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Specify which state’s laws apply to arbitration agreements covering teleworkers

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in HR Management,Human Resources

Technology makes it easy for some employees to work re-motely, away from the home office. As a result, California employers may find themselves managing employees who work in another state.

If you happen to use an arbitration agreement in employment contracts for out-of-state telecommuters, be aware that you may have to specify what state law you want to apply to the contract. Otherwise, the court will likely presume the employee’s state of residence applies.

Recent case: Robert went to work for Fujitsu America, a company based in California. Robert signed an employment agreement, which included an arbitration provision for all employment disputes. He worked out of his Maryland home and the company’s Maryland office, selling products nationwide.

Robert was terminated and he sued in federal court in California, alleging age discrimination.

Fujitsu moved to have the case transferred to arbitration, but the agreement didn’t specify which state law would apply to the contract.

The court concluded Maryland law did. Luckily for Fujitsu, Maryland encourages arbitration and held the agreement valid. The case now goes to arbitration. (Farrow v. Fujitsu America, No. 5:13-CV-05292, ND CA, 2014)

Final note: Always get expert help before adding an arbitration agreement to employment contracts, job applications and handbooks. You want to make sure the agreement is binding and doesn’t tie you up in needless litigation—all over an agreement designed to avoid needless litigation. This is especially true if you have employees working in multiple states.

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