New Law Prohibits Employers From Forcing Workers To Bring Claims In Other States and Countries

On September 26, 2016, Governor Jerry Brown signed Senate Bill 1241, which addresses choice of law and choice of forum clauses in employment contracts.  Simply put, some employers try to force workers to bring any claims they might have (for discrimination, failure to pay wages, etc.) in other states.  The most aggressive seek to force workers to bring their claims in other countries.  See, for example, Petersen v. Boeing Co. (9th Cir. 2013) 715 F.3d 276, in which the employer attempted to compel the plaintiff to litigate his claims in Saudi Arabia.

Choice of forum clauses are particularly burdensome for low wage workers.  It is often a challenge for these workers to find an attorney to represent them, in part because their claims are generally thought to be worth less money.  A choice of forum clause requiring a worker to litigate in another state renders it even more difficult to find an attorney willing to take the case.

Beginning on January 1, 2017, California workers will have an important tool to combat choice of forum clauses.  The new Labor Code section 925 will prohibit employers from requiring employees who primarily reside and work in California to agree that they must bring employment-related claims outside of California, provided that the employees’ claims arise in California.  Under section 925, such contractual provisions are voidable, and any dispute over them must be heard and decided in California.  Additionally, section 925 provides for attorney’s fees to an employee who is enforcing rights under that section.

California law will therefore be much more favorable than federal law.  For example, the US Supreme Court held in The Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1 that forum selection clauses are presumptively valid unless both unreasonable and unjust under the circumstances unless:

• The inclusion of the clause was the product of fraud or neglect;
• The party wishing to repudiate the clause would be effectively deprived of his or her day in court; or
• Enforcement would contravene a strong public policy of the forum in which the suit is brought.

In Atlantic Marine Constr. Co. v. U.S. District Court (2013) __ U.S. __, 134 S.Ct. 568 the US Supreme Court held that The Bremen rule applies to all manner of contracts; that there is a heavy burden on the resisting party to show why the forum selection clause should be set aside; and that “private interests” do not count; only “public interest factors” count.  Under the federal standard, few, if any, forum selection clauses are able to be set aside.

Section 925 will also prevent employers from using choice of law clauses to deprive California workers of the substantive protections of California law.  In other words, employers will not be permitted to require that California employees agree to be bound by the law of another state or country where such laws deprive the employees of the rights that they have in California.

Prior to the enactment of section 925, under California law choice of law clauses were enforced unless either:

• The chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice; or
• Application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state.

See Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459.  The new California protections are significantly broader, and should invalidate many more choice of law clauses.  As a result, workers will be able to bring their claims in the state in which they live and work.

Finally, it should be noted that section 925 may not apply to contracts with employees who were represented by attorneys in negotiating the choice of law and choice of forum terms.  See § 925(2)(e).