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January 26, 2023 Practice Points

Forum Selection and Choice of Law Provisions in Employment Agreements

Considerations for national employers seeking to enforce restrictive covenants.

By Gabrielle A. Giombetti

Many employers choose to include forum selection and choice of law provisions in their employment agreements. Together, these clauses operate to provide employers with some certainty about which court will decide most disputes arising from the employment relationship, and what state’s laws will apply to interpret important issues, such as the validity and scope of restrictive covenants.

Generally speaking, forum selection and choice of law provisions are enforceable, and courts tend to look upon them favorably, so long as the employment relationship has some connection to the chosen forum and law—such as the state where the company’s central headquarters are located. Historically, employers could use these clauses to capitalize on the protections of an enforcement-friendly state, or at least to utilize a “home field” advantage. However, multistate and national employers whose employees live and work in multiple states across the country may soon find the need to reconsider these earlier strategies.

As hostility toward noncompete agreements and other restrictive covenants increases, a growing number of states have passed or introduced legislation that limits an employer’s ability to select either the forum or law (or both) to be applied in the context of restrictive covenant litigation. Indeed, several states, such as California, Colorado, Massachusetts, and Washington, have passed laws placing some restrictions on contractual forum selection and choice of law clauses that purport to remove a case from that state’s jurisdiction or to apply another state’s laws when the employee lives or works in that forum. The consequences of ignoring these statutes can be significant, including monetary penalties against the employer and, in some cases, a court may void the restrictive covenants altogether.

Considering this shift, and to avoid having their restrictive covenants abrogated, multistate and national employers might consider selecting the state encompassing the employee’s “last assigned work location” as the designated forum and law in their employment agreements. This strategy can provide employers with some degree of certainty for future litigation, without running afoul of state non-compete laws. This is especially true in this period of increased employee mobility and remote work, where employees may not live in the same state as their assigned work location. Most courts will find a sufficient connection between the employee and his or her last assigned office or work location to apply that state’s laws, regardless of where the employee currently resides. Further, an employee challenging such a forum will be unlikely to meet the high burden to succeed on a forum non conveniens motion.

As mentioned above, if a multistate or national employer prefers to designate a specific forum and law, the selected state should have some connection to the employment relationship, such as the employer’s principal place of business. Bear in mind, however, that even if the court finds a reasonable relationship between the agreement and the choice of law/forum, those provisions are not guaranteed to withstand scrutiny.

Gabrielle A. Giombetti is an associate with Fisher & Phillips LLP in Philadelphia, Pennsylvania.

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