Recently, California Governor Jerry Brown signed into law Senate Bill 1241. The new law, which will take effect on January 1, 2017, adds Section 925 to the Labor Code and intends to ensure that employees who primarily live and work in California have the benefit of a local forum and employee protections of California law during employment disputes. The new law voids forum selection and choice of law clauses in employment agreements.
About California Senate Bill 1241
California Senate Bill 1241 limits an employer's ability to impose choice of law and venue selection provisions upon employees who are based in California. This new law provides more protections to California-based employees who work for companies that are headquartered outside of the state of California. The text of SB 1241 states the following:
(a) An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:
(1) Require the employee to adjudicate outside of California a claim arising in California.
(2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.
(b) Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.
(c) In addition to injunctive relief and any other remedies available, a court may award an employee who is enforcing his or her rights under this section reasonable attorney's fees.
(d) For purposes of this section, adjudication includes litigation and arbitration.
(e) This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.
(f) This section shall apply to a contract entered into, modified, or extended on or after January 1, 2017.
Why the Enactment of SB 1241 is Important for Employees
Many companies have used forum-selection clauses and choice-of-law provisions to avoid California employment laws that offer stronger protections to employees during workplace disputes. California SB 1241, specifically Section 925, makes it unlawful for employers to require employees to adjudicate their employment claims (including arbitration agreements, executive contracts and non-compete covenants) outside of California or to submit to (often weaker) laws of a state outside of California. Under the new law, if an employee successfully sues his or her employer to void such provisions, he or she will be able to recover reasonable attorney's fees.
Limitations of California SB 1241
While the new law does offer more employee protections to California-based workers, it is also limited. As stated previously, SB 1241 will only apply to new agreements made on or after January 1, 2017 (though it can also apply to modifications or extensions of agreements that are already in place). Other key SB 1241 limitations include:
- The new law only applies to employees who primarily reside and work in California - not either/or.
- The new law does not apply if an employee was represented by an attorney when an employment agreement was reached, modified or extended.
- The new law only applies if employment is conditioned on the agreement between an employee and an employer. This means that opt-out arbitration agreements or contracts that affect certain job-based benefits probably will not be covered by the new law.
- The new law only permits employees to void forum selection or choice of law clauses if the employment claims arise in California. If the behaviors or incidents happened in another state, the new law will not apply.
California SB 1241: Additional Information
- California Senate Bill 1241: Full Bill Text
- California Senate Bill 1241: New Legislation Requiring Employment Disputes to be Adjudicated in California Under California Law via The National Law Review
- California's New Law Restricts Choice of Law and Forum Selection Provisions in Employment Agreements via JDSupra.com
- Fewer Choices for Employers, More Choices for Employees - The California Legislature Is at It Again via Lexology.com
If you ever find that your employer is abusing its power and skirting California employment laws like SB 1241, rest assured that our passionate California employment attorneys at Hennig Ruiz can help. Contact us today for a free consultation.