BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 22, 2011 20011-2012 Regular
Session
Consultant: Alma Perez Fiscal:No
Urgency: No
Bill No: AB 267
Author: Swanson
Version: As introduced February 7, 2011
SUBJECT
Employment contracts
KEY ISSUES
Should the Legislature authorize a policy that prohibits any
choice of law, choice of forum or choice of venue that is not
California, as a condition of employment?
Should the Legislature prohibit an employer from depriving an
employee or job applicant, as a condition of employment, of the
protection of California Labor laws for employment claims that
arose in this state?
PURPOSE
To prohibit an employer from requiring an employee or job
applicant to waive the application of California law, as
specified, as a condition of employment.
ANALYSIS
Under existing law , when a court upon motion of a party or its
own motion finds that in the interest of substantial justice an
action should be heard in a forum outside this state, the court
shall stay or dismiss the action in whole or in part on any
conditions that may be just. (Code of Civil Procedure �410.30)
Existing law provides that the following provisions of a
contract between the contractor and a subcontractor with
principal offices in this state, for the construction of a
public or private work in this state, shall be void and
unenforceable (Code of Civil Procedure � 410.42):
a. A provision which purports to require any dispute
between the parties to be litigated, arbitrated, or
otherwise determined outside this state.
b. A provision which purports to preclude a party from
commencing such a proceeding or obtaining a judgment or
other resolution in this state or the courts of this state.
Existing law further provides that, if a court finds as a matter
of law that a contract or any clause of the contract was
unconscionable at the time it was made, the court may refuse to
enforce the contract or the unconscionable clause. (Civil Code
�1670.5)
This Bill would prohibit an employer from requiring an employee
or job applicant to waive the application of California law, as
specified, as a condition of employment.
Specifically, this bill would:
1) Prohibit an employer from requiring an employee or job
applicant, as a condition of employment, to:
a. Waive the application of California law to any
dispute relating to employment; or
b. Resolve outside of California any dispute regarding
employment.
1) Make void and unconscionable as against public policy,
any choice of law, choice of forum, or choice of venue
provision in a job application, employment agreement,
employment handbook, or other statements of employer
policies if the provisions would have the effect of either
of the following:
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a. Requiring the employee or job applicant, as a
condition of employment, to resolve outside of California
claims that arose from employment, or the securing of
employment, in California;
b. Depriving the employee or job applicant of the
protection of California law for claims arising from
employment, or the securing of employment, in California.
2) Specify 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.
3) Make several findings and declarations regarding
California Labor law and public policy related to
California employees and job applicants.
COMMENTS
1. Need for this bill?
Existing law prohibits certain employment contract provisions
as against public policy. Existing law does not explicitly
prohibit employers from conditioning employment or the
continuance of employment on the employee entering into an
employment contract that requires the employee to agree to a
non-California forum and/or non-California law to resolve any
employment dispute that arises in the course of employment.
This bill seeks to protect California employees by prohibiting
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Senate Committee on Labor and Industrial Relations
employment contract provisions which waive the application of
California law to employment disputes as a condition of
obtaining or continuing employment. The author believes that
this bill will ensure that California workers are protected by
California law and will result in leveling the playing field
for California businesses by ensuring that out-of-state
companies play by the same rules applicable to California
companies.
2. Background: Examples of Case Law Regarding the Issue
The California Supreme 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 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.
Committee staff has been provided with information regarding
other similar cases:
(1) Hopkinson v. Lotus Development Corp. (N.D.Cal. June
21, 1995) 1995 U.S. Dist. Lexis 8804. In Hopkinson, the
court required that San Francisco employees litigate their
employment discrimination claims in Massachusetts pursuant
to an employment agreement.
(2) Flake v. Medline Industries, Inc. (E.D.Cal. 1995) 882
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F.Supp.947. In Flake, the court held that a California
employee's age discrimination lawsuit under FEHA was
subject to Illinois law under the forum selection clause in
the employment contract.
(3) Sarmiento v. BMG Entertainment (C.D.Cal. 2003) 326
F.Supp.2d 1108. In Sarmiento, the court held that a
California composer and music director must litigate his
breach of contract and other claims in New York, pursuant
to a forum selection clause.
The author and sponsor argue that the above decisions
underscore the need for this bill. They argue that, in light
of current Labor Code provisions, which do not contain
antiwaiver provisions, employers, particularly out-of-state
employers, will continue to take advantage of choice of law
and forum selection clauses in employment contracts that
deprive California employees of their employment rights under
California law.
3. Double Referral to the Senate Judiciary Committee:
If approved by the Senate Labor and Industrial Relations
Committee, this bill will go to the Senate Judiciary
Committee, per Senate Rules.
4. Proponent Arguments :
Proponents argue that, under current law, employers can
require California workers as a condition of employment to
give up the protection of California law and accept the less
protective laws of other States and can force California
workers to travel to other States to resolve employment
disputes that arose in California. Proponents argue that these
"choice of law" and forum selection clauses create an unfair
competitive advantage over employers who remain subject to the
rigorous requirements of California labor and employment laws.
They argue that correcting this problem, therefore, benefits
California employers as well as employees and contributes to
fair competition in California.
Additionally, proponents argue that allowing employers to
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impose these provisions on their California workers also
creates confusion for employees and the Courts as to what laws
govern the employment relationships that take place in
California and where any related dispute shall be resolved.
According to proponents, without any legislation to guide
them, California courts have freely enforced these provisions,
allowing out-of-state employers to evade California labor laws
and sending California workers to Florida, Illinois, New York
and Minnesota, even out of the country, to resolve
discrimination claims and other employment disputes (sometimes
under the laws of those jurisdictions) that arose in
California. Proponents argue that current law does not
expressly prohibit this practice.
Furthermore, proponents assert 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. In addition, proponents argue that by requiring a
worker to litigate under the laws of another state or in
another state's court, these contracts make it nearly
impossible for workers to find legal representation since an
attorney must be familiar with laws in other states and
because often the laws in other states are less favorable to
the worker.
According to proponents, 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.
5. Opponent Arguments :
According to opponents, this bill is unnecessary and overrides
judicial discretion arguing that employees are already
protected from contractual choice of law or forum provisions
since California courts already have the discretion to deem
such provisions unenforceable. They argue that courts have the
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Senate Committee on Labor and Industrial Relations
ability to analyze on an independent basis whether an employee
had sufficient bargaining power when negotiating his/her
employment contract that included a choice of law or choice of
forum provision. They believe that judges should be allowed
to balance factors in individual cases to determine which
choice of law is appropriate and argue that this bill would
remove the ability for courts to conduct this analysis.
Additionally, the opponents contend that employers and jobs
are increasingly mobile and not constrained by geographical
boundaries. They argue that this bill could result in fewer
employment opportunities for Californians since global
employers would be discouraged from offering employment in
California if doing so means they would have to travel across
the country or overseas to appear in California courts.
Finally, they argue that accepting a choice of forum or law as
a "condition of employment" is tied to a voluntary decision by
the employee and this bill sets a bad precedent for statutory
interference with the Constitutional right of parties to
contract.
6. Prior Legislation :
AB 1043 (Swanson) of 2007: Vetoed by the Governor
This bill �AB 267] is identical to AB 1043 which would have
prohibited 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, to
resolve any dispute with an employer regarding
employment-related issues that arise in California.
In his veto message the Governor stated that, "This bill
appears to create a solution in search of a problem.
California law currently ensures that employees cannot be
subjected to unconscionable contract provisions that would
force them to forego the protections of California law or
litigate their claims in an inappropriate out-of-state forum.
Moreover, this bill creates unnecessary and unhelpful
uncertainties for the employers and employees concerning
issues of federal preemption. Lastly, I strongly support the
right of parties to freely contract for the terms of their
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employment relationship. This bill fundamentally conflicts
with that policy."
AB 1740 (Assembly Judiciary Committee) of 2005: Died in Senate
Judiciary Committee
AB 1740 would have provided that an agreement entered into or
renewed on or after January 1, 2006, establishing a forum
outside of this state for the hearing of specified matters
relating to a California consumer would be contrary to public
policy and void and unenforceable. This bill passed out of
the Assembly, but was not pursued in the Senate.
SUPPORT
Aioli Bodega Espa�ola Restaurant
American Federation of State, County and Municipal Employees,
AFL-CIO
CA Official Court Reporters Association
California Communities United Institute
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Labor Federation
California Teamsters Public Affairs Council
Consumer Attorneys of California
Equal Rights Advocates
IkonCycles, Inc.
International Longshore and Warehouse Union
Lambert Water Conditioning Inc.
Professional and Technical Engineers, IFPTE Local 21
SCOPE, Laborers International Union of North America
UNITE HERE!
United Food and Commercial Workers Region 8 States Council
Utility Workers Union of America, Local 132
Women's Employment Rights Clinic of Golden Gate University of
Law
1-individual
OPPOSITION
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Senate Committee on Labor and Industrial Relations
California Chamber of Commerce
Civil Justice Association of California
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Senate Committee on Labor and Industrial Relations