With Labor Code Section 925, the California Legislation Gives California Employees An Important Gift For 2017

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 an employee 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 be headquartered.

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 agreements.

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!

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