- within Real Estate and Construction topic(s)
- with readers working within the Insurance industries
In this series, we will explore some of the ways states vary from one another in their employment laws.
Not that long ago, many multi-state employers thought they had a workaround to avoid pro-employee state laws — they would simply insert a choice of law provision for a state they preferred that had more favorable laws for employers. While this may still work in some places, many pro-employee states have caught on to this tactic and have fought back with laws preventing employers from using out-of-state choice of law provisions.
Illinois' Workplace Transparency Act limits employers from using confidentiality and non-disparagement clauses that prohibit employees from reporting unlawful employment practices. In the past, an easy workaround would have been to draft a settlement agreement or employment agreement that used a different state's law, even if the employee was located in Illinois.
However, the Illinois legislature recently amended the Act to state that any such agreement that applies non-Illinois law to an Illinois employee's claim or requires a venue outside of Illinois to adjudicate an Illinois employee's claim "is against public policy, void to the extent it denies an employee ... a substantive or procedural right or remedy related to alleged unlawful employment practices, and severable from an otherwise valid and enforceable contract under this Act."
California has a comparable law. Labor Code Section 925 prohibits employers from requiring California-based employees to agree to a contractual provision that would require the employee to bring a legal claim outside of California or deprive the employee of the protections of California law.
In the restrictive covenant space, Washington has taken a similar tactic. As of 2024, employers cannot avoid the cumbersome terms of Washington's non-compete law by relying on an out-of-state choice of law.
Employers must remember that, increasingly, there is no easy way to avoid pro-employee laws in certain states. Rather than relying on loopholes, employers must make themselves aware of relevant state laws and work within their restrictions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
