California is one of the best places for finding talent for your business anywhere in the world. However, it is also one of the most particular when it comes to employment and labor laws. As a deeply employee-friendly state, costly consequences can arise when employers fail to fully comply with California state law in the creation of employment agreements, and new employment laws are seemingly being enacted all the time. Here are three new California laws that employers will want to keep in mind when creating or renewing employment agreements.

Employees Cannot Be Forced to Litigate or Arbitrate Outside of California

Many agreements include what are called “choice of forum” and “choice of law” provisions. A choice of forum provision requires the parties to litigate and/or arbitrate any claim arising from the contract (e.g. a breach of the employment contract) in a specific forum, or court system, such as the New York State court system. Under recently enacted law, employers cannot require employees who primarily reside and work in California to accept a choice of forum clause designating a non-California forum in an employment agreement. To the extent such clauses exist in current agreements, employees may void such clauses at their will and litigate in California.

Similarly, a choice of law provision dictates which state’s substantive law will apply to a claim, regardless of where it is litigated. The new law also prevents employers from designating another state’s law as the choice of law in an employment contract where the employee primarily resides and works in California.

Fair Pay Act Extended to Race and Ethnicity

In 2015, California enacted the Fair Pay Act. This landmark legislation requires equal pay for substantially similar work regardless of gender, unless a justifiable reason for the difference is present, such as wage differentiation based on education, training, or experience. Under new changes effective in 2017, the equal pay requirements of the Fair Pay Act have been extended beyond gender to include race and ethnicity.

Thus, if an employee can show that he or she is doing substantially similar work as another worker, regardless of job titles, and the other worker of a different race or ethnicity is being paid more for similar work, then the employer will have the burden of proving that the wage differential was not due to race or ethnicity but instead based on an enumerated bona fide reason. Such bona fide reasons for the wage differential include a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or due to employees’ education, training, or experience.

Previous Salary Cannot Justify a Wage Differential

The Fair Pay Act was also amended to explicitly state that an employee’s previous salary or salary history is not a legally valid reason to justify a wage differential between that employee and another employee doing substantially similar work when the employee is alleging the wage gap is based on gender, race, or ethnicity.

Employers creating employment agreements with any employees in California are encouraged to work with experienced transactional counsel to assist them in complying with the requirements of California’s Fair Pay Act, among other state law provisions.

Work With a Trusted California Business Disputes and Transactional Attorney

At The Ledbetter Law Firm, APC, in Manhattan Beach, California, we represent businesses and business owners in meeting a variety of business disputes and transactional needs, including the negotiation and creation of employment and independent contractor agreements. Contact our offices today to see we can be of service to your business in meeting your legal needs.

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