New restrictions for choice of law provisions in employee contracts

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It is not uncommon an employer operating in multiple states to require its employees who live or work within California to litigate any employment-related disputes outside of California under the law of a different state.

Now, that’s no bueno. Employers cannot require employees who live and work in California to agree, as a condition of employment, to litigate or arbitrate outside of California claims that arise in California, or to apply non-California law to a controversy arising in California. Any such agreements will be voidable (deemed unenforceable) at the employee’s request, and the disputes would instead be decided in California under California law. This law applies to contracts entered into, modified, or extended on or after January 1, 2017.

A big exception exists, however. This law does not apply where the employee is individually represented by legal counsel in negotiating the terms of the agreement with respect to choice of law or forum. While most rank-and-file dealership employees do not obtain legal counsel when negotiating the terms of their employment agreement, General Managers, Platform Managers and C-Suite employees often have counsel and can be required to litigate outside of California under those circumstances.

Check your employment agreements and obtain input from counsel regarding choice of law or forum provisions.

In Coffee Break episode 22, Chris and Jennifer explain changes in California law restricting employers' ability to litigate disputes outside of California.