Companies that have employees in various states often seek uniformity in developing employment agreements by using choice of governing law and venue provisions based on the state in which the company is headquartered or registered. For example, a Minneapolis-based company might select Minnesota law to govern its employment agreements, even though some of those employees are located in other states.
Employers who seek this consistency should be aware of a new California law which provides that employees who primarily reside and work in California cannot as a condition of employment be required to (1) adjudicate outside of California a claim arising in California or (2) be deprived of the substantive provisions of California law with respect to a controversy arising in California. This law applies to contracts entered into, modified, or extended on or after January 1, 2017.
Any provision of a contract violating this new prohibition is voidable at the request of the employee, after which any disputes will be governed by California law and will be adjudicated in California. This option to void contrary choice of law or venue provisions does not apply to contracts in which the employee was in fact individually represented by legal counsel in negotiating the terms of the agreement. A court may award reasonable attorney fees to an employee who must enforce their rights under this new law.
Takeaway: Employers based outside of California should be aware that contracts with California employees with choice of governing law and venue provisions outside of California are voidable and should measure expectations accordingly.