Your Venue Clause Won't Hold for a California Employee: Labor Code § 925
By Ryan Danz, Founding Attorney, Employer Guidance Group PC
Disclaimer: This article is general information about California law — not legal advice, and not a substitute for having counsel review your specific agreements. Reading it does not create an attorney-client relationship. Employment law changes frequently; consult a licensed California employment attorney about your situation before acting.
An Ohio manufacturer hires a remote account manager who lives in Sacramento. The employment agreement — standard company-wide, drafted by Ohio counsel — sends every dispute to Ohio courts under Ohio law. Eighteen months later the employee quits, claims unpaid commissions, and sues in California anyway. The company points to the venue clause. It doesn't matter. California voided it the moment the employee signed.
That outcome isn't a fluke or a rogue judge. It's Labor Code § 925, and if your company is based outside California but has even one employee who lives and works here, it applies to you whether you've heard of it or not.
Why your home-state clause probably won't survive
Out-of-state employers write contracts the way they always have: pick the state where the company is headquartered, route disputes to its courts, apply its law. That's the right instinct for every other state. California is the exception. Since January 1, 2017, Labor Code § 925 has barred employers from requiring a California-based employee — as a condition of employment — to litigate or arbitrate a California-arising claim anywhere else, or to give up the protection of California law for a California-arising dispute. The statute doesn't care where your headquarters sits, where the contract was signed, or which state's law the document says governs. If the employee primarily resides and works in California, the clause is voidable at that employee's option.
What Section 925 actually reaches
| A clause requires | Status under § 925 |
|---|---|
| The employee adjudicate a California-arising claim outside California | Voidable by the employee |
| The employee give up a substantive California-law protection for a California-arising dispute | Voidable by the employee |
| Adjudication through arbitration, not just litigation | Still covered — the statute defines "adjudication" to include both |
| The contract was signed, modified, or extended on or after January 1, 2017 | Covered |
| The contract has never been touched since before January 1, 2017 | Not covered |
Two details trip up out-of-state employers more than any others. First, an arbitration clause is no workaround. Subdivision (d) defines adjudication to include arbitration as well as litigation, so routing the dispute to an arbitrator in your home state fares no better than sending it to that state's courts. Second, the statute follows the contract, not the calendar. Under subdivision (f), any agreement "entered into, modified, or extended" on or after January 1, 2017 is covered — so touching a legacy pre-2017 employment agreement with a renewal, a compensation change, or another amendment may pull it back under the statute, even if the change never mentions venue or choice of law. Courts haven't drawn a bright line on how minor a touch has to be before it counts, so this is an unsettled area rather than a settled rule. Many employers take the cautious route and treat any amendment as a reset, but that is a judgment call, not legal certainty. If you have pre-2017 California-employee agreements that have since been amended in any way, have counsel review them before assuming where you stand.
The narrow escape: independently negotiated clauses
Section 925 has exactly one exception, in subdivision (e): it doesn't apply where the employee was individually represented by legal counsel in negotiating the venue, forum, or choice-of-law terms. Read that narrowly. A standard acknowledgment buried in an offer letter — "employee has had the opportunity to consult counsel" — isn't individual representation in negotiating those specific terms, and employers relying on boilerplate to claim the exception are building on sand. A genuine out-of-state forum for a senior hire requires the employee's own lawyer actually negotiating the clause, with a paper trail showing it happened.
What it costs you when the clause fails
Subdivision (b) doesn't just strike the clause — it affirmatively sends the case to California and applies California law. Subdivision (c) lets the court award the employee attorney's fees on top of injunctive relief. California's courts have enforced this even against a company already litigating the same dispute in its home state. In LGCY Power, LLC v. Superior Court (Cal. Ct. App., 5th Dist., No. F082353, published, decided March 1, 2022), the court held that Section 925 lets a California-based employee proceed with his California claims notwithstanding a related action already pending in a sister state, rejecting the employer's argument that full faith and credit required California to defer to the other state's compulsory cross-complaint rule. In plain terms: filing first, somewhere else, doesn't protect you.
What a compliant structure looks like
For employees who primarily reside and work in California, the agreement should designate California as a permitted venue and forum for California-arising claims and specify California law governs those disputes — no home-state substitute. That doesn't require rewriting your whole multistate template; it means carving out a California-specific venue and choice-of-law provision, the same way you'd already treat California wage and hour rules as a jurisdiction-specific layer rather than one handbook for every state. For where other California obligations reach an out-of-state company, see our companion piece on which California employment laws apply to out-of-state employers. A voided venue clause often surfaces alongside wage claims that can escalate into a PAGA action — worth reviewing our PAGA penalties guide at the same time.
The steps below are general information, not legal advice. Have counsel tailor them to your workforce and agreements before you act.
Action checklist
- Inventory every employment agreement that covers a worker who primarily resides and works in California.
- Strike or rewrite any clause requiring that employee to litigate or arbitrate outside California, or to waive California law.
- Add a California-specific venue, forum, and choice-of-law carve-out for those employees rather than relying on your standard template.
- Treat any amendment, renewal, or extension of a legacy pre-2017 agreement as resetting Section 925 coverage, and review the venue clause when you touch the document for any reason.
- If you want an out-of-state forum for a specific hire, have that term negotiated through the employee's own independently retained counsel, and keep the documentation.
- Route every new California hire's agreement through counsel familiar with Section 925 before the offer goes out, not after a dispute arises.
Get this reviewed before it's tested in court
If your company is based outside California and you have even one California-based employee, the agreement you're using today was almost certainly written for a different legal landscape. Get your employment agreements audited before a departing employee — or their lawyer — finds the gap for you. Employer Guidance Group PC advises out-of-state companies on California employment law for out-of-state employers, and we're available to review your agreements directly.
Disclaimer
This article is general information about California law. It is not legal advice, and reading it does not create an attorney-client relationship. Employer Guidance Group PC is not your attorney unless and until you have signed a written engagement agreement with the firm.
California employment law changes constantly. The information here may be incomplete, out of date, unverified, or incorrect, and it does not account for your specific facts — and outcomes turn on facts. Do not act, or refrain from acting, on the basis of this article. Consult a licensed attorney about your own situation before making any employment decision.
This communication may constitute attorney advertising. Prior results do not guarantee a similar outcome.