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In the News: Texas-Based Employer Attempts to Avoid California Employment Law, Suffers Huge Blow

texas-employer-avoiding-california-employment-law-suffers-blow.jpgRecently, in Verdugo v. Alliantgroup L.P., 2015, Cal. App. Lexis 466, a Texas based employer's attempt to avoid employment law regulations in California backfired, giving a California-based employee home court advantage. Alliantgroup, L.P., a tax consulting firm headquartered in Texas, created a forum selection clause and related choice of law clause in an employment agreement that would have required an employee, who worked in their Irvine, California office, to litigate claims in Texas under Texas law. However, the clauses were deemed unenforceable by the California Court of Appeal, protecting the California worker's rights to litigate claims under California law.

texas-employer-avoiding-california-employment-law-suffers-blow.jpg

Recently, in Verdugo v. Alliantgroup L.P., 2015, Cal. App. Lexis 466, a Texas based employer's attempt to avoid employment law regulations in California backfired, giving a California-based employee home court advantage. Alliantgroup, L.P., a tax consulting firm headquartered in Texas, created a forum selection clause and related choice of law clause in an employment agreement that would have required an employee, who worked in their Irvine, California office, to litigate claims in Texas under Texas law. However, the clauses were deemed unenforceable by the California Court of Appeal, protecting the California worker's rights to litigate claims under California law.

Where Alliantgroup Went Wrong According to the California Court of Appeal

To avoid application of California employment law, at times employers will include phrasing in employment contracts in the form of forum selection and choice of law clauses that specify the employment laws of another state will govern the employment relationship. In this case, Alliantgroup's clause required that employee disputes would be litigated outside of the state of California.

This was a problem for Alliantgroup, however, as well as a huge win for the California-based employee, due to the California Court of Appeal's decision in Verdugo. A forum selection clause outlined in the plaintiff's employment agreement was held as unenforceable by the court based on a legal test that deemed it impossible to use such a clause in order to avoid application of California employment laws. This was due to the fact that there was a problem with the employment agreement that stated all employment disputes were to be litigated in Harris County, Texas. Regardless, the plaintiff filed a class action lawsuit in California state court for Alliantgroup's failure to provide meal breaks, pay overtime and pay accrued vacation.

The Court of Appeal concluded that the forum selection clause was not enforceable. The court observed that "California courts will refuse to defer to the selected forum if to do so would substantially diminish the rights of California residents in a way that violates our state's public policy," and concluded that the employee's rights would be threatened by "requiring the plaintiff to litigate her claims in Texas where (if enforced by the Texas court), the employment agreement's choice-of-law clause would require the court to apply Texas law rather than California law."

Read more: California Decision Gives Employees Home Court Advantage

If you are a California employee who is being subjected to workplace retaliation or harassment and your employment agreement contains protection clauses set by an out-of-state employer, you can still file your claim in California court. Let our experienced employment attorneys at Hennig Ruiz help. Contact us today for your free consultation.

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