On September 25, 2016, California Governor Jerry Brown signed S.B. 1241 into law, prohibiting employers doing business in the Golden State from requiring California employees, as a condition of employment, to agree to non-California choice-of-law or venue provisions for claims arising in California, either in litigation or arbitration.  Such provisions are frequently found in employment, arbitration, or non-compete agreements.  The new law will be codified as California Labor Code section 925, and will apply to contracts entered into, modified, or extended on or after January 1, 2017.

Specifically, the new law applies to employees who “primarily work and reside in California,” and prohibits employers from requiring such employees, as a condition of employment, to agree to contract provisions that either: (1) Require the employee to adjudicate outside of California a claim “arising in California”; or (2) Deprive the employee of the substantive protection of California law with respect to a controversy “arising in California.”  Such provisions will be voidable by the employee—they are not per se unenforceable.  If a provision is rendered void at the request of an employee, the matter will be adjudicated in California and under California law.  Importantly, these restrictions do not apply to employees who were represented by legal counsel in negotiating the terms designating a non-California venue or choice-of-law.  Courts will have discretion to award reasonable attorney’s fees to an employee enforcing her rights under S.B. 1241.

Employers with California employees should review any employment agreements, arbitration agreements, agreements containing post-employment restrictions, and any other employment-related agreements to determine whether they should be revised in light of this new law.