It is common practice for employers to utilize forum selection and choice of law provisions in employment agreements in order to require employees to have employment-related disputes adjudicated outside of California and/or under the law of a state other than California. There are a myriad of compelling reasons an employer would seek to include such provisions in its employment law contracts, such as the desire to have disputes adjudicated in a state with laws that are more favorable to employers or a preference to litigate in the state where an employer’s principal place of business is located.
However, starting January 1, 2017, Senate Bill 1241 (“SB 1241”) will prohibit employers from requiring an employee who resides and works in California to agree, as a pre-requisite to employment, to adjudicate disputes outside the state and/or under the law of a state other than California. Accordingly, any provisions in contracts entered into, modified or extended on or after January 1, 2017 that violate SB 1241 are voidable at the request of the employee and any dispute regarding a voided provision must be adjudicated in California under California law. What’s more, if an employee elects to enforce his rights under Labor Code Section 925, the statute provides a basis from which the employee can be awarded attorneys’ fees. The goal of SB 1241 is to ensure that employees working in California are not deprived of the “substantive protection of California law with respect to a controversy arising in California.” SB 1241.
Notably, SB 1241 does not apply to contracts entered into with an employee who is individually represented by legal counsel in negotiating the terms of an agreement containing forum selection and choice of law provisions.
In advance of 2017, employers who have contracts with employees who live and work in California should audit their employment agreements in order to ensure they do not contain provisions that would violate SB 1241.