California

New California Law Bans Choice Of Law Provisions In Employment Agreements

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signing-contractCalifornia has passed a new law prohibiting employers from requiring workers to litigate claims under other states’ laws.

The law, which applies to agreements entered into, modified or extended beginning January 1, 2017, states that any agreement to pursue employment-related claims, including arbitration, outside of California or under the laws of another state violates public policy and is “voidable by the employee.” The new law codifies existing case law finding such choice of law provisions invalid.

This new law serves as a great reminder for California employers to review their employment agreements to make sure that they do not choose another state’s law. Likewise, multi-state employers with operations in California should make sure that the documents being signed by California employees either choose California law or are silent on what state’s law applies.

New California Law Broadens “Equal Pay“ Protections

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Effective January 1st, California will have one of the toughest pay equality laws in the country.pillars

Existing California and federal law already prohibit employers from paying women less than men for the “same jobs.”  But many feel that these laws were proving ineffective in California – citing data including a U.S. Census Bureau report this year that found that full-time women employees in California are paid substantially less (a median 84 cents for every dollar) than their male counterparts.

The new law, referred to as the California Fair Pay Act, has as its stated purpose attempting to close this gap and broaden the scope of existing equal pay laws by mandating that employers pay male and female employees the same amount for “substantially similar work” under similar working conditions.  So, employees performing “substantially similar work” under similar working conditions must be paid the same amount even if they have different titles or work at different locations.  This new standard will likely make it significantly easier for employees to bring a pay discrimination claim under the California law than under the federal Equal Pay Act.  The law also prohibits retaliation against employees who complain of pay inequities.

California employers should review and update their existing compensation systems and policies to ensure that differences in pay are reasonably related to legitimate business factors (like merit or seniority), and not based on gender.  This is especially important because we anticipate that new legislation will lead to a spike in litigation — especially given that plaintiffs will have an easier task in establishing that they were performing “substantially similar work” rather than the “same job.”