BILL ANALYSIS �
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THIRD READING
Bill No: AB 267
Author: Swanson (D)
Amended: 8/22/11 in Senate
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 5-1, 6/22/11
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NOES: Wyland
NO VOTE RECORDED: Runner
SENATE JUDICIARY COMMITTEE : 3-2, 7/5/11
AYES: Evans, Corbett, Leno
NOES: Harman, Blakeslee
ASSEMBLY FLOOR : 49-26, 5/26/11 - See last page for vote
SUBJECT : Employment contracts
SOURCE : California Employment Lawyers Association
DIGEST : This bill makes void and unenforceable as
against public policy 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, and makes related changes.
Senate Amendments of 8/22/11 conform various provisions
CONTINUED
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with the intent of this bill specifying that this bill will
affect only employment in California and prohibit an
employer from requiring an employee to waive the
application of California law or to resolve an employment
dispute outside of California. The amendments make various
technical revisions.
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.
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:
1. A provision which purports to require any dispute
between the parties to be litigated, arbitrated, or
otherwise determined outside this state.
2. 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.
This bill:
1. Prohibits an employer from requiring an employee or job
applicant to waive the application of California law, as
specified, as a condition of employment.
2. Prohibits an employer from requiring an employee or job
applicant, as a condition of employment, to:
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A. Waive the application of California law to any
dispute relating to employment,
B. Resolve outside of California any dispute
regarding employment in California, or to resolve
outside of California any dispute regarding the
securing of employment in California or to resolve
outside of California any dispute regarding the
securing of employment in California.
3. Makes 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:
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.
4. Specifies that nothing in this bill prevents 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.
5. Makes several findings and declarations regarding
California Labor law and public policy related to
California employees and job applicants.
Comments
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
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to resolve any employment dispute that arises in the course
of employment.
This bill seeks to protect California employees by
prohibiting 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.
Background
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.
Prior Legislation
AB 1043 (Swanson), 2007-08 Session, is identical to this
bill, 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
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regarding employment-related issues that arise in
California. This bill was vetoed by Governor
Schwarzenegger; 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 employment relationship.
This bill fundamentally conflicts with that policy."
AB 1740 (Assembly Judiciary Committee), 2005-06, 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. Died in
Senate Judiciary Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/23/11)
California Employment Lawyers Association (source)
Aioli Bodega Espa�ola Restaurant
American Federation of State, County and Municipal
Employees, AFL-CIO
California 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.
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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
OPPOSITION : (Verified 8/23/11)
California Chamber of Commerce
Civil Justice Association of California
ARGUMENTS IN SUPPORT : Proponents argue that, under
existing 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 maintain 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
believe 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
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 state
that current law does not expressly prohibit this practice.
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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.
ARGUMENTS IN OPPOSITION : 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
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
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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.
ASSEMBLY FLOOR :
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Chesbro,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Gatto,
Gordon, Hall, Hayashi, Roger Hern�ndez, Hill, Huber,
Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza,
Mitchell, Monning, Pan, Perea, V. Manuel P�rez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman,
Harkey, Jeffries, Knight, Logue, Mansoor, Miller,
Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Smyth,
Valadao, Wagner
NO VOTE RECORDED: Cedillo, Davis, Galgiani, Gorell, Jones
PQ:do 8/24/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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