Over the last few weeks we’ve discussed some key components in employment contracts including venue and jury trial waivers. Another key provision is choice of law. As was discussed in the Sam Adams case, choice of law was critical because it permitted the employer to pursue an action against a former employee for breach of a non-compete agreement which would not be enforceable in the state of California. In that case, there is both a venue and choice of law provision for Massachusetts.
As with venue and jury trial waiver provisions, the choice of law should be tailored to circumstances of the agreement at hand. Many employers like to default to the choice of law where their headquarters is located or many times the state of Delaware (shareholder disputes are very difficult to prosecute in that jurisdiction), but that will not always make sense in an employee/employer relationship.
Additionally, courts do not always enforce choice of law provisions and employers should consult with their attorneys to put themselves in the best position contractually to enforce the provision. There is always a preference of the Court to enforce the contract based on laws of that jurisdiction because the judge is typically more familiar with those laws as opposed to some other jurisdiction.
In the context of post-employment covenant litigation, there are certain jurisdictions state laws employers will want to avoid because they are not friendly to enforcement and vice versa. Employers need to be cognizant of the effect of a choice of law provision and also put some thought into its use because it will be an issue on down the road.
