Three Provisions Employers Cannot Include in Employment Contracts in California
California is an at-will employment state. With that being said, many employees—specifically higher-ranking executives employees—work under a contract that takes the employment relationship out of the “at-will” doctrine. Employers and employees have broad discretion to work out their own agreement terms. However, in California, there are certain provisions that employers cannot include in a contract as a matter of law. Otherwise, the entire agreement is at risk of being ruled invalid if a legal conflict arises. Here, our California employment attorney highlights three provisions that companies cannot include in an employment contract.
- Waiver of Employee Rights Under FEHA
The Fair Employment and Housing Act (FEHA) protects employees in California against discrimination and other unfair practices in the workplace. State law is clear: Employers may not require employees to waive rights or procedures under FEHA as a condition of employment or continued employment. In other words, employers should never include any type of contract language that suggests a worker is waiving their right to bring a FEHA claim, such as for race discrimination or sexual harassment. These provisions are strictly unenforceable.
- Choice of Law/Venue Provision
Some commercial agreements include choice of law provisions. For example, if companies from two different states enter into a business contract, they may want to decide in advance which state law (and which state courts) control the agreement. These types of clauses are referred to as choice of law and choice of venue provisions. They are not permissible for employment agreements in California, unless that state is California.
California Labor Code § 925 prohibits employers from requiring employees who primarily reside and work in California to agree to out-of-state choice of law or forum selection clauses as a condition of employment. Agreements that mandate litigation or arbitration in another state, or apply another state’s substantive law, are voidable at the employee’s election.
- A Non-Compete Clause
California has the most comprehensive ban on non-compete agreements in the entire country. Indeed, with only very narrow exceptions, non-compete agreements are simply not enforceable in California. They are generally going to be thrown out of court under California Business & Professions Code § 16600. That statute states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
To be clear, California courts interpret this provision broadly, rendering post-employment non-compete agreements unenforceable, regardless of duration or geographic scope. Attempts to circumvent the rule through “non-solicitation” or “garden leave” clauses may also be struck down if they restrict employee mobility. “Garden leave” is a transition period for employees who are in the process of being terminated, during which the employer binds them for a certain period in a non-competition agreement with pay, while prohibiting them from working for another employer or starting their own business.
Further, employers in California may even face civil liability under the Unfair Competition Law (UCL) for including or attempting to enforce such clauses.
Speak to an Employment Contract Lawyer for Employers in California
At Sloat Law Group, APC, our California employment attorney for employers has the experience to handle the full range of employment contract matters, including drafting and negotiation. Contact us today for a completely confidential initial consultation. Our firm provides employment law representation to businesses and organizations in Coachella Valley, Riverside County, and throughout California.
Source:
dor.ca.gov/Home/FairEmploymentAct
