BILL ANALYSIS Ó SB 1241 Page 1 Date of Hearing: June 29, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 1241 (Wieckowski) - As Amended June 20, 2016 ----------------------------------------------------------------- |Policy |Judiciary |Vote:|7 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allows a consumer or an employee to void a choice-of-venue or choice-of-law provision in a purchase or employment contract, entered into after January 1, 2017, that would either require the consumer or employee to adjudicate a SB 1241 Page 2 legal claim outside of California or require the consumer or employee to waive their protections under California law. This bill also: 1)Stipulates that if provision or condition described above is rendered void at the request of the consumer or employee, the matter must be adjudicated, through litigation or arbitration, in California and California law shall govern the dispute. 2)Allows a court to award a consumer or employee, who is enforcing his or her rights under this act, reasonable attorney's fees, in addition to other remedies available. 3)Provides that this act does not apply to a contract with an employee who is 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. FISCAL EFFECT: Any fiscal impact to the courts should be minor. COMMENTS: 1)Purpose. According to author and supporters of the bill, an increasing number of businesses and employers are imposing choice of venue and choice of law contractual provisions on Californians in order to evade California law. These contractual provisions allow businesses and employers to pick laws or venues of another state (and even another country) that are favorable to the business interest to govern a legal dispute if one should arise. Accordingly, Californians who SB 1241 Page 3 are forced to agree to these contractual terms must travel to other states or countries to litigate or arbitrate a legal claim. Given the expense and burdens of going to another forum, this ultimately means that a consumer or an employee is unlikely to vindicate his or her legal rights. This bill prohibits a seller or an employer from requiring a consumer or an employee from agreeing to a provision, as a condition of entering into a contract, that would either require the consumer or employee to adjudicate a legal claim outside of California, or deprive the consumer or the employee of protection under California law. Additionally, if a consumer or an employee becomes subject to such contractual provisions during a contractual relationship with a seller or employer, this bill allows a consumer or an employee to void these provisions so that the legal claim may be adjudicated in California under California law. This bill applies to contracts commencing after January 1, 2017, and also allows a court to award reasonable attorney's fees for a consumer or an employee who enforces rights under this bill. 2)Opposition. Various business interests led by the Chamber of Commerce, contend that this bill is unnecessary because courts may already invalidate choice of law of venue clauses in California contracts by evaluating, in part, the bargaining power and convenience of the parties involved. 3)Prior Legislation. AB 267 (Swanson) of 2011, which included provisions similar to this bill with respect to employment contracts, was vetoed. The Governor indicated, "I have not seen convincing evidence that these protections are insufficient to protect employees in California. Finally, I would note that imposing this burden could deter out of state companies from hiring Californians - something we can ill afford at this time of high unemployment." SB 1241 Page 4 Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081