Employment contracts frequently designate the place where employment disputes will be arbitrated or litigated and the law that will apply. The place is not always California, and the law is not always California law, even when employees are working and residing in California. This is about to change with the enactment of Senate Bill 1241, which creates new protections for employees who primarily work and reside in California (hereafter “California employees”).
The SB 1241 protections will apply to new contracts entered into, and existing contracts that are modified or extended, on January 1, 2017 or later. Employers will not be able to require California employees to arbitrate or litigate an employment dispute arising in California outside of California. Additionally, employers will not be able to deprive employees of the protection of California law for disputes arising in California; for example, by including a provision in the employment contract requiring that another state’s law apply instead of California law. Provisions in contracts that violate these protections will not be automatically void. Rather, they will be voidable at the employee’s option. If voided, the employee can still have his or her employment dispute decided in California, applying California law, and may recover attorney’s fees for doing so.
Companies operating in multiple states, and in particular, companies that are headquartered outside of California, are the most likely to be affected by the new protections. The law contains a very limited exception, though. The new statutory protections will not apply when the employee is individually represented by an attorney for the negotiation of the employment contract. When employees are not represented by an attorney, employers should think twice before attempting to impose out-of-state law on California employees or requiring a California employee to adjudicate employment claims arising inside California outside of this State. California employees will have a strong incentive to void the provisions because adjudicating in California will be convenient for them, California law is generally very protective of them, and they may be able to recover attorney fees if they seek to void the provisions.