Mistake, Inadvertence, or Excusable Neglect Not Grounds for Waiver of Arbitration
On August 11, 2025, the California Supreme Court issued an important decision favorable to employers in a case called Hohenshelt v. Superior Court (Golden State Foods Corp.). The case involves arbitration of employment disputes and specifically, what California law requires if the employer is late in paying its arbitration fees.
The ruling stems from a case where the employer was a couple of weeks late on two arbitration fee payments. The employee in this case sought to use Golden State’s late payment as a reason to get out of arbitration under a California law that authorizes a judge to disregard an arbitration agreement where this happens. That same law has been used to force employers to reimburse all the employee’s legal fees up to that point.
The Supreme Court ruled that a rigid interpretation of the law was simply too harsh. It reasoned that while the original purpose of the law was to prevent employers from using late payments as a tactic to stall or avoid arbitration, punishing an employer for an honest, good-faith mistake was not the legislature’s intent.
Background
Golden State Foods had employees sign mandatory arbitration agreements as a condition of hire. Dana Hohenshelt signed one when he took a job with the company. Hohenshelt later claimed that he was a victim of illegal retaliation and initiated a legal claim against Golden State. The case went to arbitration because the employee signed an arbitration agreement.
Pursuant to California law, Golden State was required to timely pay all the arbitration fees and costs or face dismissal of the arbitration. Twice during the arbitration, Golden State was late in paying the arbitration invoices, prompting Hohenshelt to seek a Court order enabling him to withdraw from the mandatory arbitration and be reimbursed for all his legal expenses. The trial court said no to the request, but the Court of Appeal held that Golden State waived its right to continue in arbitration because of the two late payments.
The California Supreme Court considered the matter and ruled that the employer could stay in arbitration where its failure to timely pay the arbitration fees was due to a good faith mistake, inadvertence, or excusable neglect — not willful or grossly negligent conduct — provided the employer makes the employee whole for any costs or damages caused by the delay. However, if the late payment was a deliberate, strategic attempt to delay the process, or was due to the employer’s gross negligence, the employer forfeits its right to compel the employee to remain in arbitration.
While the Supreme Court softened the harshest consequences, inadvertent late payments still expose employers to costly court motions to return the case to court — and courts will scrutinize whether the delay was excusable.
Practical Takeaways for Employers
- Pay on Time: Treat arbitration invoices with the same urgency as any other critical bill. Ensure your accounts payable department knows these payments are time sensitive. While the Supreme Court has provided some flexibility, you should still prioritize paying arbitration invoices on time. The deadline is typically 30 days from receipt unless your arbitration agreement states otherwise.
- Document Everything: If an invoice is missed, document the reason immediately. Was it an administrative error? An email that went to spam? This documentation can prove your mistake was not intentional.
- Reduce Your Risk: To minimize the risk of late payments, consider clearly defining payment deadlines in your company’s arbitration agreements. For example, instead of a vague “due upon receipt,” specify “within 30 days of invoice.”
- Be Prepared for Scrutiny: An inadvertent late payment doesn’t guarantee a free pass. It will still open your company up to a motion to compel the case back to court. A judge will then decide if the delay was a genuine mistake or a strategic maneuver, and this will involve legal costs and time. The best way to avoid this is to not be late at all.
If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700, or visit us online at www.brgslaw.com .
Sincerely,