Employment claims brought by a former claims adjuster were batted back and forth from California state court to Indiana federal court and nearly back again before the U.S. Court of Appeals for the 7th Circuit stepped in. On August 3, 2020, the 7th Circuit held the forum selection clause between the former claims adjuster and his employer must be given controlling weight in deciding where the case should be heard.
Defendant Ryze Claims Solutions (“Ryze”) is a comprehensive claims service company located in Indiana. Plaintiff Leslie Billings was a traveling claims adjuster and worked out of his home in California. Billings had entered into an employment agreement with Ryze in 2009 which included a forum-selection clause. A second agreement between Billings and Ryze was dated in 2016. A forum-selection clause, in essence, allows the parties to a contract to agree where they will litigate if an issue arises out of the contract.
As happens, Billings took issue with some of Ryze’s employment policies and filed suit in state court in California. He alleged wage and hour violations under both the state labor code and the Fair Labor Standards Act. Ryze removed the claims to federal court in California. Ryze then successfully transferred the venue to an Indiana federal district court based on the forum-selection clauses in its agreements with Billings.
The Indiana court granted Ryze’s motion for summary judgment as to all federal claims. Despite having heard a motion for summary judgment and having other motions pending, the Indiana district court then sent the case back to a California federal district court. In support of this action, the Indiana court cited to its own congested docket and the California court’s “familiarity” with California labor law.
Once again docketed in California, the California district court ordered the parties to show why the action should not be sent to state court. Ryze, in turn, filed a petition for mandamus with the 7th Circuit to bring the matter back to Indiana.
The 7th Circuit granted the petition. The 7th Circuit held the district court must give “forum-selection clauses ‘controlling weight in all but the most exceptional cases.” Finding nothing particularly exceptional, the 7th Circuit found that Indiana was the proper venue.
While this case is an example of a forum selection clause being enforced, employers are reminded of the requirements of Labor Code section 925. Section 925 states that an employer shall not require an employee who primarily resides and works in California to “adjudicate out of California a claim arising in California. Section 925 applies only to contracts entered into on or after January 1, 2017. Billings signed his employment agreements in 2009 and 2016. If he had signed after 2017, then potentially, this case would not have made it out of California. Section 925 does not apply where an employee is individually represented in the negotiations of the contract that contains the forum selection clause.
If you have questions about drafting or enforcing forum-selection clauses in the employment arena contact a Jackson Lewis attorney to discuss in more depth.