A California Chamber of Commerce-opposed bill that interferes with the enforcement of contracts is awaiting action by the Assembly.
SB 1241 (Wieckowski; D-Fremont) undermines judicial discretion and the intent of the parties who negotiated the contract by unnecessarily limiting the ability of employment or consumer contracts to designate a choice of law or choice of venue clause other than California.
Existing law protects California employees and consumers from contractual choice of law or venue provisions that are unreasonable, unconscionable or that would substantially diminish their California legal protections. California courts have the authority to refuse to enforce such provisions by evaluating, in part, the bargaining power of the parties involved as well as which state has a stronger interest in the outcome of the litigation.
SB 1241 eliminates this balancing of interests and deems voidable all choice of law or venue provisions other than California.
Reasons to Oppose
Other reasons for the CalChamber’s opposition include:
- The one-size-fits-all approach of SB 1241 would allow out-of-state residents, sophisticated consumers, and highly compensated employees to forum shop and void negotiated terms of a contract. SB 1241 is extremely broad and applies to all consumers and employees, regardless of whether those consumers or employees are residents of California or work primarily in California.
Professional athletes, executives, attorneys, all of whom spend limited time in California and reside elsewhere, could void a choice of law or venue provision in their employment contract for a dispute arising in California simply because it designates their home state instead of California as the venue/choice of law.
- SB 1241 interferes with interstate commerce and employment opportunities, as highlighted by a narrower bill vetoed by the Governor. SB 1241 applies to all consumer and employment contracts, for all disputes that arise in California, regardless of whether the consumer or employee actually resides in California.
As Governor Edmund G. Brown Jr. mentioned in his 2011 veto of AB 267 (Swanson; D-Alameda), a similar proposal that applied only to employment contracts, “imposing this burden could deter out of state companies from hiring Californians.” Similarly, SB 1241 could interfere with consumer opportunities.