Businesses with employees in states other than those in which the business is headquartered often include choice-of-law provisions in their employment agreements, providing that the employment agreements are covered by the law of the state in which the business is headquartered.
Such agreements also typically include venue provisions requiring that any lawsuits be filed in the state in which the business is headquartered.
As shown by a recent Massachusetts case, these types of clauses do not always work as the business planned.
The plaintiff company, Oxford Global Resources, LLC, is headquartered in Massachusetts and hired the defendant to work in its California office as an entry-level employee.
The employee, who lived and worked in California, was required to sign an agreement that included noncompetition and nonsolicitation provisions. Noncompetition provisions such as this are void in California.
The agreement also included a choice-of-law clause stating that Massachusetts law governed the agreement and a venue provision providing that any lawsuit would be filed in Massachusetts.
When the employee quit and went to work for a competitor, Oxford sued him for violating his noncompetition and nonsolicitation agreements.
Although Oxford argued that the agreement signed by the defendant included language stating that he acknowledged that he had the opportunity to read the agreement and to ask his own lawyer to review it, that he understood each provision, and that he was not under duress, the court found that the employee did not have any bargaining power with respect to the choice of law and venue clauses.
Thus, the court held that the choice-of-law and venue provisions were unenforceable.
The Court noted that the choice-of-law provision was obviously “an attempt by Oxford to circumvent California’s strong public policy against the enforceability of non-competition agreement.”
The Court then ruled that California had the most significant relationship to the dispute and therefore, the law of California would apply. Further, the case in Massachusetts was dismissed since the court determined that all of the relevant facts, as well as the damage to the plaintiff, occurred in California.
For all of these reasons, the Court concluded that California was the appropriate forum in which to litigate Oxford’s claims against its former employee.
Whether you are an employer or an employee, please feel free to contact us if you have any questions about the enforceability of similar provisions in your employment agreement.
