In California, the company or employer that drafted the arbitration agreement pays almost all the costs of arbitration in employment and consumer cases. That includes the arbitrator’s hourly compensation and the arbitration provider’s administrative fees. Business-to-business disputes work differently: the parties split the costs equally unless their contract says otherwise. So the short answer to who pays arbitration fees in California depends on who you are and who you’re arbitrating against.
Employment Cases: The Employer Pays
When an employer requires arbitration as a condition of employment, it must cover every cost that would not exist in a regular lawsuit. The California Supreme Court said so in Armendariz v. Foundation Health Psychcare Services, Inc.: “the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”1Justia. Armendariz v. Foundation Health Psychcare Services, Inc.
In practice, that means the employer pays the arbitrator’s hourly rate, every administrative fee the arbitration provider charges, and any hearing-room or scheduling costs. The employee’s financial responsibility mirrors what they would spend in court: their own attorney, deposition costs, and expert witness fees. The employer picks up arbitration-specific costs regardless of who wins, and it cannot shift those fees to the employee even after prevailing on the merits.
Consumer Cases: The Business Pays
California Code of Civil Procedure Section 1284.3 bars any arbitrator or arbitration provider from enforcing an agreement that would make a losing consumer pay the opposing business’s fees and costs, including the arbitrator’s charges, the provider’s administrative fees, and the business’s attorney or witness fees.2California Legislative Information. California Code CCP 1284.3 The business that drafted the arbitration clause pays the arbitrator and the bulk of the administrative costs.
A consumer’s out-of-pocket obligation is usually limited to a modest filing fee. At JAMS, one of the two largest arbitration providers, consumers pay a flat $250 when they initiate a claim. The business covers everything else: the remaining filing fee, case management costs, and the arbitrator’s full professional fees. When the business is the one bringing the claim, JAMS requires the business to pay all costs.3JAMS. Consumer Arbitration Minimum Standards
Fee Waivers for Low-Income Consumers
Consumers who qualify as “indigent” under California law pay nothing. Section 1284.3 defines an indigent consumer as someone whose gross monthly income falls below 300 percent of the federal poverty guidelines.2California Legislative Information. California Code CCP 1284.3 For 2026, the federal poverty guideline for a single-person household in the 48 contiguous states is $15,960 per year.4HHS ASPE. 2026 Poverty Guidelines Three hundred percent of that figure works out to roughly $3,990 per month, or about $47,880 per year. A consumer earning less than that qualifies for a complete waiver of all administrative fees charged by the arbitration provider.
The waiver process is simple. The arbitration company must notify every consumer of the right to request a waiver in its first written communication and on any invoice or fee schedule. To qualify, the consumer signs a declaration under oath stating their monthly income and household size. The arbitration company cannot demand pay stubs, bank statements, or any other proof beyond that declaration.
Business-to-Business Disputes
When two companies arbitrate a commercial disagreement, California’s protective cost-shifting rules do not apply. Code of Civil Procedure Section 1284.2 sets the default: each party pays their proportionate share of the arbitrator’s fees and other expenses the arbitrator approves, not including attorney fees or witness costs a party incurs for its own benefit.5California Legislative Information. California Code of Civil Procedure CCP 1284.2 In practice, this usually means a 50/50 split.
The arbitration agreement itself can override this default. Many commercial contracts assign fees to the losing party, cap each side’s share, or allocate costs using some other formula. Courts generally enforce those provisions between sophisticated business parties.
What Happens If the Company Doesn’t Pay
Companies sometimes miss their fee deadlines, through disorganization or as a stalling tactic. California addresses this with two statutes, and the consequences are severe.
Automatic Breach After 30 Days
Code of Civil Procedure Section 1281.97 covers fees required before an arbitration can begin. If the drafting party does not pay the initial fees within 30 days of the due date, it is automatically in material breach of the arbitration agreement, in default, and has waived its right to compel arbitration.6California Legislative Information. California Code CCP 1281.97 Section 1281.98 applies the same rule to fees that come due during a pending arbitration.7California Legislative Information. California Code CCP 1281.98
Once the drafting party is in breach, the employee or consumer chooses what happens next. They can withdraw the claim from arbitration and file a lawsuit in court, with the statute of limitations tolled back to the date of the original arbitration filing. They can also continue the arbitration if the provider agrees, compel the drafting party to pay, or petition a court to order payment of all outstanding fees.
Mandatory Sanctions
If the employee or consumer moves the case to court, the court must impose monetary sanctions on the breaching company covering the employee’s or consumer’s reasonable attorney fees and costs caused by the breach. Those sanctions are not discretionary. Beyond that, the court can bar the company from conducting discovery, strike its pleadings, enter a default judgment against it, or hold it in contempt.8California Legislative Information. California Code CCP 1281.99
Good-Faith Mistakes After Hohenshelt
The California Supreme Court softened these rules in its 2025 decision Hohenshelt v. Superior Court. The court held that Sections 1281.97 and 1281.98 cannot be applied as rigid, no-excuses deadlines. When a company’s late payment results from a genuine mistake, inadvertence, or other excusable neglect rather than willful or grossly negligent conduct, a court may grant relief from the forfeiture of arbitration rights.9Justia. Hohenshelt v. Superior Court The court emphasized that the statutes target strategic nonpayment, not honest administrative errors. If you are an employee or consumer whose employer or company missed a deadline, expect the company to argue the delay was excusable. The burden falls on the company to show good faith, and any harm caused by the delay can still justify sanctions.
Attorney Fees Follow Different Rules
The cost-shifting rules above cover arbitration-specific fees: the arbitrator’s compensation and the provider’s administrative charges. Attorney fees are a separate question, governed by whatever statute underlies the claim.
In employment discrimination cases under the Fair Employment and Housing Act, a prevailing employee can recover reasonable attorney fees, costs, and expert witness fees. A prevailing employer can only recover attorney fees if the court finds the employee’s claims were frivolous, unreasonable, or groundless when filed, or that the employee kept litigating after it became clear the case had no foundation.10California Legislative Information. California Government Code 12965 This asymmetric standard lets employees pursue discrimination claims without the fear that losing means paying the company’s legal bills. Many other California employment statutes, including wage-and-hour provisions, contain similar one-way fee-shifting rules favoring employees.
Expenses like copying, travel, and expert witnesses are usually borne by the party that incurs them. They may be recoverable as part of a costs award if the underlying statute or the arbitration agreement allows, but they are not subject to the same mandatory cost-shifting that applies to arbitration-specific fees.
Small Claims Court as an Alternative
Many arbitration agreements include a carve-out allowing either party to take small disputes to small claims court instead of arbitrating. In California, individuals can file small claims cases for up to $12,500, while business entities are limited to $6,250.11California Courts. Deciding Between Small Claims and Limited Civil Small claims filing fees are far lower than arbitration costs, attorneys are not allowed, and the process moves quickly. If your dispute falls within these dollar limits and your arbitration agreement has a small claims exception, filing there avoids the arbitration fee structure entirely.