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What Happens in California Stays in California - Employees Working and Residing in California Now Have a Right to Litigate in California and Under California Law.

A new California statute - California Labor Code § 925 - that became effective January 1, 2017, prohibits employers from requiring employees who live and work in California from litigating their employment claims elsewhere. Section 925 also prohibits attempts to limit the application of California law to employee claims.

Section 925 applies to employees who primarily (presumably, at least 50% of the time) both live and work in California. Under the statute, an employer may not require, as a condition of employment, that these employees agree to adjudicate their California-based claims outside of California. For example, an employer based in Texas may not require that its California employees litigate in Texas their claims arising from employment in California. Similarly, that same employer could not impose a requirement that Texas law, rather than California law, governed the California-based employment. (Neither, of course, could a California employer impose such requirements.) As with so many employment laws in California, the employee (but not the employer) may recover his or her attorney's fees incurred in successfully enforcing Section 925 rights. Any provision of an agreement that violates the statute is voidable by the employee, but that applies only to the offending provision, not the entire agreement. Moreover, because the offending provision is merely voidable rather than being void, an employee could decide for whatever reason not to void the provision and proceed under the agreement as written.

There are some important limits to the statute. To start, it applies only to agreements that are imposed as a condition of employment. That is, to agreements required as a condition of becoming employed or remaining employed. Also, the law applies only to agreements entered into, modified or extended on or after January 1, 2017. As written, the law applies only to employees who both live and work in California. (That said, apart from people who live at the state boundary, it seems unlikely that an employee would only live or work in California, rather than both.) Possibly most important, the law does not apply to an agreement that is negotiated with an employee who is represented by counsel.

Employers with California employees should review all of their employment-related materials to determine whether they contain provisions potentially subject to Labor Code § 925, and then consult with their advisors to determine what actions, if any, need to be taken in order to comply with the new law. 

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