Substantial Compliance With CCP § 1281.97 Just Won't Cut It.
In July 2022, the California Court of Appeal ruled in Sunny Gallo v. Wood Ranch that Cal. Code of Civ. Proc. § 1281.97 is not preempted by the Federal Arbitration Act. The court reasoned that 1281.97, which requires the drafting party -- usually the employer -- to pay arbitration fees and costs within 30 days after the due date, does not thwart arbitration, but rather encourages promptly proceeding with arbitration. See our post dated 8/1/22 on Gallo. In Rosa Espinoza v. Superior Court, B314914 (2/1 9/27/22) (Bendix, Rothschild, Chaney), the court, agreeing with Gallo, held there was no federal preemption of California's statutory rule.
However, the court went one step further in Espinoza. The court held that substantial compliance, unintentional nonpayment, and absence of prejudice did not excuse the employer from making timely payment. Thus, it is not enough to pay fees and costs. Rather, fees and costs must be paid within the statutory deadline, or else the employer will waive the right to enforce the arbitration agreement.
COMMENT. Here's one consequence that the employer may not have thought about. If failure to pay within the statutory deadline constitutes a material breach of the agreement, the employer might also get stuck paying the employee's attorney fees.
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