Forum Selection Clauses: Are they Valid?

Employees who are under contract with companies outside of California may not be afforded California’s leading position in the protection of its workers, if the contract contains a forum-selection clause or a choice-of-law provision. If the employee files a case and the company is based outside of California, the employee may be forced to rely on that state’s labor laws to enforce their rights.

For the most part, forum-selection clauses are prima facie valid and enforceable.  It is rather difficult for employees to effectively argue the clause is unenforceable.  In order to be unenforceable, either 1) the inclusion of the clause must be a product of fraud/overreaching by the employer, 2) the employee would be denied his/her right to be heard in court if there was a forum change, or 3) the transfer would violate public policy of the forum where the suit was brought. With such a high standard to meet there have been many cases where forum-selection clauses have been enforced even with draconian results for the employee.

Along with forum selection, a contract may also determine which jurisdiction’s law will govern the dispute.  In federal court, when hearing a diversity case, applies the law of the forum state in order to rule on the case.  Furthermore, when a case is transferred, the court that the claim is transferred to will use its own laws to resolve the matter at hand.

A forum-selection clause or a choice-of-law provision can have a big impact on the expense and difficulty in bringing a claim.  If the clauses do exist, there is a strong presumption that they are valid. Given this situation, it is imperative that counsel and his/her client review carefully any employment contract as part of the initial case assessment.