Girardi | Keese

Gov. Brown Just Signed a Law That Makes a Big Difference to California Workers

"Choice of Law"


This may sound like a dry topic; it's anything but, especially when your back is up against the wall in an employment dispute. The issue is venue - as in, where disputes get resolved, and how one decides on that location.

In very general terms, legal disputes are resolved where they arose.

But what happens when signing a contract is an explicit condition of employment? And the contract so happens to contain an arbitration clause that requires California employees to resolve disputes outside California?

Talk about inconvenience. You could even use the word injustice.

Enter Senate Bill 1241

The bill is not without its critics, who argue that business will flee our relatively employee-friendly state. Probably not, but to be fair, entering into a contract is a voluntary process. In the so-called arms-length transaction, both parties enter into a contract with the intent to honor its terms. And, as the argument goes, "Read the fine print." In other words, no one puts the proverbial gun to your head. If the terms aren't acceptable, don't sign.

But that argument is ultimately the losing one.

At heart, the employer-employee relationship is relatively uneven in terms of the balance of power. In general, employers have the upper hand, while employees (the majority, anyhow) don't necessarily have bargaining power in large measure.

It starts to become a problem when more and more employment contracts contain a choice-of-law provision as boilerplate - a provision that distinctly favors the employer in the event of a dispute - to the point where you either sign it or you don't have a job. At least, an employee should have his or her dispute, which arose here, decided here, not in some other state.

Gov. Jerry Brown signed S.B. 1241 in late September, which makes such clauses illegal. Come Jan. 1, 2017, employers are no longer allowed to require that their California employees arbitrate disputes outside California, and this could make a big difference to the average worker. 

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