On September 25, 2016, California Governor Jerry Brown approved a new law allowing California employees to unilaterally void forum selection or choice of law clauses (not the entire agreement) in employment contracts. S.B. 1241 regulates where and under what law California employees can sue and arbitrate. The new law will take effect on January 1, 2017.
Impact of SB 1241
Most agreements allow contracting parties to select a forum to litigate or arbitrate a dispute. Under S.B. 1241, employers are prohibited from requiring, as a condition of employment, an employee who primarily resides and works in California to agree to any contractual provisions that will: 1) require the employee to litigate or arbitrate claims arising in California in a foreign forum (outside of California); and 2) deprive the employee of the protection of California employment laws. The new law also includes, but is not limited to, executive contracts, covenants, and non-compete agreements.
An employee must be represented by legal counsel when negotiating an out-of-state venue, forum, or choice of law term. If a forum selection or choice of law provision is included in an employment agreement, the reviewing court can enjoin reliance on the provision, declare it unlawful, and award reasonable attorney fees.
S.B. 1241 will be codified as Section 925 of California Labor Code. Employers should review any employment or arbitration agreements to make sure they are in compliance with the new law. Employee contracts may need to be revised. Contact our law office for more information about modifying your existing employment agreements.