CALIFORNIA LABOR CODE §925: Limitations on Employer’s Choice of Law and Forum Selection Provisions

It is no secret that California labor laws are some of the most employee friendly in the nation. Because of this, many out-of-state employers with employees who work in California have attempted to prevent these employees from: a) pursuing legal action against the employers in California; and/or, b) asserting claims based on the California Labor Code. This has been accomplished by inserting choice of law and forum selection clauses in employment agreements, which require employees to litigate or arbitrate in a state other than California, and/or require that the trier of fact apply another state’s laws.

For example, few states have abolished employment-related non-compete agreements as has occurred in California. Therefore, to prevent a California employee from competing with the employer following termination of his/her employment, a Texas based employer may include non-compete language and require that Texas law be applied in any legal proceedings concerning the employee’s employment (where non-competition language is generally enforceable, with some limitations), and require that any disputes be heard by a Texas court or arbitrator.

California Labor Code §925 is a direct attack on such practices.

Legislative Policy and Purpose of §925

In a previous version of the bill that became §925, the stated legislative policy and purpose was to “ensure that all persons have the full benefit of the rights, penalties, remedies, forums, and procedures established in the Labor Code, and that individuals not be deprived of those rights, penalties, remedies, forums, or procedures through the use of involuntary or coerced waivers;” and to “ensure that a contract to waive any of the rights, penalties, remedies, forums, or procedures under the Labor Code…is a matter of voluntary consent, not coercion.”[Emphasis added]. Click here for text. Although this language did not make it into the adopted version of the Labor Code, litigants involved in a dispute concerning the prohibitions of §*925 can anticipate that this new law will be construed broadly by California Courts for the purpose of safeguarding rights provided under California’s Labor Code, as indicated by these statements.

To this end, the adopted version of §925 expressly states that employers may not require, as a “condition of employment,” an employee to adjudicate their claims outside of California for claims “arising in California.” Furthermore, any agreement which violates §925 is “voidable by the employee” and if so voided, “the matter shall be adjudicated in California and California law shall govern the dispute.”  If an employer nonetheless pushes a matter to trial, this new law also provides Courts with the ability to award reasonable attorney’s fees to employees who assert their rights pursuant to this Section. Therefore, employers who wish to insert forum selection and choice of law provisions electing a forum other than California or application of laws other than California run a real risk of seeing such language voided and attorney’s fees being assessed against them.

Applicability of §925

This new law expressly applies to employment-related agreements which are entered into, modified or extended on or after January 1, 2017. Therefore, agreements which predate this effective date are not affected, although there is case law to support the invalidity of the offending provisions in certain circumstances already. In addition, subsection 2(e) states that §925 is inapplicable to an employee “who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.” And, if an employee works in multiple states, but not primarily in California, the prohibitions of §925 are also inapplicable. One might also anticipate that California Courts may conclude that severance agreements, which are by definition not a condition of employment, fall outside the ambit of §925.

Apart from these exceptions, employers can expect that these stated prohibitions will be applied to all employment-related contracts and materials, including employee handbooks or manuals, at-will agreements, confidentiality and nondisclosure agreements, arbitration agreements, and invention and assignment agreements.

Conclusions

While California Courts have yet to interpret §925, it is clear that out-of-state employers who wish to insert choice of law and forum selection clauses which are contrary to this Section into their employment-related agreements for their California based employees, should, at a minimum, consider the following:

1. Ensure that such agreements do not include language indicating that the terms of the agreement, or at least the prohibited clauses, are a condition of employment. It’s also likely best to affirmatively state that such clauses are not mandatory or a condition of employment (which could potentially leave the clauses open for attack on other grounds);
2. Include express language indicating that the agreement was entered into knowingly and voluntarily by the employee (best to make such language conspicuous) and that the employee did not execute the agreement under duress or as a result of coercion;
3. Most importantly, require that the employee retain California counsel to assist in negotiating the terms of the agreement and include language in the contract indicating that the employee has been represented by counsel during the negotiation process.

For out-of-state employers who do not wish to take these steps, removing the offending choice of law and forum selection provisions from their agreement will likely be necessary, or they may choose to include an addendum to their employment agreements with California based employees indicating that such provisions are stricken from the contract.

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The award-winning and AV-rated attorneys at Gehres Law Group, P.C. handle a variety of employment law matters, including drafting employment-related documents and representing parties in employment-related negotiations, mediation, arbitration and litigation. Contact us at (858) 964-2314 or by e-mail at info@gehreslaw.com for a complementary evaluation (for new clients).

© 2017 Gehres Law Group, P.C. We hope you found this article helpful and appreciate any comments or suggestions you may have. It is for general information only and should not be construed to constitute formal legal advice nor the formation of a lawyer/client relationship.

 

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TOP 7 EXCEPTIONS TO THE HEARSAY RULE

Hearsay is defined as an out-of-court statement introduced to prove the truth of its contents. In a prior article, we discussed out-of-court statements which did not constitute hearsay and, therefore, are admissible in evidence.

As an example, an offer made by a seller to sell his car to a prospective buyer for $5000, and the prospective buyer’s statement that he accepted that offer, would not constitute hearsay, because such statements would not be offered into evidence to prove that the seller would in fact sell his car to the buyer or that the buyer would in fact pay $5000 for the seller’s car. Rather, the statements of offer and acceptance may be introduced to simply prove that they were made, because the very words of “offer” and “acceptance” have “independent legal significance,” in that they constituted the execution of a contract between the buyer and seller.

In this article, we discuss seven of the most common exceptions to the hearsay rule. They permit in evidence out-of-court statements, either oral or in writing, which are in fact used to prove the truth of the contents (“hearsay”), but which for various policy reasons, the legislatures and courts have permitted in evidence.

1. Admissions of a Party. A “party” is a plaintiff or a defendant in a matter litigated in court, or a claimant (or petitioner) or a respondent in a non-court proceeding, such as an arbitration or administrative proceeding. The law permits in evidence a statement made by such a party, regardless of the fact it is introduced to prove the truth of its contents. The policy for admitting a statement of a party is that the party is present and can testify about the statement he/she allegedly made, and can deny it was made, or explain what he/she meant by it.

Admissions of a party include what are known as “adoptive admissions.” California Evidence Code §1221 provides:

“Evidence of a statement offered against a party is not made inadmissible by the hearsay rule if the statement is one of which the party, with knowledge of the content thereof, has by words or other conduct manifested his adoption or his belief in its truth.”

An “adoptive admission” is one which the party has not expressed in words, and is typically a statement made by someone else, which the party has, in effect, adopted as his own statement based on his conduct. For instance, if A says to B in reference to C, who is present at that time, “This is my new partner,” and C does not deny it, his failure to deny it is an adoptive admission by him that he is in fact A’s partner.

2. Declarations against Interest. A declaration of a non-party, which is against the interest of the person making the statement, although introduced to prove the truth of its contents, is admissible. The theory behind this exception is that one would not speak falsely or mistakenly when saying something detrimental or prejudicial to himself. A declaration is against one’s interest if it is “so far contrary to the declarant’s pecuniary or proprietary interest, or so far subjects him to the risk of civil and criminal liability, or so far tends to render invalid a claim by him against another, or creates such a risk of making him an object of hatred, ridicule, or social disgrace in the community, that a reasonable man in his position would not have made the statement unless he believed it to be true.”  California Evidence Code §1230.

However, in California state courts, for this exception to apply, the person making the statement must be “unavailable as a witness.”  Id.  If the witness who made the statement can be brought into court, such as by way of a subpoena served on him, the party seeking to introduce the statement must bring the witness into court, so that he may be questioned directly about the statement, and cross-examined by the party opposing statement.

3. Spontaneous Statements, or “Excited Utterances.” Statements made by a person without deliberation or reflection are permitted in evidence, regardless of the fact they are introduced to prove the truth of their content, on the theory that the statements are most likely true and trustworthy under such circumstances. A typical example would be a statement blurted out by the speaker immediately after and in response to a startling incident. For instance, a witness’s statement, “Oh my God, he just went through a red light,” right after a serious auto accident, would qualify for admission under this exception. See California Evidence Code §1240.
4. Dying Declarations. California Evidence Code §1242 permits proof of “a statement made by a dying person respecting the cause and circumstances of his death,” if it was made “upon his personal knowledge and under a sense of immediately impending death.” The policy permitting one who heard such a statement to testify that the statement was made is the fact that, because of the solemnity of the circumstances, one on his deathbed would not be expected to speak falsely.
5. Statements of Physical or Mental State. California Evidence Code §1250 provides that, “A statement of the declarant’s then existing state of mind, emotion, or physical sensation (including a statement of intent, plan, motive, design, mental feeling, pain, or bodily health)” is admissible when the evidence is offered to prove the declarant’s state of mind, emotion or physical sensation at any time when it is itself an issue, or to prove or explain the acts of the person making the statement.

A typical example would be a statement of intent. If, for instance, A told B that he would be traveling from California to Colorado on Monday of the following week, B would be permitted to testify that A told him that. The theory for permitting B to so testify is that it is likely that one will do that which he states he intends to do. In other words, the statement is considered reliable and the purpose for the hearsay rule would not be served by denying its admission in evidence.

6. Business records. Not all out-of-court statements are oral. Some are written. Business records are a prime example. Most businesses keep records of their transactions, and the law permits their admission in evidence, even for the purpose of proving the truth of the contents of the records, so long as the following conditions are met:

(1)  The writing or record must have been made in the regular course of the business;

(2) It must have been made at or near the time of the act, condition, or event it records;

(3)  The custodian or other qualified witness testifies to its identity and the way in which it was prepared; and

(4) The sources of information and the method and time of preparation of the record are such as to indicate its trustworthiness. See California Evidence Code §1271.

7. Official Records and Writings. Official records and writings are admissible if they are statements of a public official, so long as it is shown that the official was under a duty to make the statement, and that the statement was based on facts within the official’s personal knowledge. The policy consideration behind this exception is the fact that public functions could not be conveniently performed if government officials were always required to appear in court and testify to their acts. See California Evidence Code §1280.

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The attorneys at Gehres Law Group, P.C. handle all types of civil litigation matters, and deal with evidentiary matters, such as the hearsay rule and its exceptions, with regularity. Contact the award-winning and AV-rated trial lawyers at Gehres Law Group, P.C. at (858) 964-2314 or by e-mail at info@gehreslaw.com. We are pleased to offer complementary evaluations to new clients.

© 2017 Gehres Law Group, P.C. We hope you found this article helpful and appreciate any comments or suggestions you may have. It is for general information only and should not be construed to constitute formal legal advice nor the formation of a lawyer/client relationship.

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Want to Make a Federal Case of it?

It amuses me when I find myself resorting to one of the many “sayings” or “expressions” I learned early in my childhood, and have always understood, but the derivation of which I did not bother to investigate or learn until much later. Just now, for example, remembering how my mother would say “I don’t want to hear about it… go tell Yehudi!,”, I realize I have no idea who Yehudi might have been. I just googled it, and read that Yehudi was the name of a famous violinist of my parents’ time…and is a common Jewish name, and is sometimes used as an endonym for “jew”. (I’ll let you google “endonym”.)

Some expressions were obvious, like when my father instructed “use your noodle!”, as he often did when he thought we weren’t thinking things through. He meant “think about it”, and “noodle” meant “brain”. And I understood the aphorism, which my parents used to rebuke us for lack of discipline or character, “the road to hell is paved with good intentions.”

But frequently the references were like make-believe. If something was imagined in a far away and exotic place, most likely that would be “Timbuktu”. It failed to occur to me that Timbuktu was a real place that I could find on a map (FYI, it’s in the African nation of Mali). Nor did I have any idea who “Rube Goldberg” was, though he was usually mentioned when my parents complained of some poorly calculated solution or defective device. (I later learned he was a cartoonist who specialized in drawing fictional, complicated mechanical contraptions.)

“DON’T MAKE A FEDERAL CASE OF IT!”

Similarly, when my father thought someone was making too big a deal about some problem or dispute, and needed to “chill”, in today’s parlance,  he would often say, “you don’t need to make a Federal Case out of it!” And just as I rarely considered the literal meaning of my parents’ short-hand expressions, I never thought about what a “Federal case” was, or how it might be something more substantial than an ordinary “case”, i.e. not federal.

But that was before I was even out of grammar school, and long before I became a lawyer and learned that there actually IS such a thing as a “Federal Case”–and it DOES have significant characteristics that distinguish it from other “cases”–like “State cases.”

WHAT IS A FEDERAL CASE?

A Federal case, most literally, is a lawsuit that is filed in a Federal Court, which usually means one of the 94 “District Courts” that Congress has established throughout the United States, one or more in each of the 50 states and the District of Columbia, and a few outside of the United States (in Guam, Puerto Rico, the Mariana Islands). District Courts are courts of “original jurisdiction”, as opposed to the Federal Courts of Appeal, which are courts of
“appellate jurisdiction”. In other words, District Courts are where Federal Cases are first brought for trial in Federal Court.

WHY DID MY DAD THINK A “FEDERAL CASE” WAS SUCH A BIG DEAL?!!

I’m not sure how much my dad knew about the law. He was a smart man, but he had no training in law and never was involved in a lawsuit, as far as I know. I imagine he figured that a “Federal Case” must involve “Federal Law”, which is kind of a big deal since Federal laws apply across the county, and not just in one State–and that’s true. In most situations, Federal laws must be enforced in Federal Court.

But it’s also true that State Courts handle some very “big” and important cases, with no limit on the amount of money damages that might be awarded. This is referred to as “unlimited jurisdiction”, meaning that the amount of money damages that might be awarded is “unlimited.”  However, State Courts DO have limits regarding their jurisdiction over persons and businesses and events outside of their territory, and involving the interpretation and enforcement of Federal Law, which may require that a particular case be brought or removed to Federal Court.

SOME CASES CAN BE FILED IN EITHER STATE OR FEDERAL COURT

The question of whether a particular lawsuit can be filed in only State Court, or only in Federal Court, or either in State or Federal Court, is a bit too complicated to explain here. However, it is a question every lawyer must ask…and answer…him or herself, when devising initial litigation strategy. There are potential significant advantages and disadvantages depending on the particular facts and laws involved.

SOMETIMES IT HELPS TO MAKE A FEDERAL CASE OUT OF IT!

In our law firm’s practice, where our trial lawyers primarily represent small and medium businesses and individuals in commercial, property and professional disputes, most cases must be filed in State Court. That said, however, Federal Court jurisdiction is by no means uncommon even in these sorts of cases. Where it is available, the benefits can be significant. Many Federal Courts, including San Diego’s Federal Courts, typically have greater resources to manage and facilitate prompt resolution of disputes, prominently including their system for “early neutral evaluation” by a Magistrate Judge. The Federal Courthouses and courtrooms are also typically more formal and solemn, and the results of any given dispute can be more predictable in Federal Court. Another advantage of Federal Courts is that the time to trial is often faster than our litigation attorneys see in State Courts.

CONCLUSION

Whenever I interview a new client with a dispute likely to result in litigation, I always remember by father’s phrase when I ask myself: Do I want to make a Federal Case of this?!!!!”

Free Consultations by Experienced Attorneys at Gehres Law Group, P.C.

The experienced business litigation lawyers at Gehres Law Group understand the importance of analyzing the appropriate jurisdiction and venue where a case should be brought at the outset of a case, and advising the client and planning the case accordingly. We encourage you to take advantage of our knowledge and decades of experience successfully representing clients in litigation.

© 2017 Gehres Law Group, P.C. We hope you found this article helpful and appreciate any comments or suggestions you may have. It is for general information only and should not be construed to constitute formal legal advice nor the formation of a lawyer/client relationship.

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