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Legal Alert: Ninth Circuit Invalidates Contractual Choice of Law Provision

JDSupra (02/22/2012)

A class action lawsuit filed against the transportation company Affinity Logistics in California by one of its drivers accuses the company of violating state law and the federal Fair Labor Standards Act by failing to pay overtime, among other things. However, the company requires its drivers to sign written agreements classifying them as independent contractors and including a choice of law provision indicating that Georgia law will govern any disputes.

The Ninth Circuit refused to enforce the choice of law provision, determining that applying Georgia law would contravene an important public policy of California as it undermines California’s employee protection laws. The court also said California has a greater interest in the outcome of the case than Georgia, as the agreement was forged in California, the driver worked and lived in California, and the deliveries under the contract were in California. The only connection to Georgia was that it is the state where Affinity is incorporated.

As a result of the case, California employers should ensure that any agreement classifying workers as independent contractors meets the state’s multifactor test that distinguishes between independent contractors and employees.