Cal-Peculiarities: How California Employment Law is Different 2022 Edition

96 | 2022 Cal-Peculiarities ©2022 Seyfarth Shaw LLP  www.seyfarth.com run-away arbitration awards. Plaintiffs have successfully argued that a second-arbitrator provision, while facially neutral, adds costs and time to arbitration to the advantage of the employer as the better-resourced party. In one 2003 case the Court of Appeal struck down a second-arbitrator provision that applied only to awards exceeding $50,000, on the ground that it gave an unfair advantage to the employer . 139 A nd the Court of Appeal has found a second-arbitrator provision unconscionable even though it neutrally permitted either party to seek review without regard to any monetary threshol d. 140 5.3 Hostility to Employer Mandated Forum Selection and Choice of Law Courts throughout America generally enforce forum-selection and choice-of-law provisions. But in California it’s different. California has shown special hostility to these provisions in the employment context. A 2016 California statute forbids employers to require employees who reside and work in California to agree, as a condition of employment, to litigate or arbitrate employment disputes either outside of California or under another state’s laws. The only exception is where the employee was individually represented by a lawyer in negotiating an employment contract . 141 The statute applies to any contract “entered into, modified, or extended on or after January 1, 2017.” An employer that modified pay provisions of a 2014 employment agreement in 2018 thus found itself unable to enforce the agreement’s selection of an Ohio forum, even though the forum-selection clause itself had not been modified . 142 Even before this statute hobbled employer efforts to select venue and the applicable law, California courts were reluctant to enforce forum-selection and choice-of-law provisions. One Court of Appeal decision reasoned that an arbitration agreement, by choosing Texas law to govern the parties’ disputes, was unconscionable. The Court of Appeal faulted Texas law for not recognizing an unconscionability defense, for not recognizing a private right of action to enforce wage and hour protections, for imposing a one-year limitations period, and for permitting the defendant to recover attorney fees and costs it could not recover under California la w. 143 The Court of Appeal addressed which state—California or Texas—had the greater interest in enforcing its law in this circumstance: “We acknowledge the value and efficiency to [a Texas-based company] of having a predictable, uniform wage-and-hour regime wherever it does business nationally, and we do not minimize the priority Texas may place on providing a hospitable legal climate for Texas-based employers that is conducive to such uniformity. But when weighed against the countervailing interest of California in ensuring that its statutory protections for California-based workers are not selectively disabled by out-of-state companies wishing to do business in this state, we think California has the materially greater interest. … [T]he parties’ choice of Texas law will not be enforced ‘for the obvious reason’ that it would be contrary to ‘fundamental policy’ in California to do so. ” 144 In another decision pitting California law against Texas law, the Court of Appeal ruled against another Texas- based company. Its agreement with an employee had a forum-selection clause that required any lawsuit against the company to be heard in Texas. The employee nonetheless sued in California when asserting claims for unpaid overtime pay, meal and rest premium pay, and penalties for inadequate wage statements. Although the trial court found the forum-selection clause enforceable and stayed the lawsuit, the Court of Appeal reversed, holding that the clause had the potential to operate as a waiver of the employee’s unwaivable statutory rights under the Labor Cod e. 145 The Court of Appeal ruled: “Although a party opposing enforcement of a forum-selection clause ordinarily bears the burden to show enforcement would be unreasonable or unfair, the burden is reversed when the underlying claims are based on statutory rights the Legislature has declared to be unwaivable. ” 146