour violations, and the employer successfully moved to bring the claims to arbitration, as provided in the employment agreement that the employer drafted. When the employer waited more than 30 days to pay its share of the arbitrator’s initial filing fee, the employee moved to have the claims heard in court rather than decided by an arbitrator, but the trial court denied the motion, and the employee sought review in the appeals court.

In late October 2022, on the employer’s motion, the trial court ordered the parties to arbitration. On Dec. 2, 2022, the arbitration provider issued an email invoice for the initial filing fee to the employer marked “due upon receipt.” The total fee due was $1,750, with $400 allocated to the employee and $1,350 to the employer. Though it was not required to do so, the arbitration provider followed up on Dec. 19, 2022, to request a status of payment. The employer did not pay its share of the invoice until Jan. 4, 2023.

The employer asserted that it had until the close of business on Jan. 5, 2022, to pay the invoice, making its Jan. 4 payment timely. While conceding that its payment would normally have been due on Jan. 1, 2023—30 calendar days after Dec. 2, 2022—the employer argued that other unrelated California statutes extended the due date until Jan. 5.

The court reversed the trial court ruling, concluding that the grace period for the employer’s payment of arbitration fees was not extended to Jan. 5, 2023.

Under California’s Civil Procedure Code, an invoice for the payment of arbitration costs is due upon receipt but also allows a grace period for payment of “30 days after the due date.” Failure to pay on time constitutes a material breach of the arbitration agreement, the court explained.

The employer claimed that two unrelated provisions of the Civil Procedure Code operated to extend the 30-day grace period. Agreeing that the invoice due date in this case was Dec. 2, 2022, it first relied on a provision that extended certain deadlines that fell on a holiday.  By the employer’s calculation, because 30 days from Dec. 2, 2022, would be Jan. 1, 2023, and because both Jan. 1 and 2 were holidays, the grace period for payment was extended to Jan. 3.

The employer then sought to tack on an additional two days based on another provision of the Civil Procedure Code that deals with the electronic service of documents. It provides that, for documents electronically filed with a court, two days may be added to the filing period.

The court said that it would assume without deciding that the first statute could potentially apply to extend the time for the employer’s payment of arbitration fees if the deadline for payment fell on a “holiday.” Even so, it said, the second statute simply does not apply to the email transmission of an invoice for arbitration fees.  By its terms, the court said, the statute governs the service of documents in an action filed with the court. An arbitration proceeding is not “an action filed with the court,” and the invoice required is “provided” to the parties but is not “served.”

That an arbitration proceeding is not a court action is axiomatic, the court said. Private arbitration exists as an alternative to resolving disputes in the public court system.

Moreover, the court said, the statute at issue governs the electronic service of documents. “Service” is a legal term of art. Typically, it involves sending service copies of documents filed with the court to opposing parties in the litigation. Even if the service procedures somehow extended to arbitrations in general, the document that the employer seeks to apply it to is not something that is “served.” It is an invoice—a bill for anticipated services—that governs the economic relationship between the provider and the parties. It is not a document filed with the court or, by analogy, the arbitrator, the court said.

Suarez v. Superior Court, Calif. Ct. App., No. D082429 (Jan. 24, 2024).

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.