California to Prohibit Choice of Law and Venue Provisions in Employment Contracts | Practical Law

California to Prohibit Choice of Law and Venue Provisions in Employment Contracts | Practical Law

California Governor Jerry Brown recently signed into law Senate Bill No. 1241 (SB-1241) adding Section 925 to the California Labor Code. Section 925 prohibits the use of choice of law and choice of venue contract provisions that apply another state's law or require adjudication of disputes in another state as a condition of employment for an individual who primarily resides and works in California. The law applies to contracts entered into, modified, or extended on or after January 1, 2017.

California to Prohibit Choice of Law and Venue Provisions in Employment Contracts

Practical Law Legal Update w-003-9491 (Approx. 5 pages)

California to Prohibit Choice of Law and Venue Provisions in Employment Contracts

by Practical Law Labor & Employment
Published on 18 Oct 2016 • California, USA (National/Federal)
California Governor Jerry Brown recently signed into law Senate Bill No. 1241 (SB-1241) adding Section 925 to the California Labor Code. Section 925 prohibits the use of choice of law and choice of venue contract provisions that apply another state's law or require adjudication of disputes in another state as a condition of employment for an individual who primarily resides and works in California. The law applies to contracts entered into, modified, or extended on or after January 1, 2017.
On September 25, 2016, Governor Jerry Brown signed into law Senate Bill No. 1241 (SB-1241), titled "Employment contracts: adjudication: choice of law and forum; an act to add Section 925 to the Labor Code, relating to employment contracts."
Section 925 prohibits an employer from requiring, as a condition of employment, that an individual who primarily resides and works in California agree to a choice of law or choice of venue provision that:
  • Requires the employee to adjudicate outside of California a claim arising in California.
  • Deprives the employee of the substantive protection of California law with respect to a dispute arising in California.
The new law:
  • Makes any provision of a contract that violates these prohibitions voidable on request of the employee.
  • Requires a dispute over a voided provision to be adjudicated in California under California law.
  • Specifies that injunctive relief is available and authorizes a court to award reasonable attorneys' fees.
  • Provides that adjudication includes litigation and arbitration.
  • Does not apply to contracts where the employee is represented by legal counsel during the contract negotiations.
Section 925 applies to contracts entered into, modified, or extended on or after January 1, 2017.

Practical Implications

Before entering into any 2017 employment contracts, California employers should:
  • Consider removing choice of law and choice of venue provisions that name states other than California for employees who live or work in California.
  • If including a non-California choice of law or forum provision for California employees, consider:
    • not making it a condition of employment;
    • including a carve-out or savings provision that recognizes the employee's option to void the choice of law or venue selection; or
    • if the employee is represented by counsel during the contract negotiations, including language stating this and stipulating that Section 925 does not apply.
Employers should also review existing contracts to evaluate whether Section 925 may apply (for example, if a contract is set to renew or is likely to be modified sometime on or after January 1, 2017).