In September 2016, Governor Jerry Brown signed off on a new and employee-friendly
law -Labor Code Section 925- that will come into effect in the New Year!
Specifically, the new law states that an employer “shall not require
who primarily resides and works in California, as a condition of employment, to agree to a provision that provides for
either or both of the following:
- Requires the employee to adjudicate outside California a claim arising
in California; or
- Deprives the employee of the substantive protection of California law with
respect to a controversy arising in California.
In other words, an employer in California
cannot require California employees to agree- as a condition to the employee getting
or keeping a job- that work related disputes would be sent off to a court
(or arbitration forum) outside of California where the employer may have
its headquarters (and likely a more favorable setting). Likewise, the new law
requires that that California law be applied to the dispute rather than the law of the state in which the employer might
Further, there is some “teeth” to the new law if an employer
chooses not to comply. In the case of a violation, the contract can be
voided by the employee. In addition, LC § 925 makes available “injunctive
relief and any other remedies” including reasonable attorney’s fees.
While this is all very positive so far, there are some exceptions which
must be noted.
- First, LC §925 will not apply where the employee is “individually
represented by legal counsel in negotiating the terms [of the] agreement.”
- Second, the new law “shall apply to a contract entered into, modified,
or extended on or after January 1, 2017. In other words, the law is not
retroactive. Previously entered into agreements would likely be able to
maintain their existing non-California venue and choice of law provisions.
However, automatically renewing contracts would likely be an issue, so
employees should take a look at the language of any agreements closely.
At Markson Pico LLP, we believe that the new law should definitely have
an effect on employee and executive contracts. It is possible that under
some circumstances, LC §925 could even be implicated in settlement
If you have any comments or questions about Labor Code Section 925, please
call one of the attorneys at Markson Pico LLP. We’d love to hear from you!