October 19, 2021

Volume XI, Number 292

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October 18, 2021

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California Jurisdiction Protected Under New Employment Contracts Law

On September 25, 2016, California Governor Jerry Brown signed a new law forbidding employers from requiring employees that primarily reside and work in California to sign an employment contract that:

  1. Obligates the employee to adjudicate claims arising in California outside of California; and

  2. Deprives the employee of the substantive protection of California law with respect to a controversy arising in California.

This new law applies to any contracts signed, modified, or extended on or after January 1, 2017. The law does not apply retroactively. The law allows for one exception: employees represented individually by an attorney when negotiating the terms of an employment contract that includes a forum selection clause outside of California are not protected. The practical effect of this law is that it forecloses, with few exceptions, outside employers from enforcing non-competition provisions against California employees for claims that arise in California.

Contract provisions that violate the new law will be voidable, and employees enforcing their rights under the new law can be awarded multiple remedies, including reasonable attorney’s fees. The new law applies equally to traditional litigation and arbitration.

Clients with employees that work or reside in California should remove the choice of law/venue clause from their contracts for those employees. It is not necessary to use a California choice of law/venue clause for disputes which “arise in” California. This will occur by operation of law. Clients should allow the facts to decide where the case will be resolved because it is possible that in many cases, clients may be able to dispute where the case actually arises.

©2021 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume VI, Number 305
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About this Author

Eric Rumbaugh, Michael Best Law Firm, Labor and Employment Attorney
Partner

Eric advises clients in all areas of labor and employment law. With a practice that is national in scope, he is particularly active in litigating matters involving trade secrets, non-competition agreements and related disputes.

Eric has a nationally recognized practice in the area of contingent labor and regularly prepares and reviews policies, procedures and contracts and litigates contested matters for users and providers of temporary employees, consultants, independent contractors and other contingent talent.  Eric also counsels public...

414-225-2742
Luis Arroyo, Labor attorney, employment relations lawyer, Michael Best, Milwaukee Law firm
Partner

Luis represents employers in a range of labor and employment matters and has developed a significant practice focusing on employee defection and recruitment, including litigating injunction and damage actions relating to: covenants not to compete, non-solicitation and non-disclosure agreements, unfair competition, trade secrets, duty of loyalty, the Computer Fraud & Abuse Act, and state trade secrets and unfair competition statutes. 

Luis has represented clients in numerous industries including banking and securities brokerage, print media, software, medicine, automotive parts...

414-225-2773
Elizabeth N. Larson, Michael Best, Employment Discrimination Lawyer, Affirmative Action Compliance Attorney
Associate

Elizabeth focuses on employment discrimination, affirmative action, and Office of Federal Contract Compliance Programs (OFCCP) matters. Clients value her responsiveness, as well as her attention to detail, in these areas. They also look to her for support with trade secret and non-compete litigation.

Elizabeth previously served as a law clerk for MillerCoors where she researched a variety of legal matters including wage garnishments, disability discrimination, immigration law, alcohol and beverage law, privacy, and intellectual property. She...

414-225-8295
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