California Bans Out-of-State Law

By Bill Wright

California has passed a novel piece of employment law.  New section 925 of the California Labor Code prohibits employers from requiring employees to sign an agreement that (a) forces the employee to litigate or arbitrate outside California if the claims arise from events (e.g. living and working) inside California; and (b) specifies that the laws of another state governs any “substantive” legal issue.  The bill exempts employees who are represented by counsel in negotiating the agreement.  The law takes effect Jan. 1, 2017.

The consequence of using your same old employment agreement form in California now is that venue and choice-of-law provisions that specify states other than California are voidable, at the option of the employee.  And employers get to pay any attorney fees the employee incurs in pointing out this issue to the employer.  Be warned.  Of course, this is yet another full-frontal assault on employment arbitration by the State of California.  It appears that the state thrives on creating arbitration uncertainty that should ultimately be struck down by the U.S. Supreme Court.