Wednesday, September 28, 2016

New California Law Restricts Choice of Law and Forum Provisions in Employment Contracts

On Sunday, September 25th, California Governor Jerry Brown approved Senate Bill 1241 as an amendment to the California Labor Code.  The new law makes voidable, upon the request of the employee, any provision of a contract that requires an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would require the employee to adjudicate outside of California a claim arising in California, or deprive the employee of the substantive protections of California law with respect to a controversy arising in California.  The law specifically requires that if a provision is rendered void, the matter shall be adjudicated in California, and California law shall govern.
 
For purposes of the new law, the term "adjudication" includes litigation and arbitration, and in addition to injunctive relief and any other available remedies, a court may award reasonable attorneys' fees to an employee who is enforcing his or her rights.  Notably, the new legislation does not apply to a contract with an employee who is individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated, or the choice of law to be applied.
 
Employers with operations in  California should review any existing employment-related agreements to ensure compliance with the new law, which applies to a contract entered into, modified, or extended on or after January 1, 2017.  A copy of SB 1241 can be found here:  https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160SB1241.