Senate Bill (“SB”) 707, which became effective on January 1, 2020, creates substantial consequences for employers that fail to pay the costs and fees associated with the arbitration on time.
Specifically, after January 1, 2020, an employer that fails to pay arbitration fees within 30 days after such fees are due will be held to have materially breached the arbitration agreement, which could result in severe consequences under SB 707. Most critically, the employee can choose to move the proceeding to civil court. This is a very significant penalty for employers because civil proceedings typically provide far more procedural protections for employees (such as the right to discovery and the right to a jury trial) than those available in an arbitration. Civil proceedings are also generally more time-consuming and expensive for employers than arbitration.
If the employee does not want to move to civil court, he or she also has the option of compelling arbitration or, where arbitration proceedings are in progress: (1) moving to compel payment of the fees; (2) moving forward with the arbitration and asking the arbitrator to collect the fees from the employer; or (3) paying the fees and costs in order to continue the arbitration and then seeking to recover them from the employer at the conclusion of the arbitration. For more egregious violations, once the employee moves the matter to the Court, the employee can ask the Court for additional sanctions.
Now more than ever, it’s critical that employers who seek to use mandatory arbitration as an alternate to litigation ensure that they pay their arbitration fees on time.
