When an employer’s headquarter is outside of California, but has employees inside of California, the employer may seek to include a provision in an employment contract that dictates the laws of another state govern the terms of employment, or that any disputes relating to the employment would be decided by the laws of another state – these are called Choice-of-Law and Forum-Selection clauses.
A new law has been signed which affects the validity and enforceability of these clauses. The new law provides that:
“An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:
- Require the employee to adjudicate outside of California a claim arising in California.
- Deprive the employee of the substantive prection of California law with respect to a controversy arising in California.”
This restriction serves to preclude employers from requiring employees to litigate or arbitrate employment disputes outside of California or under the laws of another state.
The only exception to this restriction is where the employee was individually represented by a lawyer in negotiating an employment contract.
For years, many companies have included these Forum-Selection and Choice-of-Law provisions in employment contracts in an effort to avoid having California courts apply California law to employment disputes, especially those involving unfair competition, because the laws of other states maybe more favorable to employers. Under the new bill, these Forum-Selection and Choice-of-Law provisions would not be enforceable in California and the courts in California would apply California law.
If an employee successfully sues to void such provisions contained in an employment contract, they can recover reasonable attorney’s fees.
This law does not affect employment agreements already in existence; the law applies only to contracts entered into, modified, or extended on or after January 1, 2017..
(Adds Section 925 to the Labor Code)