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NEW CALIFORNIA LAW PROHIBITS OUT OF STATE DISPUTE RESOLUTION CLAUSES EFFECTIVE JAN. 1, 2017

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Tuesday, November 15, 2016.

 

Erwin J. Shustak, Esq.
619.696.9500 ex. 109
[email protected] 

NEW CALIFORNIA LAW PROHIBITS OUT OF STATE
DISPUTE RESOLUTION CLAUSES EFFECTIVE JAN. 1, 2017 

Starting January 1, 2017, the California legislature prohibits employers of California employees from requiring those employees to “adjudicate” their employment disputes outside of California and from making the law of any other state applicable to that dispute. Governor Brown signed the law on September 25, 2016. The new law, Senate Bill 1241, amends the California Labor Code.

Under the new law, any employer who employs a California employee “who primarily resides and works in California” is prohibited from requiring the employee, by contract or otherwise, from having to “adjudicate” any claims arising out of the employment relationship outside of California. “Adjudicate” is defined as both arbitration and litigation. 

Moreover, the law prohibits an employer of a California employee from depriving that employee “of the substantive protection of California law” for any dispute arising in California. That means a company cannot use what are commonly referred to as a “choice of law” provision to make the law of any other state applicable to California workers.

The law has one exemption- Any agreement made by an employee individually represented by his or her own attorney that designates “either the venue or forum” in which the employment dispute will be resolved. This means if an employee uses an attorney to negotiate his or her employment agreement, and the company is aware of that representation, the law will not benefit the employee.

This is the bottom line. Starting January 1, 2017, out-of-state companies that conduct business in California will no longer be able to force employees to defend themselves in their home, out-of-state venues where the law may be more employer friendly. The new law applies to any contracts signed, modified, or extended after January 1, 2017. Now is the time for employers to review their existing agreements to ensure they comply with the new law.

Shustak Reynolds & Partners, P.C.  focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. For more information, contact Erwin J. Shustak, Managing Partner [email protected], or call 800.496.5900 ext. 109.

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