July 2014

Recently I was writing an article of the state of non-competes in Texas that I’ll post a link to once it’s published.  One of the issues I discussed were forum selection provisions, which got me thinking about venue and choice of law in all employment disputes.   In Texas, parties can contract for venue (where any lawsuit has to be filed) and choice-of-law (what law applies).  This is important in situations where the parties to the contract live in different places – not so much when the parties are in the same place.  Here’s an example:

Choice of Law; Venue. This Contract will be governed by and construed in accordance with the laws of the State of Texas, without giving effect to its conflict of laws provisions or your actual state or country of residence. Any claims, legal proceeding or litigation arising in connection with the Contract will be brought solely in a state court in Dallas County, Texas, and you consent to the jurisdiction of such courts.

Most employers like to have venue where its headquarters are located and choice-of-law in the state where the company is based. In non-compete and non-solicit disputes it doesn’t always make sense to require venue where the employer is headquartered.  In many instances the employer enforcing a non-compete is going to seek a temporary restraining order or temporary injunction.  Part and parcel to these types of proceedings is expedited discovery where the parties exchange documents and conduct depositions.  It is much easier to enforce an injunction in the place where the former employee lives.  That court likely has jurisdiction over the employee, can enforce its orders with contempt proceedings, and it is logistically easier to serve and enforce any rulings from the court.

Outside of these types of disputes the employer needs to think about a few things when deciding venue.  How likely is it there is going to be a dispute?  Will forcing the employee to file suit in the employer’s hometown dissuade them from filing suit because of costs etc.?  Does the company well known and have a good reputation within their home jurisdiction?  Usually the company will default to home venue.

In terms of choice of law, make sure the contract terms are enforceable under the state chosen because state can differ.  For example, Texas recognizes non-competes, California does not in most instances.  Also, and a more of a common sense point, judges are more familiar with the laws of the state where they live.

These are just a few things to think about when preparing an employment agreement, but they can be some of the most important.  The first thing I look at when reviewing an agreement is the forum and choice of law selection.  These are key in both defending and prosecuting claims.