BILL ANALYSIS �
AB 267
Page 1
GOVERNOR'S VETO
AB 267 (Swanson)
As Amended August 22, 2011
2/3 vote
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|ASSEMBLY: |49-26|(May 26, 2011) |SENATE: |21-15|(August 30, |
| | | | | |2011) |
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|ASSEMBLY: |49-27|(September 2, | | | |
| | |2011) | | | |
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Original Committee Reference: L. & E.
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 in
California.
The Senate amendments are minor and clarifying.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar to
the version passed by the Senate.
FISCAL EFFECT : According to the Assembly Appropriations Committee,
negligible state costs, if any.
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
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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 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
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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.
GOVERNOR'S VETO MESSAGE :
This measure would prohibit employment contracts that require
California
employees to agree to the use of legal forums and laws of other
states.
Current law prohibits California employees from being subjected
to laws or
forums that substantially diminish their rights under our laws
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and 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.
Analysis Prepared by : Lorie Erickson / L. & E. / (916) 319-2091
FN: 0002937