New California labor law impedes effective legal representation of residents negotiating with out-of-state employers
Last week, Governor Brown signed SB1241. This law adds section 925 to the California Labor Code. The heart of this new statute is section 925(a), which provides, "An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: (1) Require the employee to adjudicate outside of California a claim arising in California; (2) Deprive the employee of the substantive protection of California law with respect to a claim arising in California."
Any employment-related contract entered, modified, or extended on or after January 1, 2017 that runs afoul of these strictures is voidable at the election of the employee, in which case any matter under dispute must be adjudicated (either via litigation or arbitration) in California.
The statute includes a surprising twist: its protections will not extend to "an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied."
Regrettably, this provision's impact on the attorney-client relationship was apparently not considered. A resident might be better off not being represented at all, especially if the out-of-state employer is large and inflexible on choice of law/forum clauses. And, there's a non-trivial risk that simply advising a client on the terms of the agreement – or merely giving the client the thumbs-up for signature – would render the client a represented employee, and therefore ineligible for the protection of the statute.