BILL ANALYSIS �
AB 267
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ASSEMBLY THIRD READING
AB 267 (Swanson)
As Introduced February 7, 2011
Majority vote
LABOR & EMPLOYMENT 5-1
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|Ayes:|Swanson, Alejo, Allen, | | |
| |Furutani, Yamada | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell | | |
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SUMMARY : Prohibits any choice of law clause, venue-selection
clause, or forum-selection clause in binding employment
materials that are imposed on an employee as a condition of
employment. Specifically, this bill :
1)Makes void and unenforceable as against public policy, the
following clauses contained in any job applications,
employment agreements, employment handbooks or other
statements of employer policies applicable to its employees,
if imposed on an employee as a condition of employment:
a) Choice of law clause that selects a state's law other
than California to govern an employment dispute between an
employer and employee;
b) Venue-selection clause that selects a venue outside of
California for an employee to bring an employment claim
against his/her employer; and,
c) Forum-selection clause that selects a forum outside of
California for an employee to bring an employment claim
against his/her employer.
2)Specifies that nothing in this bill would prevent an employee
from voluntarily agreeing to a choice of law or forum
selection as long as it is not a condition of employment and
that it is subject to independent consideration.
FISCAL EFFECT : Unknown
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COMMENTS : The California Supreme Court (Court) has held that
out-of-state employers who employ individuals in California may
use choice of law and forum selection provisions in their
employment contracts, so long as the forum selected offers the
employee adequate remedies otherwise available to him/her under
California law (see Olinick v. BMG Entertainment, 42 Cal.Rptr.3d
268). In this case, a California employee tried to bring an age
discrimination suit under California's Fair Employment and
Housing Act (FEHA) in a California court but was subject to a
choice of law clause and forum selection clause in his
employment contract, which stated that any employment dispute
was to be brought in New York and resolved under New York law.
The Court held that the public policy of California in enforcing
its anti-discrimination statutes under FEHA and the convenience
of the party and witnesses in adjudicating the case in
California do not invalidate the parties' enforceable agreement
where the selected forum affords an adequate remedy to the
employee.
Under the United States (U.S.) Constitution and the California
Constitution, a federal or state law may not operate as a
substantial impairment of a contractual relationship (U.S.
Constitution, Article I, Section 10; California Constitution,
Article I, Section 9). This bill, however, does not act to
prohibit or impair the contractual relationship because the
contracting parties may still voluntarily agree to a choice of
law clause or forum selection clause. This bill takes the
narrow approach of prohibiting employers from forcing employees
to accept these provisions as a condition of employment, i.e.,
the provisions at issue are declared void and unconscionable
only to the extent that they are required as a condition of
employment.
The Federal Arbitration Act (FAA) governs the interpretation of
arbitration agreements and preempts any state law to the
contrary. State law, however, is applicable to an arbitration
case if the law governs issues concerning the validity,
revocability, and enforceability of contracts generally.
Therefore, because this bill states that it is the public policy
of the state that forum selection clauses and choice of law
clauses are unconscionable if imposed on an employee as a
condition of employment, as opposed to prohibiting these clauses
altogether, this bill would not be preempted under the FAA. As
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a result, because these clauses are not outright prohibited, an
employer and employee may have the option to bargain over
whether to insert these clauses into an employment contract.
The sponsor of this bill, California Employment Lawyers
Association (CELA) asserts in their letter of support, that most
workers lack the resources to travel across the country-let
alone around the world-to pursue an employment claim in another
state or country. The problem is particularly acute for lower
income workers and disabled workers. Those workers that do have
the resources and ability to travel might well find that the
protection that they had under California law does not exist, or
is not as comprehensive, in the jurisdiction that will be
deciding their dispute.
Finally, CELA feels this bill seeks to correct this injustice by
making clear that any provision in an employment contract that
requires an employee, as a condition of obtaining or continuing
employment, to use a forum other than California, or to agree to
a choice of law other than California law, is void and
unenforceable as against public policy and provides clarity to
the courts, justice to California employees and a more level
playing field for businesses in California.
The California Chamber of Commerce argues in their letter of
opposition that this bill is unnecessary and overrides judicial
discretion, stating that under existing law, California
employees are already protected from contractual choice of law
or forum provisions which are unreasonable, unconscionable or
diminish substantially their legal protections in this state
since California courts already have the discretion to deem such
provisions unenforceable.
Finally, they state that accepting a choice of forum or law as a
"condition of employment" is tied to a voluntary decision by the
employee to accept an offer of employment or not and this bill
sets a bad precedent for statutory interference with the
Constitutional right of parties to contract.
Please see policy committee analysis for existing law and
additional comments of support and opposition.
Analysis Prepared by : Lorie Erickson / L. & E. / (916)
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319-2091 FN:
0000535