Verdugo v. Alliantgroup: Court Rejects Out-of-State Forum Selection and Choice-of-Law Clauses in Employment Agreement

In Verdugo v. Alliantgroup, L.P. (5/28/15) --- Cal.App.4th ---, the plaintiff, Verdugo, worked for the defendant, Alliantgroup. Her employment agreement stated that any dispute would be litigated in Alliantgroup's home state, Texas, and that Texas law would apply. Verdugo filed a putative class action for wage and hour violations, and the court granted Alliantgroup's motion to stay the action, holding that the forum selection clause was valid. The Court of Appeal reversed, holding as follows:

When the claims at issue are based on unwaivable rights created by California statutes, the party seeking to enforce the forum selection clause bears the burden of proving that doing so “will not diminish in any way the substantive rights afforded . . . under California law.”

Indeed, a defendant can meet its burden only by showing the foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue.

Verdugo's claims were based on unwaivable statutory rights, and Alliantgroup failed to show that litigating the claims in Texas would not diminish those rights. The fact that a Texas court may choose to apply California law did not prove that Verdugo's unwaivable statutory rights would not be diminished "in any way."

The opinion is available here.