A Playbook for Employers to Avoid California’s Labor Code Section 925 Provisions

In September 2016, the State of California enacted Labor Code Section 925, which received lots of buzz at the time for its potential to crumble employers’ ability to legally enforce non-compete agreements and other employment contracts involving individuals living and working primarily in California. Many non-California employers who employed individuals in the state feared that Section 925 would be the death knell of any possibility of avoiding the state’s especially restrictive non-compete laws. Yet one lawyer who advises multi-state employers says that, with creative legal counsel, organizations can still sidestep the statute in agreements and avoid its application in litigation. Joel O’Malley, employment attorney with Nilan Johnson Lewis in Minneapolis, has noted at least five key considerations employers should make when trying to circumvent Section 925, including analyzing closely whether or not it poses an unconstitutional violation of the dormant Commerce Clause and whether or not choice-of-forum and choice of law clauses are binding as a result of the employee’s past whereabouts, the presence of certain clauses or the degree to which the contract is or isn’t contingent upon employment. “With clever counsel, and time to test Section 925, non-California employers can still keep the door open to favorable choice-of-forum and choice-of-law clauses, and work to defend those clauses when confronting litigation,” said O’Malley. Contact Joel O’Malley about this issue at 612.305.7747 or jomalley@nilanjohnson.com.

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